Used Car Prices Slip in Q3 as Gas Spike Lifts Hybrid Values

A quarter that split the used-car market in two

Wholesale used-car prices fell in the third quarter. Treating that as one market-wide decline would miss what happened, though. High fuel costs split the market: values for big trucks and SUVs dropped, while values for hybrids, EVs and small cars climbed. The other costs that shape a car purchase are also changing. New-car prices are near record highs, incentives are being shifted between powertrains, insurance premiums are rising again, and the federal EV tax credit has now been gone for a full year.

The main figure came from Cox Automotive on Oct. 7. Its Manheim Used Vehicle Value Index, which tracks wholesale auction prices, stood at 205.9 in September. That was 0.6% lower than a year earlier and 1.1% lower than August, after adjusting for vehicle mix, mileage and season.26 Before those adjustments, wholesale prices fell 1.2% from a year earlier and 1.3% from August.26 The index fell 1.95% from July through September. September was also the first month since March 2025 in which it failed to beat its year-earlier level.21

Cox cut its full-year forecast as a result. It now expects the index to end 2026 up about 0.2%, down from the 2% gain it projected in July. That is below last year's 0.4% gain and well below the long-term average of 2.3%.26 Chief economist Jeremy Robb said depreciation in late September was steeper than normal for what is already the weakest season for wholesale values.23 Other trackers saw the same thing. Black Book's Used Vehicle Retention Index fell 3.1% in September to 139.7, and the firm expects depreciation to continue through the fourth quarter.24

Fuel economy is now priced in

The split by fuel economy is the more important story. Gas averaged $4.33 a gallon nationally in September, according to AAA. That is 50 cents above the previous September record, set in 2023.21 Cox's Jonathan Gregory said wholesale values for non-electric vehicles rated at 40 mpg or better, which include conventional hybrids, have risen 9.9% since January. Vehicles in the 35–39 mpg range gained 3.7%.22 Over the same period, the low-mpg categories, mostly full-size pickups and large SUVs, lost value.22 By mid-September, compact cars and EVs were the only major segments worth more than a year earlier. Midsize cars, pickups and SUVs were all below year-ago levels.25

Diesel shows the pressure most clearly. Diesel vehicles make up just over 3% of wholesale inventory, but with diesel prices at records, their supply rose to 39 days, 27% higher than a year earlier.26 Used EVs moved the other way. Their supply tightened, and used retail EV sales reached about 124,000 units in the quarter, a record and up 11.4% from a year earlier. That is still only about 2.8% of all used retail sales.26

Used EVs are rising in price even as more of them reach the market. Recurrent found prices for comparable used EVs rose 5% from January through June, despite a growing number of off-lease returns. Cox data showed average used-EV listing prices in August were 8.2% higher than a year earlier.29 Normally more supply would push prices down. This year, demand has absorbed it.

Cox's deputy chief economist, Mark Strand, called energy costs the biggest unknown for used-car prices heading into 2027. He said higher gas prices tend to lower consumer sentiment, and lower gas prices tend to raise it.22 That makes the trend fragile. If fuel prices fall, the premium for fuel-efficient cars could shrink quickly.

Lower wholesale prices haven't reached buyers yet

For shoppers, there is a gap between the wholesale numbers and what they actually pay. The average used-vehicle listing price was $27,239 in August, the highest since December 2022.29 Interest on financed used vehicles reached 10.6% in the third quarter, according to Edmunds.24 Cox noted that retail demand remains fairly healthy, but said the price trends suggest dealers have reached the limit of what buyers will pay.21 Retail prices usually follow wholesale prices with a delay.30 The Q3 decline should eventually reach dealer lots, though probably not for the cheap cars buyers want most. Edmunds found that vehicles under $20,000 made up just 31.8% of used sales in the second quarter, down from 55.2% in 2019.29

Borrowing costs are a separate problem. With the Federal Reserve raising rates for the first time in more than three years, Cox expects higher financing costs to weigh on demand.25 Supply is also growing. Cox forecasts a 23% jump in off-lease vehicles in 2026.26 Edmunds expects lease returns to rise 25.7%, adding nearly half a million vehicles.29 On that outlook, used-car buyers' position should improve into 2027. Rising rates are the main reason it may not.

New-car prices: two measures, one direction

The two main measures of new-car prices give different numbers, mostly because they are calculated differently. Kelley Blue Book reported an average transaction price of $50,089 in August. That was the first time above $50,000 this year, up 1.9% from a year earlier and below December 2025's record of $50,612.4 J.D. Power's September forecast put the average transaction price at $45,915, up 0.7%, with average monthly loan payments at $821, the highest ever for a September.6 Both show prices rising slowly, and both suggest the more pressing problem is monthly payments rather than sticker prices.

The incentive data diverge more. Kelley Blue Book says automakers cut back: incentives fell to 6.5% of the transaction price in August, from 7.2% a year earlier.7 J.D. Power says incentives per vehicle are trending up 7.3% to $3,574 in September.1 The way to reconcile the two is to look at incentives by powertrain. J.D. Power projects incentives on gas and hybrid vehicles up 31.6% to $3,319. EV incentives are projected down 21.7% to $8,829, which it linked to a 6.5-point drop in EV share of new sales.6 CDK data shows truck incentives up 32% from a year earlier to $5,084 per vehicle.5 Taken together, automakers appear to be offering bigger discounts on gas-heavy trucks and SUVs that are harder to sell when fuel is expensive, and smaller ones on EVs now that the federal credit no longer adds to them. Kelley Blue Book reported the average EV incentive at $6,594, or 12% of the transaction price, down 19.9% from a year earlier.2

Entry-level buyers are seeing the steepest increases. Subcompact SUVs rose 2.2% to an average $31,149, and compact cars rose 2.9% to $27,997. Both increases are faster than the overall market.4 CDK said the average price of the ten bestselling vehicles hit a record $36,418 in September.5 Industry analysts expect larger discounts in November and December as dealers clear out 2026 models.7

One year without the EV credit

The $7,500 federal credit ended for vehicles acquired after Sept. 30, 2025, under the One Big Beautiful Bill Act.31 Edmunds data shows EVs went from more than 11% of new sales in September 2025, when buyers rushed to beat the deadline, to 5.8% a month later.31 Since then, EVs have stayed between 5% and 6% of new sales.35 Edmunds' Ivan Drury described that as much weaker than before, but not the collapse some had predicted.37 Cox counts EV sales down nearly 24% in the first half of 2026. It also says second-quarter sales rose more than 14% from the first quarter as gas prices climbed.33

Hybrids have gained the most. Cox says hybrid volume rose 23% from a year earlier in the second quarter, pushing their market share to a record 16.3%.32 Edmunds puts hybrid sales growth near 27% over the past year.31 Toyota still leads with 44% of hybrid registrations, but its share has fallen more than four points while Kia and Hyundai have gained.32 The average new EV still sold for $54,754 in August, though that was 2.8% less than a year earlier.2 Some states still offer their own incentives, including Maine, New Mexico, Pennsylvania and Rhode Island.40

Insurance is rising again

Insurance is adding modestly to costs. After a 6% drop in 2025, full-coverage premiums rose 1% in the first half of 2026 to an average $2,237 a year. Insurify expects 32 states to end the year with increases, led by Connecticut at about 15%.13 Monthly averages have held at roughly $187 for full coverage through the summer.12 The choice of vehicle matters more than the national average. One estimate puts full coverage on a Tesla Model Y at $306 a month, compared with $175 for a Ford F-150.20 EV buyers should check insurance quotes before signing.

What it means for buyers

Taken together, the third quarter points to a lasting shift rather than a temporary drop in prices. High fuel costs are now reflected in what cars are worth. Hybrids and small cars are gaining value, and big gas-powered vehicles are losing it. Buyers looking for a bargain are more likely to find one on large trucks and SUVs, with discounts on both new and used models, than on the efficient cars most shoppers want. If gas prices stay above $4, expect the gap between the two to keep widening.