If you're waiting for a better deal on a car purchase or repair, experts advise against it. The 25% tariffs on steel and aluminum imposed by President Donald Trump have already started, and the temporary exemption for U.S. automakers from tariffs on imports from Mexico and Canada ends on April 2. This could lead to higher prices for cars and parts soon.
Ivan Drury from Edmunds advises that waiting won't yield better discounts. The auto market is currently stabilizing, with new vehicle prices slightly down and used car prices up by 0.8% compared to last year, both below the overall inflation rate of 2.8%. However, these trends might not last, as tariffs could increase car costs by $4,000 to $12,500, depending on various factors, according to Anderson Economic Group.
Not only American brands like Ford and General Motors will be affected, but foreign automakers with North American production, such as Honda and BMW, might also raise prices. Patrick Anderson, CEO of Anderson Economic Group, warns that these trade policies could harm the U.S. economy's ability to manufacture using parts from Canada and Mexico. The impact of tariffs is uncertain, but they have already unsettled consumers.
A recent survey by the New York Federal Reserve shows that 33.5% of consumers expect to be denied auto loans, the highest rate in 12 years. Those looking for North American-made vehicles might face shortages, as S&P Global Mobility predicts a potential drop in production by 20,000 units per day once the tariffs take effect.
Stephanie Brinley from S&P Global Mobility notes that automakers will need to balance appealing vehicle content with increased costs. Incentives like rebates and financing promotions may soon be reduced as manufacturers try to offset higher expenses.
Used car prices are also expected to rise, partly because lessees might hold onto their vehicles longer to avoid tariff-inflated prices, tightening the used car market. Consumers can do little to avoid these effects, but knowing where a vehicle and its parts are made can help. Drury suggests using the American Automobile Labeling Act report to understand a vehicle's origins.
Brinley advises against compromising on needs to avoid tariffs, as this could lead to unsatisfactory purchases. While prices may rise, it's important to shop wisely and stick to your needs. Adjust your budget if necessary, but continue shopping as you normally would.