Tariffs Are Here, But Prices Haven’t Spiked—Yet
In April 2025, the U.S. imposed a 25% tariff on imported vehicles and auto parts, aiming to bolster domestic manufacturing. Despite expectations of immediate price hikes, many car prices have remained stable. This is largely because dealerships are still selling vehicles imported before the tariffs took effect, allowing them to maintain pre-tariff pricing temporarily. Dealership lots are currently stocked with models that were shipped before the new tariffs were set in motion, creating a bit of breathing room for shoppers. This means that while the tariffs are officially in place, their impact hasn’t fully trickled down to sticker prices. Consumers walking into dealerships now might not notice a difference, but this situation is expected to change as older inventory is sold off. The stability in prices offers a unique, but likely short-lived, opportunity for buyers who have been waiting to make a purchase.
Automakers Absorbing Costs to Stay Competitive
Some automakers are choosing to absorb the additional costs rather than pass them on to consumers. For instance, BMW has covered tariff expenses for vehicles produced in Mexico through May 1, 2025, to maintain their market share. This approach helps keep car prices attractive for customers despite the extra financial burden on the manufacturer. However, this strategy is not sustainable long-term, and price increases may be inevitable as inventories of pre-tariff vehicles dwindle. As manufacturers face mounting pressure from higher costs, they may eventually have to shift the burden to buyers. Right now, some brands are using their own resources to cushion the blow and stay competitive in the market, but this can only last so long. Once these companies are forced to adjust, new car prices could rise substantially, putting more strain on consumers.
Used Car Prices Are Climbing
While new car prices have remained relatively stable, the used car market is experiencing price increases. As of early 2025, the average price for a three-year-old used car rose to $30,522, a 2.3% increase from the previous year. This trend is driven by increased demand as consumers seek more affordable alternatives amidst potential new car price hikes. Shoppers who are wary of paying more for a new car are turning to used vehicles instead, fueling competition in the pre-owned market. The heightened demand is pushing prices higher, making it harder for buyers to find bargains. As new car tariffs continue to loom over the market, the pressure on used car prices is expected to persist. Those looking for a deal in the used car market may find themselves facing steeper price tags than anticipated.
Domestic Production Shifts to Mitigate Tariff Impact
In response to the tariffs, automakers are shifting production to the U.S. General Motors announced a $4 billion investment to move some production from Mexico to the U.S., aiming to mitigate potential price increases and maintain competitiveness. This move is expected to enhance GM’s U.S.-based production capacity to over 2 million vehicles annually. Companies are making significant investments in American manufacturing facilities to reduce reliance on imported parts and vehicles. This shift is not only a strategic move to avoid tariffs but also a way to secure jobs and support the domestic economy. Automakers are scrambling to adapt their supply chains, and such investments signal a long-term commitment to U.S. manufacturing. As these changes take effect, the impact on pricing and availability of certain models will likely become more apparent.
Insurance and Repair Costs on the Rise
Tariffs are not only affecting vehicle prices but also increasing insurance and repair costs. With higher costs for imported auto parts, insurance premiums are projected to rise. Insurify estimates that average insurance premiums could increase by 19%, reaching approximately $2,759 annually. Additionally, repair costs are expected to climb due to more expensive parts. Car owners may soon find that routine maintenance and unexpected repairs come with a heftier bill. The ripple effect of tariffs extends beyond the initial purchase, touching every aspect of vehicle ownership. As the cost of keeping a car on the road rises, consumers might need to rethink their budgets and future vehicle decisions. This new reality could influence both new and current car owners as they navigate a shifting landscape.
Trade Agreements Offer Temporary Relief
The U.S. and the U.K. signed a limited trade deal allowing 100,000 U.K.-made vehicles to enter the U.S. annually at a reduced 10% tariff. While this provides some relief for certain models, it’s unclear when this agreement will take effect. Other countries are still negotiating, and the broader impact of tariffs remains uncertain. Temporary deals like this can help offset some of the price increases for select vehicles, offering a glimmer of hope for consumers looking for specific makes or models. However, these agreements are limited in scope and may not address the needs of every buyer. As negotiations continue, the market remains in flux, making it difficult to predict how prices will evolve in the coming months. Shoppers may need to act quickly to benefit from these temporary arrangements.
Potential for Future Price Increases
Analysts warn that as pre-tariff inventories are depleted, consumers may see significant price increases. Wedbush Securities projects that the price of a typical car could rise by $5,000 to $10,000 due to the new tariffs. This potential surge underscores the importance of timing in purchasing decisions. As the remaining pre-tariff vehicles are sold, automakers and dealerships will have little choice but to adjust prices to reflect the new economic reality. The looming threat of higher prices could prompt a rush among buyers eager to lock in current rates before it’s too late. This sense of urgency is likely to grow as inventory levels drop and the full impact of tariffs takes hold. Those who wait may find themselves facing a much costlier market.
Should You Buy Now?
Given the current market conditions, purchasing a vehicle now could be advantageous. With pre-tariff inventories still available and prices yet to reflect the full impact of tariffs, consumers have a window of opportunity. However, this window may close as inventories dwindle and manufacturers adjust pricing strategies. Prospective buyers should act promptly to secure favorable deals before anticipated price increases materialize. For many, the chance to buy at today’s prices may not last much longer. Those considering a purchase are encouraged to weigh their options carefully and make a move before the market shifts.