The used car market kicked off 2026 by beginning to cool, as prices dropped across nearly every major vehicle segment. According to the latest data from the CARFAX Used Car Index, January saw significant price reductions nationally, signaling what could be the most opportune buying window of the year before the traditional spring sales surge.
While a January dip is a familiar seasonal pattern, the magnitude of the declines suggests a broader softening in the market. Historically, the beginning of the year often represents the annual low point for used vehicle pricing. This lull typically precedes a sharp rebound as tax refunds hit consumer bank accounts in late winter and early spring, fueling renewed demand and driving prices back up.
Surprisingly, Luxury Segments Lead the Drop
Going against the trends we saw to end 2025, most dramatic movement was observed in the luxury sector. Used luxury SUVs experienced the steepest drop, with average prices falling by more than $1,040 from December levels. This correction offers relief to a segment that has seen continuously rising pricing in recent years. Luxury cars, which had been on an upward trajectory throughout the latter half of 2025, also reversed course, shedding more than $300 in average value.
Mainstream segments were not immune to the decline either. Used SUVs, pickup trucks, and the combined category of hybrids and electric vehicles (EVs) all saw average price declines of just under $600. Regular cars—a category including sedans, hatchbacks, and wagons—dropped nearly $200.
In a sea of red ink, one singular segment saw prices increase in January: vans and minivans. The average price for the practical family-hauler category bucked the national trend, increasing by more than $250.
Regional Nuances Abound
While the national narrative is one of decline, regional data reveals a more complex landscape. The Mid-Atlantic, Northeast, and Southeast regions experienced price drops across all vehicle segments, mirroring the broader national trend, but some regions saw more outlier results.
- Midwest & Plains: These regions saw the most significant volatility. In the Plains states, used luxury SUVs plummeted by an astonishing $1,500, while vans and minivans saw modest gains. Similarly, the Midwest saw massive drops in luxury vehicles and hybrids (all down more than $700), countered by a $500 spike in van and minivan prices.
- West Coast: The West saw a mixed bag, with luxury cars climbing by more than $250 while hybrids and EVs dropped significantly by over $700, likely reflecting the region’s high concentration of electrified vehicles and fluctuating demand dynamics.
- South: The southern region remained relatively stable for luxury cars (up only $30) but saw the same steep decline in luxury SUVs (down >$1,000) observed elsewhere.
Implications for Buyers and Sellers
With tax season on the horizon, inventory acquired now at lower valuations could yield better margins when demand heats up in the coming months. For consumers sitting on the fence, CARFAX analysts suggest that current pricing may represent the “floor” for 2026.
However, the report also notes that while prices are falling, they remain elevated compared to historical norms. This dynamic creates a double-edged sword: buyers can find better deals than in late 2025, but sellers can still command strong trade-in values, particularly for popular SUVs and pickup trucks.
As the industry moves toward February, all eyes will be on whether these price drops stabilize and if the anticipated tax-season rebound arrives on schedule. For now, the data points to a buyer’s market—at least temporarily.
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