On the Dash:
- Sales momentum may strengthen in March as OEM competition increases during the final month of the quarter.
- Hybrid demand continues to grow, while BEV adoption remains under pressure despite significantly higher incentives.
- Affordability challenges persist, with more buyers shifting to 84-month loan terms to offset rising monthly payments.
New light-vehicle sales in February reached a seasonally adjusted annual rate of 15.8 million units, a 1.4% decline year over year. While the pace improved compared with January 2026, winter storms across the mid-Atlantic and Northeast continued to weigh on sales activity.
Industry momentum is expected to increase in March as automakers ramp up competition during the final month of the quarter.
Battery-electric vehicles accounted for 6.3% of the market year to date through February, down 1.5 percentage points from the same period last year. Market share for BEVs has yet to return to levels seen in 2025 before the expiration of federal BEV tax credits.
Automakers have responded by increasing incentives for electric vehicles. According to J.D. Power, the average discount on BEVs is expected to reach $10,356 in February, compared with $3,085 for non-EVs.
At the same time, conventional hybrids continue to gain traction with consumers. Hybrid market share reached 13.6% year to date through February, up 1.5 percentage points year over year.
Vehicle affordability remains a major concern for consumers as payments continue to rise. J.D. Power estimates the average monthly payment in February at $811, up $32 from the same month last year.
To manage higher payments, more buyers are turning to longer loan terms. Loans with terms of 84 months are expected to represent 12.7% of financed sales in February, up from 7.7% in February 2025.
Global developments could also create uncertainty for the industry. While the conflict involving Iran is unlikely to significantly affect the auto sector in the near term, prolonged fighting could lead to higher energy prices. That could increase production input costs and potentially disrupt supply chains.
Meanwhile, stronger tax refunds could support vehicle demand in the coming months. According to the Tax Foundation, average tax refunds are up roughly 10% so far this year. Higher refunds are expected to provide a larger-than-usual boost to used-vehicle demand this spring and could also modestly lift new-vehicle sales.
Looking ahead, the industry expects new light-vehicle sales to total 16.0 million units in 2026.
