New-vehicle prices rose 1.2% year-over-year in May, the smallest annual gain of 2026 and well below the long-term May average of 3.5%, according to Kelley Blue Book data released today. The average transaction price was $49,220, down half a percent from April’s revised $49,456.
That moderation came with a tradeoff: dealers pushed incentive spending to 7.1% of ATP, the highest level in more than two years. Incentive spending averaged 6.8% of ATP in May 2025 and 6.9% in April 2026. For the past two years automakers have held incentive spending relatively tight, averaging 6.9% of ATP since January 2024. The May uptick suggests that discipline is starting to crack.
The headline softness hides segment-level volatility. The two most affordable SUV categories both hit all-time price highs in May. Compact SUVs averaged $37,757, up 3.4% year-over-year. Subcompact SUVs averaged $31,122, up 4.2%. Those are the entry segments for most first-time SUV buyers, and they are moving the wrong direction on affordability.
Four of the five best-selling segments posted annual ATP gains above the 1.2% industry average. Midsize SUVs, the volume leader for the fourth straight month, averaged $50,185, up 2.9%. Full-size pickups averaged $66,288, up 2.4%. Compact cars, the only segment in the top five running below the industry average, gained 0.7% to $27,443. The top five segments accounted for 64.2% of total sales.
Erin Keating, executive analyst at Cox Automotive, attributed the segment-level price pressure to redesign cycles and supply tightness. Redesigned SUVs from Toyota, Kia, Jeep, and Hyundai are commanding higher prices at launch, while Ford F-Series production constraints have tightened truck inventory and lifted transaction prices. Ram’s freshened pickup is stepping in to capture buyers at the premium end.
MSRP movement was muted. The industry average MSRP in May was $51,595, effectively flat compared to April’s revised $51,604. Year-over-year MSRP growth slowed to 1.6% in May from 2.0% in April, well below the long-term average of 3.4% annual MSRP growth.
Electric vehicles continued their year-long price retreat. The average EV transaction price was $54,532 in May, down 4.0% year-over-year. May marked the 11th consecutive month of annual EV price declines. EV sales topped 85,000 units, the best result since the federal EV tax credits were revoked at the end of third quarter 2025.
EV incentives remain elevated at nearly double the industry average. Dealers spent 14% of ATP on EV incentives in May, equal to roughly $7,600 per vehicle, unchanged from April. Tesla, which accounts for roughly half the EV market, saw average transaction prices fall 3.4% year-over-year to an average weighted by its two core models: the Model 3 at $49,082 and the Model Y at $51,537. Those two models accounted for 96% of Tesla’s May sales. Lower Tesla prices pull the industry-wide EV average down with them.
Incentive spending remained concentrated in EVs, luxury segments, compact cars, and full-size pickups. The pattern suggests dealers are using incentives selectively to move inventory in segments where consumer resistance is highest, not as a broad lever to drive volume across the board.
Source: Cox Automotive.
