Car sales sputtered in icy January. Poor weather wasn't the only problem for auto dealers and the U.S. economy.

MW Car sales sputtered in icy January. Poor weather wasn't the only problem for auto dealers and the U.S. economy.

By Jeffry Bartash

High cost of car ownership is a big burden

A major winter storm cast a big chill on car sales in the first month of 2026.

Sales of new cars and trucks - a barometer for the economy - sank in January to the lowest level in three years after a major winter storm. It could be a tough year for automakers even after the weather gets warmer.

Automobile sales increased at an annual rate of 14.9 million in January, down 7% from 16.1 million in the final month of 2025, according to Wards Intelligence.

The figure reflected how many new vehicles would be sold in the entire year if the same number were purchased each month as were sold in January.

The first month of the year is usually a tough one for auto dealers as households rein in spending following the holidays.

Severe winter weather can also be a hindrance, as it was last month. A huge snow and ice storm blanketed the country late in January.

The problems for the auto industry go even deeper.

For one thing, a generous tax break for buying electric vehicles expired last fall, prolonging a slump in sales of nonfuel cars. That's not going to reverse soon.

Automakers have also absorbed most of the tariff costs, but they will eventually pass them to customers who are already balking at record-high prices.

The cost of insurance and car repairs has also soared, making it more expensive than ever to own a vehicle.

Several large automakers, such as Toyota $(TM)$and General Motors $(GM)$, have warned that sales could taper off in 2026.

Car sales still managed to increase in 2025 for the third year in a row, but mostly because richer Americans stepped in. Rising wealth from a record stock market and high home values has given them more money to spend.

"Stock-market performance could be important for vehicle sales this year," said Grace Zwemmer, associate economist at Oxford Economics. "Since high-income consumers are responsible for most new-vehicle sales, vehicle purchases are one of the most wealth-sensitive category of consumer spending."

Lower-income households, which have suffered more from high inflation, bought fewer vehicles than normal last year.

The only potential tailwinds for automakers this year are falling interest rates and a new tax break to induce interest on car payments.

If rates decline enough, it would reduce monthly payments and make it easier for buyers to afford a new car.

Car purchases play a big role in retail sales and overall consumer spending, the main engine of the economy. Strong car sales also tend to indicate a strong economy. Weak sales tend to reflect stresses on the economy.

Sluggish sales in January could also weigh on gross domestic product in the first quarter unless there is a big rebound in February and March. GDP is the official scorecard of the economy.

-Jeffry Bartash

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 04, 2026 10:03 ET (15:03 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.