New car prices could increase $4,000 or more, according to one estimate. And used cars could also rise in price. “It’s a crazy situation for consumers,” an expert said.
Car shopping may be especially challenging this year.
President Trump’s threatened 25 percent tariffs on goods imported from Canada and Mexico would deal a major blow to the auto industry, whose supply chains extend across U.S. borders into both of those countries. Those tariffs have been paused until April. But a second set of tariffs, 25 percent on imports of steel and aluminum, took effect this week, and those will also hit car manufacturers.
The whiplash has left the American automobile industry in a state of turmoil. That translates to a daunting market for car shoppers, who are already rattled by the high cost of new vehicles and the expensive loans to buy them.
What impact could tariffs have on car prices?
If the delayed tariffs take effect as now scheduled, new car prices could increase $4,000 to $10,000, and even more for certain battery-powered electric vehicles, according to estimates from Anderson Economic Group, a consulting firm in East Lansing, Mich. (The estimate doesn’t include the impact of the metals tariff.) While prices have moderated since the pandemic years, cars remain expensive. The average transaction price for a new vehicle is about $45,000 or more than $48,000, depending on the data source.
“It’s a crazy situation for consumers, and even more difficult for manufacturers,” said Patrick Anderson, chief executive of the Anderson firm.
The impact of the tariffs would vary by car model, since some rely more on imported parts than others. But rather than vastly increasing the price of specific vehicles, the industry is likely to spread increases across all types — “like peanut butter” — to smooth out the price increases, said Tyson Jominy, vice president of data and analytics at the market research firm J.D. Power. Mr. Anderson said manufacturers would “almost certainly cut back” on models that became significantly more expensive.
What if I want to buy a car this year?
Much remains uncertain, including whether the delayed tariffs will actually go into effect and, if so, how long they would stay in place. “We literally have no idea,” said Joseph Yoon, consumer insights analyst at the automotive site Edmunds.com. So if a new car wasn’t on your radar, there’s no need to rush to buy one, he said. A car is an expensive purchase. It’s important, he said, to take time to research models and get one that fits your needs and your budget. “Don’t panic-buy a car valued at $47,000.”