Used cars are also expected to get more expensive. Dealers, anticipating potential disruptions in the new-car pipeline, are likely to step up purchases of used cars to stock their lots, Jominy said.President Donald Trump’s threatened 25% 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% on imports of steel and aluminum, took effect this week, and those will also hit car manufacturers.
The whiplash has left the U.S. 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, Michigan. (The estimate doesn’t include the effect of the metals tariff.) While prices have moderated since the pandemic years, cars remain expensive. The average transaction price for a new vehicle is $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, CEO of Anderson Economic Group.
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 market research firm J.D. Power.
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 Edmunds.com, an automotive site. 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,” Yoon said.
Still, if you were planning to shop for a new car in the next few months anyway, and the model with your preferred features is available now, it may make sense to buy sooner rather than later. Jennifer Newman, editor-in-chief of online car shopping site Cars.com, said that inventories of new cars are plentiful and that tariffs shouldn’t affect vehicles that are already sitting on sales lots.
“If you’re thinking about buying a car, you need to be shopping now,” she said.
And if you’re interested in an electric vehicle or a plug-in hybrid, now could also be a good time to consider one because you may qualify for a federal tax credit of up to $7,500 if you buy or lease a new one. (The Trump administration has said it aims to reduce or repeal the credit, although Trump went on television this week to announce that he is buying a Tesla.)
But make sure an EV truly “suits you,” said Jake Fisher, senior director of the Consumer Reports auto test center.
Weigh factors like how far you typically drive, he said, and whether you’ll have access to a charger at home or at work.
Are used cars a better option?
Used cars are also expected to get more expensive. Dealers, anticipating potential disruptions in the new-car pipeline, are likely to step up purchases of used cars to stock their lots, Jominy said, and that will help drive up used car prices.
A quirk of the car leasing market is also expected to contribute to a tighter supply of the most desirable used cars — typically those that are under 5 years old. Many car leases last 36 months, and drivers often return them to the dealer when the lease ends, making them available for purchase. But in 2022, there weren’t many cars available to lease because of chip shortages and other pandemic-related factors, Yoon said. So that means fewer off-lease cars are available for sale this year, which tends to raise prices.
All of which means that if you’re in the market for a used car, you may pay more for a gently used vehicle or have to consider an older one. The average used car was listed for about $25,000 in January, according to the Kelley Blue Book, a used-car price guide.
What’s happening with consumer protections for car shoppers?
The Trump administration has moved to hobble the Consumer Financial Protection Bureauthe watchdog agency that oversees consumer loans, including automobile financing, by laying off staff members and seeking to limit its funding. (The efforts are being challenged in court.)
The bureau had previously been assertive in scrutinizing auto lenders. In 2023, under the Biden administration, the bureau ordered Toyota Motor Credit, the company’s U.S.-based auto financing arm, to pay $60 million for withholding refunds when consumers canceled add-on products such as gap insurance. The bureau also accused the lender of falsely reporting that borrowers had missed payments, resulting in “tarnished” credit reports.
And last year, the agency flagged illegal practices at auto finance companies, including repossessing cars even after borrowers had made timely payments or received loan extensions.
