05 February 2026
The $1,000 payment threshold: How OEMs can navigate 2026's affordability challenge
By Matt Weiss
Article Summary
How OEMs can tackle the $1,000 payment threshold using pricing analytics and vehicle analytics to optimize incentives, inventory, and monthly affordability in 2026.
Following on the heels of the COVID-19 pandemic, tariffs, and other recent disruptors, the US auto market faces another critical challenge around vehicle pricing: Today, the average monthly auto loan payment is approaching a record high of $800, with 20% of US car owners paying more than $1,000 a month for their vehicle.
By the end of 2026, as many as 40% of customers could be making that payment, with SUV and truck buyers hitting the barrier first. Another statistic to consider in the affordability environment is this: 84-month loans for new vehicles hit a record high share of 22% in November 2025, evidence that consumers are squeezing expensive vehicles into their monthly budgets by incurring additional interest payments.
Affordability is an industry-wide issue that could shape the entire market for some time. An undercurrent to this situation is the near-term trend of price-sensitive electric vehicle (EV) buyers defecting into hybrids and entry-level ICE vehicles.
See how connected pricing, inventory, and incentive intelligence can help OEMs respond to affordability pressure in real time with Mobility Pulse 360.
The coming affordability cliff and its repercussions
Such a large percentage of US car buyers facing four-figure monthly payments would be an ominous first for consumers and the auto industry alike.
Several factors are converging to create this situation. Inflation, supply chain pressures, and tariffs have all led to rising MSRPs, and this pressure could continue throughout 2026. For example, while EV inventory levels declined in December and January, the decline was driven by supply-side adjustments rather than increased retail demand, as reflected in the rising average age of EVs on dealer lots. This dynamic reflects a broader affordability constraint, exacerbated by the limited availability of lower-priced EV models—there just are not that many options for the affordability-minded consumer.
Faced with these mounting payment pressures, consumers are fundamentally changing their purchasing behavior, resulting in:
- Delayed purchase cycles: Holding onto current vehicles for longer.
- Feature and size trade-downs: Compromising on vehicle content or class to maintain affordability.
- Brand or segment switching: Erosion of traditional brand loyalty.
- Greater sensitivity to incentives: Increased focus on pricing deals, rebates, or incentives.
- A shift toward alternative ownership models: Greater interest in leasing and subscription services.
- Hesitation around EV adoption: Price-conscious buyers are pulling back from electric vehicles as rebates disappear.
- Auto loan delinquency: Rising auto loan delinquency rates in line with higher payments.
OEMs are responding, but is it enough?
The $1,000 affordability milestone is serving as a wake-up call for OEMs, and automakers are responding with new strategies around lower-priced models.
Stellantis is planning to introduce more products priced under $40,000 and potentially even $30,000. General Motors and Ford announced $27 billion in cuts to higher-priced EV models and are pivoting toward investments in ICE vehicles. The move toward lower-priced cars isn't without an EV component, however: Ford also plans to start building a lower-priced $30,000 electric pickup in 2027.
While these product strategy shifts are necessary, they're not sufficient. It's more important than ever for OEMs to use real-time vehicle pricing analytics and incentive intelligence to react quickly to market and competitive changes while protecting both volume and profitability.
The domino effect of blanket price cuts
To stay competitive as buyers gravitate toward more affordable vehicles, OEMs are increasingly tempted to discount entry-level models, setting off a chain reaction that affects the rest of the lineup. While demand for high-end luxury vehicles remains strong, entry-level luxury faces a different dynamic: As discounts narrow the price gap between segments, price-conscious buyers may defect to mainstream vehicles for comparable features at lower cost.
This creates a delicate balancing act: How to maintain competitiveness in entry-level segments without eroding margins across the portfolio or diluting brand positioning.
Why traditional incentive strategies are failing
OEMs have the standard levers at their disposal—APR financing, cash rebates, loyalty programs—but without visibility into competitor moves, they're either overspending (leaving margin on the table) or underinvesting (losing market share). The brief decision window for incentive adjustments demands instant competitive intelligence that traditional monthly or quarterly planning cycles simply cannot provide.
Adding to this complexity is the inventory-pricing challenge. Models sitting longer than normal send two critical signals: wrong price point AND wrong mix. But most OEMs can't see both signals simultaneously, making it difficult to diagnose whether slow-moving inventory is a pricing problem, a product mix issue, or both.
Competitive payment positioning: The new battleground
For OEM sales teams, success in 2026 requires knowing exactly how your monthly payments stack up against those of your competitors on comparable models. OEMs that can simulate multiple scenarios—lease versus finance, varying APR, different terms—will win share. The battleground has shifted from MSRP comparison to monthly payment affordability, and many OEMs lack the pricing-analytics tools to compete effectively in this new reality.
The path forward
In response to persistent market volatility and increasing complexity within the automotive industry, tools like S&P Global Mobility's newly launched Mobility Pulse 360 represent the kind of integrated intelligence platform OEMs need right now. By combining sales, dealer inventory, in-market incentive programs, and transactional pricing data into a single, cohesive view, these platforms enable automakers to move from observing market trends to understanding the drivers behind them.
For example, Mobility Pulse 360 showcases how an OEM’s transaction price measures against their competition and then triangulates their sales performance, measured by share; their incentive offerings, measured by incentives and monthly payment; and their dealer inventory, measured by geography (down to DMA level).
By optimizing inventory and incentive spending based on real-time competitive pressures, OEMs can uncover significant efficiencies that not only strengthen their market position but also provide strategic levers to help address pressing industry issues like vehicle affordability for buyers.
The $1,000 payment threshold is already a reality for many buyers, but its expansion to an even larger share of consumers will be a real test for the industry. OEMs that thrive in 2026 will be those that combine strategic product decisions with real-time market intelligence, allowing them to navigate the affordability challenge while maintaining profitability and market share.
For more on Mobility Pulse 360, visit our webpage: Accelerate decisions with connected pricing & performance analytics
This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.