Shoppers are downsizing, buying used vehicles, taking on longer car loans and holding out for deals

For years it has seemed no sticker price was too high for American car buyers. Even as average new car prices approached $50,000 this year, dealers fretted more over depleted inventories than losing customers to sticker shock.

Those days are coming to an end.

Increasingly stretched consumers are starting to draw the line on what they will pay for a new car, according to dealers, analysts and industry data.

Car buyers are downsizing, buying used vehicles, taking on longer car loans and holding out for deals.

“People are asking, ‘How can I afford this?’” said Robert Peltier, who owns dealerships in East Texas. He said traffic, while still solid, has slowed at his dealerships and more customers are gravitating toward less-costly cars such as the pint-size Chevrolet Trax. “There are people who are in debt and living paycheck to paycheck.”

For the U.S. auto industry, 2025 was supposed to be a banner year fueled by tax cuts and a deregulatory wave. Analysts predicted a third-straight annual sales increase as automakers, who had been hit hard by the coronavirus pandemic and semiconductor shortages, finally got their factories running full steam. Now forecasts predict muted or no growth for the year and more of the same in 2026.

The industry had reason for optimism. Car prices soared due to short supply post-Covid, and consumers remained willing to pay up even as inventory came back and volumes approached historic norms. Car buyers continued to shrug off higher prices earlier this year even as they pared back shopping for everything from dishwashers to beer.

But now auto tariffs, persistent inflation and a tighter job market have more Americans rethinking their biggest-ticket purchases. Meanwhile, the collapse of the U.S. electric-vehicle market—hastened by the end of the federal government’s $7,500 EV credit in September—has cost the industry hundreds of thousands of potential vehicle sales.

With a surge in EV demand before the credit expired, auto sales kept ahead of pace through three quarters, as automakers with large North American footprints flexed their ability to produce and absorb the tariff burden. General Motors sales jumped 10.5% and Ford’s rose 7.3%. But then October’s selling rate was the slowest in more than a year, November results announced this week are expected to be down, and a quick rebound isn’t in the forecast.

Signs of strain are beginning to show up in the data. Cars are sitting longer on dealer lots. Dealers are piling on extra discounts to make sales. Lower-income borrowers are defaulting on car loans. Americans as a whole are spending less overall on vehicle purchases than they did a year ago.

“Other components of the economy are tugging on the consumer,” said Ivan Drury, an automotive analyst for the car-shopping website Edmunds.com.

That tension is unlikely to lead to dramatic price cuts or plummeting sales, analysts and economists say. That is because years of tight new-car supply means that used cars, even older ones, are historically pricey as well, and many car owners are reaching the limit of how long they can hold out for a new vehicle.

The cost of car parts and repairs has climbed as well, so hanging on to old vehicles comes with its own costs. “You can’t really find relief,” Drury said.

The reality is evident in the nation’s showrooms. Several of the industry’s biggest auto retailers reported weaker margins and profits on new-vehicle sales in the most recent quarter.

“Something’s got to give and it’s typically the dealer that will have to put more money on the hood to move the vehicle,” said Erin Keating, an executive analyst at the services firm Cox Automotive. She said she expects U.S. vehicle sales to continue to climb, albeit more slowly.

And not all shoppers are suffering. A swath of the nation’s consumers have continued to amass wealth and are bolstering industry profits as they pay top dollar for trucks and sport-utility vehicles loaded with heated steering wheels, massaging seats and advanced driver-assistance systems. Still, there are only so many Americans on the upward leg of the K-shaped economy.

“There are going to be a few more alarm bells out there saying: ‘We really are relying on the top 20% of households’,” to sustain the market, Keating said.

Michael Sassano, who manages a Chevrolet dealership in New Rochelle, N.Y., took in the latest data on visits to the store’s website and physical showroom. Traffic was down for both.

Less price-conscious consumers have already purchased their cars and now he’s seeing more people who’ve held out for years because they are loath to take on higher car payments. “More customers just aren’t willing to pull the trigger,” he said. “They say, ‘Wow, I’m paying $500 a month now, I don’t want to pay $700’.”

The good news, he said: Business is up on the service side of the shop as people try to squeeze more life out of their cars.

Petrit Xhudo, a 35-year-old from Idaho, needed a new car after his older Acura was totaled in an accident. He and his wife have a newer Tesla, but wanted a reliable and reasonably spacious second car that could hold up on long road trips. Even though the couple is financially secure—she’s a doctor, he stays home—Xhudo followed with dread the news reports about ever-climbing vehicle prices, and he approached the car-buying process ready to do battle. He looked at a Hyundai early on, but was thrown by the price. “I was flabbergasted.”

For a week, the pair price-shopped a dozen dealers, negotiating across several states and haggling for lower prices. As the days wore on, Xhudo said, dealers who once balked at matching his best offer called back and said they could do better.

“They were all calling us asking, ‘What do we need to do to get your business?’” he said.

The couple eventually settled on a higher-end Hyundai Tucson hybrid. The dealer knocked some $5,000 off the initial asking price.

Sharon Terlep at sharon.terlep@wsj.com