04/01/2025
What Should I Know About Tariffs Changing Car Prices?
1. New Cars and Trucks Would Get More Expensive
If the new vehicle you’re interested in is built anywhere outside the U.S. (and roughly 50% of cars sold in the U.S. are), it would have a 25% tax slapped on it that the automaker must pay when they bring it across the border. That cost will almost certainly not be eaten by the automaker, which would take a massive hit to its profitability. It’s not paid by the country where it’s built (that’s not how tariffs work). Instead, it would be passed on to the consumer.
Whether the automaker would decide to raise the price of a specific vehicle or increase the prices of all of its cars by a lesser amount (by spreading the net cost rises over a larger volume to make it seem more palatable) remains to be seen. Still, we’d bet the latter plan will happen in the next few months if anything happens at all. Keep an eye on destination fees for new cars, as this is the easiest place for automakers to quickly adjust pricing on new vehicles. Unfortunately, this means that all new cars will likely get more expensive regardless of where they’re built.
2. Used Cars Would Also Get More Expensive
Should you consider a used car instead? Used cars are also almost certain to see prices rise due to increased demand from people finding new cars too expensive and less supply due to the COVID-19 pandemic’s lean production and sales years. The used-car market relies on a healthy supply of lightly used vehicles coming off leases from the previous three or four years, during peak pandemic years when sales and production were in the dumps. Low supply and high demand mean prices go up. Still, used cars are generally less expensive than comparable new cars.
3. Supply of New Vehicles Could Quickly Be Affected
The tariffs may impact the production of new cars and trucks as the supply chain of parts and equipment used for making vehicles could be disrupted. For nearly all automotive parts suppliers, eating a 25% cost jump in components is impossible, meaning they will need to appeal to automakers for higher prices for their parts — and if those aren’t forthcoming quickly, the production lines for parts could shut down. This means that the car or truck you might be considering could have a short supply on dealer lots, or the one you’ve already ordered might be indefinitely delayed.
What Should You Do Now?
As prices look set to rise, economic indicators suggest inflation may be returning, and interest rate outlooks remain uncertain. What should you do if you’re looking at buying a car?
1. Buy Sooner Rather Than Later
Don’t wait. Now is the time to buy that car you’re looking at if you can afford it and find a decent interest rate if you plan to finance it. Given that the tariffs will impact cars, trucks, and everyday items, locking in a price and interest rate now instead of later may help affordability in the long run.
2. Look at Used Cars as Well as New
Used car prices are likely to rise as well. While that may be good if you’re trading in a vehicle (it will be worth more against your bottom line), higher trade-in will be offset by higher prices for new and used cars.
3. Consider the Total Cost of Ownership, Not Just Purchase Price
A more fuel-efficient vehicle versus one that’s thirstier will lower your costs to operate it, and buying a more reliable car will also reduce your long-term maintenance costs. Looking at resale value could be significant, too, as it can help you recoup more of your investment when you’re ready to trade it in for something else. Considering more than a vehicle’s purchase price is essential for the overall cash outlay.
4. Don’t Accept ‘Tariff Fees’ on Vehicles Already Sitting on Dealer Lots
The tariffs do not take effect until April 3, so if you see an additional tariff fee tacked onto the window sticker, feel free to challenge the dealer. No automaker has officially changed pricing yet, and any dealer trying to charge you more and claiming it’s due to tariffs is pulling some shenanigans.
