Shockwaves from the Covid-19 pandemic are still hitting the US auto market and driving up prices, even for exceptionally old cars.
The pandemic dealt a major blow to the total supply of new cars, which spilled over into the used market.
About 8 million vehicles that would have been made for U.S. buyers during those years never were, largely because of production shutdowns and supply shortages, said Jeremy Robb, Cox Automotive’s chief economist. Automakers faced with reduced production have shifted their lines toward profitable high-end vehicles, a strategy they have largely continued.
These factors have driven up prices for everyone, even for customers buying decade-old used vehicles.
“I think this is sort of the new normal outside of a significant economic impact,” Robb said. “Supply won’t improve much over the next three or four years.”
About 16.2 million cars were sold in 2025, compared to 13.8 million in 2022, the lowest level of the pandemic, according to the US Bureau of Economic Analysis. Cox forecasts about 15.8 million vehicles will be sold in 2026, while JD Power forecasts 16.3 million.
This is a significant drop from the record 17.55 million vehicles sold in 2016.
Volumes were already declining before the pandemic took hold. The automobile market is historically cyclical, so sales rise and fall.
But Tyson Jominy, vice president of JD Power, said the U.S. auto industry sold about 16 million fewer vehicles than if annual sales had reached 2016’s record of 17.5 million. That’s about a year’s worth of volume gone – about half since the pandemic.
The reduction in the number of vehicles entering the new market has limited the supply of used vehicles.
“Selling a new vehicle is the ball at the top of the mousetrap game,” Jominy said. “And when you drop that marble, it will go through all the chutes and ladders to the bottom.”
Rental and incentives
In addition to tighter supply, automakers and dealers have also reduced industry practices such as leasing and incentives due to the supply shortage.
“Renting is very expensive for an OEM,” Robb said, referring to the acronym for original equipment manufacturer, another name for automakers.
Typically, payments are lower for leases, there can be many upfront costs for the manufacturer and when the car comes back it must, among other things, be redistributed on the used market, he said.
“OEMs have really leaned into building more profitable cars, like trim levels, trucks, SUVs, things like that,” Robb said. “And those, they’re more expensive. They tend not to get rented as much.”
Off-lease vehicles constitute an important pipeline for the used market. Before the pandemic, leasing made up about 30% of the new vehicle market, Robb said. In 2022, it reached a minimum of 18%.
Given that most leases are for three years, it took that long for the second-hand market to feel the wave.
Automakers also don’t want to have to lower their vehicles if they don’t have to. During the pandemic, they didn’t need it.
The incentives – essentially rebates on new cars – averaged about 9.5% of vehicle prices in the new car market before the pandemic, according to Cox Automotive. During the pandemic, they fell to a fraction of that amount. They have risen again, averaging between 6.5% and 7% in 2026, Cox’s Robb said. But this figure remains low compared to pre-pandemic levels, and they are not equally represented in the industry.
All this means that used car prices have remained relatively high.
Meanwhile, consumers face high gas prices, inflation and a general increase in spending.
“Prices have increased by about a third and yet wages and incomes have not come close to matching these increases,” said JD Power’s Jominy. “There is a smaller group of buyers who can afford new vehicles. The average household income using a new vehicle is more than $150,000 per year, compared to about $80,000 for the U.S. economy as a whole.”
Data from Cox Automotive shows that demand, even for used vehicles that are 9 and 10 years old, is much higher than it has been historically. This indicates that more consumers are switching to older and cheaper cars as prices rise.
“We don’t normally see this kind of pricing pressure at the lower end of the market,” Robb said.