US Auto Market Trends 2026: Volume, Affordability, and Opportunity

As reported in the recently published Motors and Markets Report (March 2026), Morningstar forecasts 2026 US light-vehicle sales will be between 15.8 million and 16.0 million units. 

We see more uncertainty for 2026 than in a typical year due to the ambiguity of what the economy will be like under President Donald Trump. 

Interest rates and inflation are still a problem, though rates are more stifling for used vehicles than new, and we see the chance for further rate cuts in 2026, especially after a new Federal Reserve chair assumes the role. 

The impact of tariffs on 2025 sales was not severe because firms didn’t pass the costs to consumers, which led to gross margin compression (such as nearly 200 basis points for General Motors’ GM automotive segment), but pricing dynamics can always change, and we think more pass-throughs are coming this year. Inventory recovery from the September 2021 low continues, but we still don't expect a return to the high 3 million or even over 4 million units that the industry saw before the pandemic. 

High interest rates are keeping some consumers out of the market, so we still believe that sales can actually rise or not fall severely in a recession. We don't normally say that, but US auto sales have already been at severe recessionary levels at times across 2020 and 2021, and recent levels indicate a mild recession when looking at per capita data. Normally, just before a recession, incentives as a percentage of average transaction price are high, as are sales, but that is not the case in early 2026.

US new light-vehicle sales (millions) and year-over-year change for the past 10 years.

The average American vehicle is from around the 2013 model year. It has safety and tech features that are primitive relative to what is available now, plus weaker sheet metal integrity than a new vehicle. At the end of 2022, the fleet was at a then-record age of about 12.4 years. The rate of age increase accelerated as soft 2022 new-vehicle sales enabled the fleet's age to rise faster than in recent years. 2024 shows another record of 12.8 years. 

Credit access is mostly healthy, and originations to us look responsible, with no indication of never-ending subprime lending. Interest rates are more likely to go down in 2026 than up. Gas is not outrageously expensive, historically speaking, though prices could spike again due to various macro/geopolitical risks such as war. In our view, these factors give people a reason to, say, trade in a sedan that's nearly 13 years old for a 2026 crossover or SUV.

For a global take on 2026, read the Morningstar and DBRS global automotive outlook, published at the beginning of the year.

GM’s stock had an excellent 2025 and continues to post quality scores with JD Power that suggest consumers’ quality gap with the Japanese automakers is a perception gap rather than a real one. In 2027, GM is expanding US capacity to accommodate vehicles currently only made in Mexico to ease its tariff burden, so we don’t see tariffs as the potential disaster they seemed a year ago. We expect GM to keep using its strong free cash flow to reinvest in the business while repurchasing large amounts of its own stock. 

We've said in prior versions of this report that GM's stock does not get an adequate degree of respect, something CEO Mary Barra has also lamented in the past when referring to GM's battery electric vehicle investments. 2024 was finally different, however, with the stock rising 48%, and 2025 was an exceptional year for the shares, up another 53%. All it took was GM to buy back $24.2 billion of its own stock across 2023-25, reducing its diluted share count by 36.4% since the end of 2022, using the fourth-quarter 2025 share count of 925 million.

GM’s share repurchases since 2022 split between two ASR programs and open-market purchases.

Buybacks, in our view, were likely the spark to get the stock finally moving upward starting in 2024, but GM's continued strong financial performance should not be ignored. For each of the first three quarters of 2024, GM beat LSEG consensus and raised full-year 2024 guidance. It also beat consensus with its fourth-quarter EPS, but its 2025 guidance was so good that the market did not believe it, especially since it did not include any tariff impact. GM also beat consensus in every quarter of 2025 on good cost control and continued pricing tailwinds of nearly $2 billion. GM has often beaten consensus on earnings day the past few years, and it's frustrated us to see the stock not get credit for its earnings despite free cash flow generation. 2024 and 2025 have been a pleasant change of pace, as we're sure it was for longtime shareholders. 2026 guidance given in the Jan. 27 earnings release is for adjusted EBIT of $13 billion-$15 billion ($12.7 billion in 2025) and EPS of $11-$13 ($10.60 in 2025), including gross tariff headwinds of $3 billion-$4 billion.

Morningstar researchers expect continued gradual consolidation of auto dealers. In the 2025 US Auto Dealer Industry Report, they explained why gaining exposure to the entire US auto sector could be worth considering.

Morningstar doesn't believe a 17 million annual sales number is forever lost. We believe that affordability will slowly improve over time and that industry sales can eventually return to 17 million units or better because the US population continues to grow. Recent per capita sales levels of new-vehicle sales as a percentage of licensed drivers are about 6.7% versus 7.5%-8.0% across 2015-19. If this ratio rose to 7% with no further growth in the number of licensed drivers, sales would still be 16.9 million, so 17 million at some future time is not impossible, in our view. Also needed is leasing mix returning to the 30% or more level. Rates need to fall more than just 25 basis points for this to happen, though. 

The US is a vehicle-centric country with many areas lacking dense public transportation options, and we don't see that changing. If anything, the pandemic has increased the demand for private mobility, so we don't see high 15 million to low 16 million sales levels as long-term demand. Unfortunately for automotive investors, patience is often a required virtue.

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