New-vehicle prices moved higher in July as automakers reduced incentive spending and more 2027 models began arriving at dealerships, according to a new report from Kelley Blue Book.
Kelley Blue Book says the average transaction price, or ATP, for a new vehicle reached $49,855 in July, the highest level so far in 2026. That was up 1.9% from July 2025 and 0.2% from June. Even with the increase, the average remained below the all-time record of $50,612 set in December 2025.
The increase came as the overall sales pace softened. KBB reports that July new-vehicle sales were down 1.5% from a year earlier and were essentially flat compared with June. At the same time, buyers continued moving toward lower-priced vehicles, helping limit the increase in the industrywide average transaction price.
That shift in what consumers are buying is important. Kelley Blue Book says several high-volume, relatively affordable segments—including subcompact SUVs, compact cars and midsize cars—posted year-over-year sales gains in July. Meanwhile, sales of full-size pickups, full-size SUVs and many luxury segments were comparatively weaker. Because less-expensive vehicles are making up a larger part of the sales mix, overall new-vehicle price inflation remains below historical norms.
The average manufacturer's suggested retail price was $51,621 in July, up 1.9% from a year earlier but down 0.1% from June. KBB notes that the long-term average annual increase in MSRP is 3.4%, meaning current new-vehicle price inflation continues to run below that historical rate. Since January, the average transaction price has increased 0.9%, which KBB describes as historically typical.
One significant change for shoppers was a reduction in incentives. Average incentive spending fell to 6.4% of the transaction price in July, down from 7% in June and 7.3% in July 2025. It was the second consecutive monthly decline and the lowest incentive level since January. Some of the industry's biggest segments continued to offer substantially more, however. Incentives averaged 8.6% of ATP on full-size pickups, 7.8% on compact SUVs and 6.8% on midsize SUVs.
Among the five largest segments by sales volume, midsize SUVs averaged $50,144 in July, up 2.4% from a year ago. Compact SUVs averaged $37,745, up 2.7%, while full-size pickup transactions averaged $66,980, an increase of 2.8%. Subcompact SUVs averaged $31,052, up just 1.1%, while compact cars averaged $27,904, a 2.6% increase. Together, those five segments accounted for 64% of July new-vehicle sales.
Cox Automotive Executive Analyst Erin Keating said the reduction in incentives is only part of what is pushing prices higher. More 2027 model-year vehicles are arriving with updated features and higher sticker prices, putting upward pressure on both MSRPs and transaction prices. At the same time, consumers' continued preference for more affordable segments is helping restrain the overall increase.
Electric vehicles also became more expensive in July. Kelley Blue Book says the average EV transaction price rose to $56,126, up 1.2% from June and 1.6% from a year ago. It was the second consecutive monthly increase and the first year-over-year gain in EV prices since December 2025.
EV incentives fell sharply, averaging $6,626 in July, down 9.1% from June and 24.3% from a year earlier. Incentives represented 11.8% of the average EV transaction price, still considerably above the 6.4% industrywide average but well below the 15.8% level recorded a year ago.
Tesla followed a similar pattern. KBB estimates Tesla's July average transaction price at $53,891, up 1.5% from June and 1.6% year over year. Tesla incentives averaged $5,599, nearly 34% lower than a year earlier and equal to 10.4% of ATP, compared with 16% in July 2025.
The bottom line from Kelley Blue Book's July data: new-vehicle prices are moving higher, but the market is not seeing unusually high overall inflation. Buyers are increasingly gravitating toward more affordable vehicles, even as shrinking incentives and higher-priced new model-year inventory push transaction prices upward.