Autobody News

The U.S. auto market is expected to cool modestly in 2026, with new-vehicle sales projected to drop 2.4% from 2025 levels, according to Cox Automotive’s latest annual outlook released Jan. 6. The forecast points to several factors collision repair operators have been tracking: stable wholesale values, a wave of off-lease EVs entering the used market, and continued affordability pressures that have been pushing more older vehicles into total loss territory.

Cox Automotive is projecting 15.8 million new-vehicle sales in 2026, down from 2025’s stronger-than-expected results. Retail sales are expected to decline by about 1.5% year over year, while fleet sales could drop more sharply — by 6.1%, according to the forecast. The used retail market is also expected to see a slight decline as affordability concerns continue to push consumers toward lower-priced vehicles.

Jeremy Robb, interim chief economist at Cox Automotive, noted that 2025 outperformed most expectations, but conditions are shifting. He characterized 2026 as a slowing market that should still be considered healthy overall, with potential good news on interest rates and tax returns in the first half of the year.

Five forces pulling in different directions

The forecast highlights what Cox Automotive calls a “fragmented” market shaped by five competing forces. A widening gap between high-income and lower-income consumers will likely accelerate trade-down behavior, with wealthier buyers benefiting from stock market gains and potential tax relief while budget-conscious shoppers seek lower monthly payments and used-vehicle alternatives.

A stagnant labor market presents another headwind. Cox Automotive describes the current environment as a “jobless expansion” where GDP grows through productivity gains, but employment remains flat. Slow job growth dampens household formation and big-ticket purchases, potentially limiting demand in entry-level vehicle segments.

EV tax credit expiration reshapes leasing, used market

The end of federal EV tax credits looms large in the 2026 outlook. With the expiration of government incentives as of Sept. 30, 2025, Cox Automotive expects EV and plug-in hybrid lease penetration to decline, with overall leasing dropping to around 21% — the lowest level in three years. At the same time, off-lease EVs will begin entering the used market in greater numbers, adding complexity to wholesale pricing trends.

The Manheim Used Vehicle Value Index is projected to rise 2% by the end of 2026, reflecting relatively normal depreciation rates. Industry data has shown that stable or rising wholesale values can help keep repair-cost thresholds from pushing borderline vehicles into total loss — though the trend of elevated total losses is expected to continue as repair costs remain high relative to older vehicle values.

More EVs heading to shops

Cox Automotive notes that EVs will represent an increasing share of wholesale values, adding complexity to pricing trends. For shops, the influx of off-lease EVs into the used market could mean more battery electric vehicles coming through their doors. EV repairs have averaged higher severity and additional labor hours compared to internal combustion vehicles, according to industry data.

Tariffs, AI round out the outlook

Uncertainty around tariffs and trade policy also factors into the outlook. Cox Automotive points to the USMCA renegotiation as a potential disruptor, with policy shifts creating an uneven playing field for automakers and their supply chains. The forecast notes that the auto industry now operates with higher material costs.

The forecast acknowledges AI as an emerging factor, with investments in infrastructure driving productivity gains and improving retail efficiency at dealerships. Cox Automotive expects AI to enhance pricing transparency and customer service experiences.