Under the hood of our vehicle sales and affordability outlook

We’re raising our forecast for light vehicle sales to 15.7mn next year to reflect improving affordability, the new-car loan interest tax break, and the continued spending strength of high-income households.

• Affordability of new vehicles is set to improve in 2026 as the impact of the Federal Reserve’s rate cuts feeds through, household incomes grow, and the tariff boost to vehicle prices begins to fade in the second half of the year.
• High-income households account for more than half of purchases, making vehicle sales quite sensitive to swings in the equity market.
• We expect the average monthly payment as a percent of the median household income will decline by 0.5ppts next year to 12.3% in Q4 2026 (Chart 1).
• While vehicle sales this year were dominated by shifts in demand driven by the timing of tariffs and the expiry of the electric vehicle tax credit, we think the fundamentals will begin to reassert themselves in 2026.