Used car inventory to grow in 2026 but affordability still a challenge

Even as experts anticipate more supply in the used car market this year, consumers probably won’t see much relief on pricing.

While dealer inventories continue to slowly improve, the higher-cost mix of vehicles hitting the used car market — and wholesale prices that ticked higher in January — could limit how much that added supply translates into cheaper cars.

Although the consumer price index shows that prices for used cars were down 1.8% in January from December and 2% from a year earlier, they’re easing off record highs. The average price of a used car up to 8 years old was $30,202 in 2025, up 27.6% from $23,668 in 2020, according to J.D. Power.

“The affordable under-$20,000 vehicles are harder to find,” said Jonathan Banks, a vice president with J.D. Power.

That’s likely to remain the case even as inventory improves. “You’ll see a richer mix of vehicles,” Banks said. “That’s just the reality of it.”

The share of under-$20,000 cars was 30% in 2025, down from 53% in 2019, according to J.D. Power.

Because consumers have been hanging on to their cars for longer, today’s higher prices may be a bit of a shock for them, Banks said.

“A lot of people will be coming into the market when they haven’t been there in a long time,” he said.

Although used car prices have eased, they remain elevated against a backdrop of a broader household affordability crunch. Many consumers are already struggling to keep up with high costs for everyday things like housing, groceries and insurance premiums.

Compared with the average price paid for a new car — $49,191, according to Kelley Blue Book — the used car market may be the more desirable option.

However, the cost of financing a used car is also a pain point. Interest rates generally are higher compared with those that apply to new car loans, which can be especially costly for consumers with poor credit.

For credit scores ranging from 501 to 600, the average interest rate for used car loans was 19% in the third quarter of 2025, according to Experian. That’s compared with an average of 7.43% for consumers with a score of 781 to 850.

The average amount financed for a used vehicle in January was $29,364 and the average interest rate was 10.5%, according to Edmunds. 

If that amount were financed at that interest rate over 72 months — the average is 69.7 months — the monthly payment would be $551, and the interest paid over the full life of the loan would be $10,339, according to Bankrate’s auto loan calculator. That would push the total amount paid for the car to $39,703.

Separately, a small but growing share of consumers are taking out used car loans with a monthly payment of $1,000 or more, according to Edmunds. In the final quarter of 2025, 6.3% of buyers committed to a payment of that amount, compared with 6.1% in the third quarter and 5.4% in the fourth quarter of 2024.

The variety of available used vehicles reflects what’s been purchased in the new car market over time. Consumers have preferred SUVs and trucks over sedans for years. Last year, sedans accounted for just 17% of the new car market, according to Edmunds. In 2015, that share was above 40%.

A greater number of vehicles are coming off of three-year leases this year compared with last year due to higher lease volume in 2023 than in 2022, said Ivan Drury, director of insights for Edmunds. Additionally, a growing number of fleet vehicles — for example, rental cars — should hit the used car market this year as that supply also continues recovering from pandemic-era disruptions.

As carmakers boost the number of deals they’re offering on new autos, used car shoppers may benefit as well, Drury said. “When we start to see discounts on the new cars, it trickles down to used cars,” he said.

If it’s been a while since you bought a vehicle, brush up on the best strategies for buying a used car.

“Do your due diligence,” Banks said. Some strategies he recommends:

• Look at certified preowned vehicles. “You may be able to get a late-model vehicle with low mileage and a warranty,” he said.

• Make sure you trust the dealer and have fully vetted the car you want to buy, he said. You can check a car’s history on sites like Carfax or AutoCheck for a fee ranging from about $10 to $45.

• Research how much your trade-in is worth and shop it around. “As a consumer, leverage the availability of data,” Banks said.