Other August 2026 Observations

• “Regarding affordability, the cost of financing a new vehicle keeps easing, though not by enough to offset the structural affordability pressures on buyers. The average interest rate on new-vehicle loans is expected to fall 0.06 percentage points to 6.55%, the lowest August reading since 2022.
• “However, the average transaction price of a new vehicle has increased to $45,563, an increase of 2.0% from a year ago, while average monthly finance payments have climbed 3.7% to $812, the highest ever for the month of August.
• “A key driver of the higher monthly payment, despite longer loan terms, is lower trade-in equity. Many of the buyers returning to showrooms today purchased when prices were at their peak several years ago when inventory was scarce. This is manifesting itself as more buyers carrying negative equity on their trade-in. 28.8% of trade-ins had negative equity in August, up 0.6 percentage points from a year ago.
• “Subprime penetration remains elevated from last year, with the mix rising 2.0 percentage points from August 2025 to 10.8% this month, in part because many buyers with strong credit and the ability to accelerate their purchases did so last year.
• “To manage monthly payments, consumers are using longer loan terms. 13.9% of loans now have terms of 84 months or longer, up 2.1 percentage points year over year, helping to partially bridge the affordability gap.
• “Manufacturers are leaning harder into discounts to keep buyers in the market. Average incentive spending per vehicle is trending towards $3,384, a 5.9% increase from a year ago. Part of that jump reflects tariff-related dynamics a year ago, when several OEMs made unseasonal pullbacks in incentive spending to preemptively offset tariff costs. Incentives as a percentage of MSRP are expected to hit 6.6% in August, up 0.3 percentage points from August 2025.
• “The divergence in manufacturer incentive strategies by powertrain continues to be evident in August. Incentive spending on traditional internal-combustion engine and hybrid vehicles is expected to increase $651 per unit year over year, up 26.2% to $3140 in August 2026. Meanwhile, EV incentives moved in the opposite direction, with a forecasted decline of $2297 per unit or 19.9% to $9228, contributing to the 4.6 percentage point decline in EV share of new vehicle sales compared to last year,” said King.