At this year’s NADA in Las Vegas, Chief Strategy Officer Jonathan Smoke and newly announced Chief Economist Jeremy Robb outlined five major forces and strategic themes they predict will shape the auto industry in 2026. For the best business outcomes in the year ahead, dealers should consider the following forces in their strategic roadmap:
The Bifurcated Consumer
In an increasingly fickle economy, upper-income households are thriving amidst rising home values and tax breaks, while lower-income households remain squeezed by affordability pressures. Within this economy, disposable income growth is concentrated at the top 40%, and that’s where much of the spending power will reside this year. So, while dealers may see things such as lower down payments on used cars and slipping savings rates, wealthy consumers are far more likely to pay cash for new cars, which lowers dealer profitability. It’s more fair to see the customers who drive a large share of sales volume will continue to do so.
Fragmented Labor
From people retiring and leaving the workforce to a huge decline in immigration, dealers will see low job growth this year. Smoke and Robb assure their audience, however, that while jobs may be limited, the economy will be able to grow in different ways, particularly with improvements in productivity due to technological advancements and further adoption of AI.
Inflation and Fed Risk
In 2026, interest rates will continue to be unpredictable. Inflation has remained higher than expected according to Fed targets, raising the average monthly cost of private car ownership from roughly $750 to over $1,000 at the end of last year. Despite the unpredictability of this economy, consumers should expect roughly the same rates and monthly payments that they currently have.
Policy and EV Shock
Thanks to tariffs and huge incentive policy shifts last year, Smoke and Robb believe the industry will see both fewer imports as well as fewer EVs produced and sold. These changes will impact every dealer differently. However, the two also anticipate a bump in used EV sales due to a surge in off-lease EVs coming back into the market.
AI’s Inflection Point
AI will continue to deliver results for both the economy and dealers’ bottom lines. Where the labor force might not be growing, AI-powered software solutions will help bolster productivity for dealers this year. Dealers should expect to see a return on their investment in AI throughout 2026.
The industry’s economic forecast might appear bleak at first glance. However, the market this year will be supply-constrained, empowering dealers’ pricing ability and, in turn, increasing revenue. Additionally, used vehicle demand will remain supported by affordability trends, and a surge in off-lease EV supply will create new sales opportunities. Overall, despite mixed indicators, the expectation is for a steady, profitable year, especially with a big tax refund season on the horizon.
