The Trump administration’s new 25% tariff on imported cars and auto parts, which came into effect on April 3, is throwing wrenches for potential car buyers. Those who have been waiting for prices to drop for a long time will find themselves making the difficult decision to wait indefinitely before tariffs begin or to buy immediately.
Since the Covid-19 pandemic led to a car shortage, consumers have struggled with the costly car market. These shortages are plagued by buyers five years from now, especially in the second-hand car market. As new vehicles rise, consumers are biased towards using the vehicles they use, increasing their used prices to almost new prices.
After years of rapid growth, new vehicle prices show signs of leveling. The average new car price in February was $48,039, but it was up 1.0% year-on-year since February 2024 and 1.3% from January, but close to the record price in August 2019.
Customs taxes increase the price of ownership of the vehicle
One of the Trump administration’s tariff goals is to revive domestic manufacturing jobs, but high tariffs make it more expensive for businesses to import goods. Automakers can follow, but they cannot bring the factory home overnight or at no cost.
In a March 5 press release, Jessica Caldway, director of insights at Edmunds, said, “While a one-month exemption provides a welcome reprieve, the reality is that there is not enough time for carmakers to move factories or reconfigure their supply chains.”
It is difficult to say how much the amount of tariffs affects car prices, but the short-term impact is clear.
- Increase in purchase prices for imported vehicles: almost 44% of new vehicles The products sold domestically were imported from North America, Europe and Asia in 2024. Domestic tariffs, along with mutual tariffs from international trading partners, dramatically raise prices for perennial favourites like Toyota and Honda.
- More expensive parts: Auto parts prices rose 2.3% during the tariffs imposed by the first Trump administration in 2018. It is currently unclear how customs duties will apply to domestically imported auto parts that are entered multiple times before being installed on a completed vehicle.
- Increase in insurance costs: As with the price of the parts, repair costs will increase. Repair waits can be longer and demand for rental cars could increase. These increases are passed to consumers in the form of higher premiums.
Four ways car buyers deal with customs duties and car prices
Since the announcement of tariffs, consumers have been evaluating their options more carefully. Prices can be leveled or falling after the initial disruption that disrupts the supply chain due to these tariffs. In any case, consumers don’t jump into buying without first comparing shopping and looking into industry trends.
As affordability rises again, affordability becomes an even greater hurdle. Edmunds’ Affordable Price Survey showed that 73% of consumers in September 2024 reported that price increases would delay car purchases. More than half of those surveyed indicated they were planning to spend more time or take on additional jobs to pay for their next vehicle.
Bankrate spoke with four consumers who have purchased a car now or recently, and are looking at how they are navigating tariffs and car prices.
1. Decide whether to repair or replace
Keeping up with car maintenance can help you save a lot of money and reduce the need to buy a new vehicle.
Choosing to repair or replace it is not always easy. Exchanges are a big financial commitment, with down payments, monthly car payments and higher premiums.
The looming tariffs have made some consumers choose to repair.
“My car is 12 years old and 110,000 miles. Last year I thought I had to replace my car, but I did my best. The car market wasn’t good either.”
It was Kelly Michelle Barrett, a communications specialist in Virginia. In the face of rising car market prices, she decided to increase her car repair budget instead of buying.
“Before I start watching again, I have the maximum amount I’m willing to pay for repairs,” Barrett said. “I knew there was tariff coming, so I raised that amount.”
Santander’s research shows that less than half of middle-class Americans are now able to access public transport. Of those surveyed, 77% reported relying on vehicles to get jobs, but maintaining older vehicles in order is expensive.
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If you are waiting to buy a new car, you can budget more effectively for repairs by estimating the average cost of car maintenance for your make and model. Following regular maintenance can delay large and expensive tasks on your vehicle and allow it to run longer.
2. Credit building for better rates and conditions
If you have a low credit score, do everything you can, such as checking your budget or adopting healthier financial habits.
Kiley Thompson, a middle school teacher from Florida, was in the second-hand truck market to rely on trucks to get a job, but is disappointed by her options.
Her current vehicle is 11 years old and is 100,000 miles when she bought it in 2019, but it cost $16,000 in good form. Recently, she noticed a 197,000-mile new model and significant cosmetic damage of $21,900.
“I’m looking for something every day, but if I want to save thousands, I feel like I have to find something before April 1st,” Thompson said. “The tariffs are definitely putting pressure on me. My trust isn’t that big now either.”
Credit scores are a concern for many potential car buyers. Car loans with bad credits are one option, but car loan interest rates have fallen for buyers with strong credits. Interest rates aren’t the only thing that counts credits because borrowers with better credits are likely to be approved on longer terms because they have lower monthly payments.
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You can start repairing your credits by checking your budget, paying off your debts, and replacing your old financial habits for a healthier one. You can build your credit without taking on debt, but a proper car loan will be part of your credit recovery journey.
3. New purchases when the term makes sense
If buying a new car gives you a monthly payment similar to a used car, it may be worth considering a new purchase.
Lindsey Wesley, an executive assistant in Georgia, was recently shocked by her high school senior daughter who went shopping for her first car and the price rose since she bought her last car three years ago.
“The cost of raising funds has changed so much that it’s hardly worth getting a second-hand car unless you know you can pay it off right away,” Wesley said. “Now I have a friend who has gotten a better deal than getting a new car because he paid interest the same or similar to a used car. Certainly, you’ll end up paying more in the end.
She’s not wrong. According to Experian data, the average monthly payment for a new car loan in the fourth quarter of 2024 was $742, but for a used car it was $525. Longer terms and dealer incentives, along with lower interest rates, can make new purchases an attractive lead.
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Always measure the pros and cons of buying a new car. Use an auto loan calculator to ensure your new car fits your budget. You also need to compare the depreciation rate of a new car with the cost of higher premiums against lower maintenance costs to determine whether a new car is a bargain.
4. Compromise can open the door
Rather than focusing on bells or whistles, prioritize the vehicles that help you best meet your needs.
For some consumers, tariffs drive the decision to buy the vehicle.
Senior bank rate writer Andrew Dehan and his family chose a used car with several issues that are covered by the warranty. The advantage was that he didn’t have to fund the purchase.
“We are looking for a third child in August, so a minivan was the preferred choice,” Dehan said. “We bought a minivan last month after planning for over a year. We knew that tariffs were coming, so we decided to pull the trigger before they were enacted.”
Compromise is important for many Americans who buy another vehicle. Consumer preferences have been tilted towards larger vehicles with higher MSRPs for decades. However, in December 2024, Cox Automotive reported a significant shift from more expensive SUVs and pickups to affordable cars and smaller SUVs, citing affordability as a major factor.
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To choose a car you like, consider the main factors of your vehicle, driving and riding, and how long it will last. Develop a compatibility and comparison shop rate checklist to get a realistic sense of what is possible on your budget. Compromise means not only giving up on a flash and a bit of a glam, but also getting what you need in the car.
Conclusion
Many remain uncertain for both car manufacturers and car buyers, but the basics of a good car buying are still true. Carefully check your finances, reduce what you can and use prequalification and comparison shopping to give you an advantage. Once you have the facts, you can decide whether it’s best to commit to paying for a new car now, or whether you’ll narrow it down a few more miles from your current vehicle until the market settles.
