New automotive tariffs are beginning to take effect in April and May. While some anxious buyers are rushing to dealerships to make a purchase, buying today may not necessarily ensure a good deal, several experts said.
Prices for new and used cars have been surging since 2019. U.S. tariffs on auto imports have added a new source of pressure on an already difficult market. Some experts argue that prices will inevitably rise, while others suggest a more cautious approach.
One auto market observer told The Epoch Times that buyers fearful of price hikes shouldn’t make a purchase based on emotions.
Karl Brauer, an executive analyst at car search engine and price aggregation service iSeeCars.com, said in an email that automakers and dealers are both “playing up the potential price increases to increase sales in the near term.”
“Even they don’t know exactly how tariffs will play out in their pricing structure,” Brauer said. “While higher future vehicle prices are possible, they are not guaranteed, and buyers should never be driven by fear or intimidation.”
Charles Benoit, a trade counsel at the Coalition for a Prosperous America, predicts that if the tariffs are successful in driving production back to the United States and pushing consumers to buy American, the increased production capacity will lower automotive prices.
Recent sales data show that consumers are nonetheless more than a little spooked about the potential impacts of a 25 percent tariff on completed automobiles enacted in April.
Through the first week of April, new vehicle sales are up by 22 percent compared with the same time in 2024, according to data shared by Cox Automotive chief economist Jonathan Smoke.
Used car sales in that timeframe are up by 12 percent, he said.
In an April 16 presentation, Smoke said those purchases were likely driven by consumers wanting to beat any tariff-related price hikes. Cox data indicated that the activity was driving down the available supply of both new and used vehicles on dealer lots across America.
Bringing Back Production
President Donald Trump, whose administration has imposed new tariffs to boost domestic industries, said on April 2 at the White House that the automotive tariffs are necessary. In his speech, Trump said the tariffs will counteract actions by foreign nations that have “devastated our industrial base and put our national security at risk.”
Benoit told The Epoch Times that the Trump administration’s actions shouldn’t have been a surprise. Rather, the first Trump administration recommended assessing a similar tariff on finished vehicles in 2019.
Right now, Benoit said, imported automobiles account for more than half of the American car market. U.S. trade policy has allowed this proliferation of imports while other countries are buying an insignificant amount of American vehicles. Automotive factories, he said, are running at less than 60 percent capacity.
In 2024, according to sales data published by Car and Driver, six of the top 25 top-selling cars in the United States were models made by U.S.-based companies.
If the tariffs are successful at attracting production to the United States, Benoit expects consumer prices to fall.
He said the tariffs are already reaping benefits in the automotive sector. Foreign auto companies are adjusting their plans to move production to the United States or dial back foreign production.
Most recently, Honda Motor Co., the second-largest Japanese automaker, said on April 16 it will only make a five-door Civic hybrid model in Indiana rather than produce it in Japan and the United States.
On April 4, Stellantis NV, a Dutch company that makes Dodge, Chrysler, Jeep, and Ram models, said it was temporarily idling plants in Mexico and Canada as it assessed the impact of the tariffs. Stellantis also announced it will temporarily lay off 900 workers in Michigan and Indiana.
Brauer said all automakers can quickly add production capacity by simply adding another shift to their U.S. facilities, but the overhaul needed to fully address the changes demanded by the new tariff schedule could take years.
“When tariffs change abruptly with little warning, it’s tough for all the automakers,” Brauer said. “They just can’t react quickly when that happens.”
Inflationary Pressure
In the short term, both Brauer and Stephanie Valdez Streaty, director of industry insights at Cox Automotive, said they believe the automotive tariffs will significantly increase the cost of both new and used cars.Along with the direct pricing pressure from the duties on finished automobiles, the tariffs on foreign-made inputs will push the cost of production upward, too. Brauer said most cars in America are made with foreign components.
In an April 7 presentation, Smoke said his initial prediction on the tariffs’ impacts was that sales would surge, as they have. Then, manufacturers and dealers would start to cut back on their incentives and discounts aimed at moving new vehicles to keep prices relatively stable. In May, when the parts tariff comes into effect, Smoke anticipates a 30 percent production drop.
Smoke predicts that vehicle production and deliveries will be cut over the long term, and some models may be eliminated from lineups entirely. The total supply of all automobiles will decline, and prices will rise.
Streaty told The Epoch Times that the cost of a vehicle will likely increase by an average of 11 percent.
“Consumers are going to have to pay more,” Valdez Streaty said. “Which isn’t a good thing, because ... vehicles are just so expensive and out of reach for the average household.”
The range of price increase will vary depending on the type of car purchased, Brauer said. In an analysis he shared with The Epoch Times, iSeeCars estimated the tariffs will boost the price of the most popular new cars in America by $6,000 to $16,500.
Fewer Affordable Options
Higher automotive prices are bad news for most Americans. Since 2019, the price of new and used cars has increased at a faster rate than overall consumer price inflation and median household income.“It’s a much more challenging environment than it’s probably ever been ... for the average American making the average amount of money to afford a car, new or used,” Brauer said. “The tariffs are only going to add to that challenge, at least in the near term.”
An industry insights report published by identifier Cars Commerce says the average list price of a new car in February was about $48,700. That’s a 29 percent increase over the past five years as the average price was $37,800 in February 2019.
The average price of used cars has increased by more than $7,000 over the past five years. In February, the average used car cost $28,500, while in February 2019, it was $21,300. That’s about a 34 percent increase.
According to observations recorded by the Federal Reserve Bank of St. Louis, the cost of living as measured by the Consumer Price Index has increased by about 26 percent over the same span. The index includes food, clothing, shelter, fuel, transportation, service fees, and sales taxes.
Meanwhile, the median household income has increased by about 17 percent to $80,600 in 2023 from $68,700 in 2019, according to estimates published by the Census Bureau.
Brauer called the current affordability situation “terrible.” In 2019, for example, an American with a $20,000 budget could afford about half of the used cars for sale in the United States. Now, only about 10 percent of used cars cost less than $20,000.
The total cost of ownership over the life of a car has also increased. Valdez Streaty said that over the past year, the cost of auto insurance has risen by about 20 percent. Since 2020, the cost of vehicle maintenance and repair has increased by more than 30 percent.
Plus, the higher interest rate is driving up the cost of financing a car. In the fourth quarter of 2024, according to statistics published by Experian Information Solutions, the average interest rate for a new car loan was about 6.3 percent, while the average rate for a new car was about 11.6 percent.
Brauer said Americans are taking out loans that last as long as eight years instead of taking out a loan that matures in less than five years.
“$700 to $1,000 car payments are far more common than they used to be, which blows my mind,” Brauer said. “That just seems like a ridiculous amount of money to be spending every month to finance a car. But that’s what has happened to affordability.”
