The automotive market kicked off 2026 with a stark difference between the new and used sectors, signaling a “K-shaped” recovery that continues to split consumer behavior. According to the January 2026 Intelligence Report released by CarGurus, the used vehicle market is experiencing a significant resurgence, while new car sales have stumbled out of the gate, hampered by persistent affordability issues and winter headwinds.
With the average list price of a new vehicle hovering near $50,000, buyers are increasingly turning to the pre-owned market, driving used vehicle demand to its highest January level since 2021.
Used Market: A Roaring Start to 2026
The headline story so far this year is the robust health of the used car market. The CarGurus Used Vehicle Demand Index surged 7.2% year-over-year and posted a strong 4.0% month-over-month increase. This uptick defies the typical post-holiday slump, suggesting that buyers were eager to take advantage of improved inventory levels before the traditional tax-season rush heats up prices.
Inventory levels for used vehicles have also improved significantly compared to last year, climbing 5.2% year-over-year. However, this increased supply has not necessarily translated into lower prices for consumers. The average used vehicle listing price has held steady at approximately $27,800, representing a 1.5% increase from January 2025. While prices dipped slightly by 1.0% from December to January, the year-over-year stickiness suggests that dealers are holding firm on pricing amidst strong demand.
“Used sales demand came out roaring in January, with savvy car buyers taking advantage of a month that typically offers lower prices, higher inventory, and less shopper competition before the market heats up during the tax-season rush,” said Kevin Roberts, Director of Economic and Market Intelligence at CarGurus. The key question now is whether this early surge signals sustained momentum. If this trend holds, it could set the tone for a competitive start to the spring selling season.”
Interestingly, despite the sales surge, vehicles are sitting on lots slightly longer. The average days-on-market for used inventory increased by 1.3% both month-over-month and year-over-year. This indicates that while fresh inventory is moving, there remains a segment of long-sitting inventory that is raising the overall average—a dynamic dealers will need to manage carefully as they head into the spring selling season.
New Market: Stalled by Affordability and Weather
In sharp contrast, the new vehicle market has struggled to find traction. The CarGurus New Vehicle Demand Index fell approximately 3.2% year-over-year and took a massive 18.1% hit month-over-month. While January is historically a slower month following December’s year-end sales push, the severity of the drop highlights deeper structural issues.
Affordability remains the primary culprit. Despite recent Federal Reserve rate cuts, auto loan rates have remained stubbornly high, keeping monthly payments out of reach for many prospective new-car buyers. Additionally, harsh winter weather across large swaths of the country likely kept shoppers at home, further chilling sales.
Automakers appear to be responding to this softness with disciplined supply management. New vehicle inventory levels were down 2.7% year-over-year and 3.3% month-over-month. OEMs are being deliberate in balancing supply against demand to preserve margins, rather than flooding lots with inventory that would require heavy incentives to move.
However, signs of stagnation are emerging on new car lots. The “Market Days Supply” (MDS)—a metric that measures how long current inventory would last at the current sales pace—jumped 10.3% month-over-month. Furthermore, the average days-on-market for new vehicles rose 3.7% from December, indicating that vehicles are beginning to accumulate as sales velocity slows.
A Competitive Spring Ahead
The data points to a complex spring season ahead. For the used market, the strong start in January could set the tone for a highly competitive period, especially as tax refunds begin to hit consumer bank accounts. Dealers appear well-positioned with inventory to meet this demand, though pricing relief for buyers seems unlikely in the near term.
For the new car market, the path forward is rockier. With 2026 models now accounting for three-quarters of listings and prices virtually flat year-over-year (+0.4%), automakers may need to rethink their incentive strategies if demand does not rebound with the warmer weather. The “deliberate” inventory management seen in January may soon need to shift toward more aggressive sales tactics if the gap between supply and demand continues to widen.
The “K-shaped” economy is alive and well in automotive retail, with value-conscious buyers driving activity in the used sector while the new car market waits for affordability conditions to improve. As the industry moves toward the critical spring selling season, all eyes will be on whether the used market’s momentum can sustain itself—and whether new car sales can thaw out from a frozen start to the year.
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