The 2026 Car Market Depends On Buyers Who Can Afford To Ignore The Car Market

If you've shopped for a new car recently, the success of that endeavor probably had a lot to do with where you stand on the financial ladder. For some, higher prices and interest rates mean putting off a purchase altogether. For others, those factors influence whether to finance the car or just write a check. And it turns out that the people who can just write that check are becoming the main drivers of the automotive industry.

According to Cox Automotive's latest analysis, rising loan rates could, in theory, be offset by more buyers simply paying cash. So sure, it's easy to avoid interest when you have the cash sitting in a bank account waiting to go to a car purchase. For everybody else, the cost of cars is getting out of reach, and the cost of simply borrowing for those cars is getting harder to work around.

Back in March, we covered how wealthier households were taking a larger share of new-car purchases. The latest wrinkle is what supports that spending, and what happens when the industry becomes increasingly dependent on it. The depth of this report helps to establish that this doesn't appear to be a blink and you miss it trend, but rather an ongoing pattern.

According to Cox chief economist Jeremy Robb, the wealthiest 10% of households now own 82% of financial assets outside of retirement accounts. That percentage is also up from 75% before the pandemic. Those assets include deposits, money market funds, bonds, stocks, and mutual funds held outside of retirement accounts. All of those compounded at 11.3% over seven years.

In other words, those are holdings that people can potentially use to fund purchases without tapping into a 401k. It explains why a buyer's salary alone doesn't tell the whole story. Investment gains can provide purchasing power that wage growth doesn't.

Robb notes that stocks and mutual funds represent 72% of the financial assets he examined. A stock-market correction could affect both household wealth and spending. Having well-heeled customers helps. Depending more heavily on their investment gains introduces its own vulnerability.

On the flip side, Cox's October 19 report says that used prime loan rates are sitting at 12.9%. That's up 37 basis points from September. One estimate within the report says that total interest over a used-vehicle loan's life has climbed from roughly $5,600 in 2019 to nearly $11,000 today. Put another way, interest now accounts for approximately 26% of total payments as opposed to 19% previously.

Keep in mind that those are financing costs alone. It doesn't account for maintenance and repair costs, which are also up by 5.8% year over year in September. Evidently, insurance rates fell some 5%, but keeping an older car running still comes with bills of its own. Somehow, shopping for an older car doesn't alleviate the price pressure. In a different analysis, Cox found that prices for cars that are eight-to-ten years old are up just under 10% year over year. Consumers looking at even older cars are finding more competition there too.

Each quarter, we report plenty of sales figures, but it's clear that there's some subtext going on. Average transaction prices, which are at near record levels, only count buyers who engage in the market. They don't capture the folks who simply cannot afford to engage. The industry, for the time being, seems completely content to keep moving cars while those households, the vast majority, struggle. Should automakers continue to feel comfortable relying on well-off buyers? Only time will tell.