February 2026 U.S. New-Vehicle Sales Outlook Reflects Softer Year-Over-Year Performance
Total new-vehicle sales for February 2026, including both retail and non-retail transactions, are projected to reach 1,183,000 units, representing a 3.8% decline compared with February 2025, according to a joint forecast from J.D. Power and GlobalData. The selli0ng environment remains comparable from a calendar perspective, as February 2026 has 24 selling days, matching the number recorded in February 2025, thereby eliminating any distortion from day-count differences and placing full emphasis on underlying demand trends. The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales in February 2026 is expected to reach 15.6 million units, a decrease of 0.6 million units from the same period last year, signaling that while demand remains relatively stable in a historical context, it has softened compared with the stronger pace seen in early 2025.
Retail Sales Forecast Signals Declining Consumer Momentum
Retail sales, which serve as a more direct indicator of consumer demand because they exclude fleet transactions, are projected to reach 931,400 units in February 2026, marking a 4.6% year-over-year decline from February 2025. The retail SAAR is expected to come in at 12.6 million units, down 0.6 million units compared with the prior year. This retail slowdown underscores mounting affordability pressures, evolving electric vehicle dynamics, and shifting consumer sentiment that continue to shape the market landscape. The data suggests that while the industry is not experiencing a sharp contraction, it is navigating a cautious and highly competitive environment where incremental changes in pricing, incentives, and financing conditions have measurable impacts on buyer behavior.
Market Performance Influenced by EV Demand and Pricing Pressures
According to Thomas King, president of OEM solutions at J.D. Power, February’s sales pace shows modest improvement over January but remains below year-ago levels, with retail sales projected to decline 4.6%. A key factor influencing current performance is depressed retail demand for electric vehicles, which are expected to account for just 6.6% of retail sales in February 2026, down 1.8 percentage points from a year earlier. This shift reflects a combination of reduced government subsidies, higher EV pricing, and more restrained discounting strategies across the industry. Elevated transaction prices overall continue to weigh on volumes, reinforcing ongoing affordability challenges that limit broader consumer participation. Despite the relatively slow start to 2026, expectations remain that sales momentum will build over the coming months, beginning with March, which traditionally benefits from elevated promotional activity and higher showroom traffic as manufacturers intensify marketing efforts and launch spring campaigns.
Transaction Prices Continue to Rise Across Segments
Average retail transaction prices in February 2026 are projected to increase 2.7% year-over-year to $46,303. Non-electric vehicles are expected to see transaction prices rise 3.0% to $46,097, while EV transaction prices are forecast to climb 2.6% to $46,528. The narrowing gap between EV and non-EV pricing indicates that electric vehicles are no longer benefiting from significant pricing advantages, especially as subsidies taper off and automakers recalibrate incentive structures. The continued escalation in transaction prices underscores persistent supply constraints in certain segments, as well as manufacturers’ ongoing efforts to protect margins amid a stabilizing but still cautious demand environment. These pricing trends also contribute to shifts in segment mix, as consumers increasingly gravitate toward models that balance features, performance, and affordability.
Incentive Spending and Discount Trends Reflect Shifting Strategy
The average manufacturer incentive spend per vehicle in February is expected to reach $3,293, an increase of $63 compared with February 2025. However, headline incentive growth masks divergent trends between EV and non-EV categories. Discounts on EVs are projected to average $10,356 in February, down $1,664 from a year earlier, reflecting tighter promotional strategies and reduced urgency to clear inventory. In contrast, discounts on non-EVs are expected to reach $3,085, up $346 year-over-year, indicating that automakers are using targeted incentives to stimulate demand in traditional powertrain segments. As a percentage of manufacturer’s suggested retail price (MSRP), discounts on non-EVs are projected at 6.0%, up 0.6 percentage points from last year, suggesting an increasingly competitive environment among internal combustion engine models as brands vie for market share in a stable but crowded market.
Affordability Challenges Drive Financing Adjustments
Affordability remains one of the most significant constraints on new-vehicle sales performance. The average monthly finance payment in February 2026 is projected to reach $811, an increase of $32 compared with a year earlier. In response to elevated monthly payments, a growing proportion of buyers are opting for extended loan terms to reduce immediate financial burden. Loans with 84-month terms are expected to account for 12.7% of financed sales in February, compared with just 7.7% a year earlier, illustrating how consumers are stretching repayment periods to manage rising transaction prices and higher borrowing costs. While extended financing helps maintain accessibility in the short term, it also raises longer-term equity risks for consumers, particularly in a market where depreciation patterns are stabilizing but still evolving.
Interest Rates and Used-Vehicle Values Provide Partial Relief
Despite rising payments, easing interest rates are offering some measure of relief to buyers. The average interest rate for new-vehicle loans in February 2026 is projected at 6.72%, representing a 31-basis-point decline from a year earlier. This modest improvement helps offset some of the impact of higher transaction prices, though not enough to fully neutralize affordability concerns. Meanwhile, used-vehicle pricing remains elevated due to constrained supply of recent model-year vehicles, a lingering consequence of lower new-vehicle production during the pandemic period. The average used-vehicle price is expected to reach $29,488 in February, up $448 year-over-year. Strong used-vehicle values benefit consumers trading in vehicles toward new purchases, as average trade-in equity is projected at $7,013, essentially flat compared with last year. However, the share of buyers carrying negative equity on their trade-in is expected to increase to 31.5%, up 3.4 percentage points from February 2025, highlighting growing financial strain among certain buyer segments.
Consumer Spending and Retailer Profitability Trends
Total consumer spending on new vehicles in February 2026 is projected to approach $41.3 billion, representing a 2.4% decline compared with the same month last year. Elevated transaction prices are not sufficient to fully offset the lower overall sales volume, resulting in slightly reduced aggregate spending. For retailers, profit per unit, including vehicle gross profit plus finance and insurance income, is expected to reach $2,524, up $83 year-over-year and $160 higher than January 2026. This suggests that dealers are successfully maintaining margin discipline even as volumes soften. Nevertheless, total aggregate retailer profit from new-vehicle sales is projected to be approximately $2.3 billion for February, down 1.8% compared with February 2025, reflecting the cumulative impact of reduced sales volume despite stable per-unit profitability.
Competitive Intensity Expected to Increase in 2026
Multiple automakers have publicly stated their intention to increase sales volume during 2026. However, given that total industry sales for the year are projected to remain similar to 2025 levels, and with few manufacturers planning for contraction, competitive intensity is expected to escalate significantly in the coming months. As brands pursue growth in a relatively flat market environment, promotional activity, pricing strategies, product launches, and financing offers are likely to become more aggressive.
This heightened competition could benefit consumers through improved incentives and expanded model availability but may also compress margins for manufacturers and retailers alike. The coming months will therefore test the industry’s ability to balance profitability with market share objectives while navigating ongoing affordability pressures, evolving EV demand dynamics, and broader economic influences shaping consumer confidence and purchasing power.
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