Travel & Lifestyle: Trump’s Tariffs Will Change Car Prices, Experts Say

Kara Pérez was not originally planning to buy a new car right now. Her 2008 Kia Spectra has 152,000 miles on it, and she was hoping “to get another year out of it.” But then Donald Trump won the U.S. election.

In a November social media post, Trump promised to use an executive order to levy a 25% tariff ― taxes on goods crossing the border ― on imports from Canada and Mexico, and has threatened to impose an additional 10% tariff on all products from China. All on his first day in office.

These tariffs could have far-reaching consequences for the auto market, since U.S. and European automakers rely on Mexico and Canada for car production and China is the second-largest source of imported car parts. Wells Fargo analysts recently estimated that a 25% tariff on Mexico and Canadian car parts could add about $2,100 in cost for each U.S. assembly vehicle, and cars produced in Mexico or Canada could cost $8,000 to $10,000 more.

As a result of these proposed tariffs, Pérez, a Massachusetts-based financial educator, said she is now planning to buy a car before the year is over and Trump takes office.

“Why would I pay a 5, 10, 15% markup in three months when I could avoid that now?” she said. And she wondered: “If I have to repair something in two years and we have to import that part, will that be more expensive?”

Higher prices, she fears, aren’t “a matter of if — it’s a matter of when.”

Should you join Pérez and speed up the timeline of your car purchase? It’s a good idea, said Robert Handfield, a supply chain management professor at North Carolina State University.

“If you’re thinking of buying a car, now would be a good time to get one before the end of the year,” he said.

If Trump’s tariffs are imposed, they could go into effect “right away,” and “could apply to any vehicles that are already on the lot,” Handfield said. Economists are predicting that Trump’s steep tariffs could make inflation worse and increase prices by as much as 1.1% in 2025.

“What people don’t understand is they think that … tariffs are paid by Mexico or Canada or China,” he said. In reality, the company that imports the products pays the tariff and then can choose to pass that cost on to U.S. customers. “The truth is that U.S. consumers pay tariffs through higher prices on their goods,” Handfield said.

But to be clear: No one knows yet if and how Trump’s tariffs will go into effect, so don’t panic-buy a new car you don’t need.

Pérez knew her car “was already on its way out.” But if her car had had less mileage, she might have had a different calculus. “If you have a 2020 [car] that has 80,000 miles on it, and it’s a make and a model that’s supposed to go to 200,000 miles ― you don’t need a new car. Don’t worry about it,” Pérez said.

She urges other potential buyers to run their numbers to see if a new car fits their budget. Before Pérez made the decision to buy a car, “I looked at how much my partner and I drive per year. I looked at how much it would cost us to make any major repairs to the [current] car, and I looked at what the car is worth.”

If you’re in a similar boat, ask yourself, “How often are you driving? Are you a two-car household? Is one car newer than the other?” Pérez said. “Can you start using more public transit? Don’t just say, ‘Oh, I saw a TikTok of somebody who’s buying a new car, I should buy a new car.’”

If you were planning to buy an electric vehicle, the math might also make sense for you to buy now.

New electric vehicles (EVs) are eligible for a tax credit worth up to $7,500 and up to $4,000 for used ones under the Biden administration’s Inflation Reduction Act. But that could disappear under Trump. “Tax credits and tax incentives are not generally a very good thing,” Trump told Reuters during his presidential campaign when asked about the EV credit.

“If Donald Trump decided to eliminate the federal IRA tax credit, then that would definitely change the prices for a lot of the EV leases, because most people that buy EVs, most people lease them,” said Jessica Caldwell, director of insights for Edmunds, a website for car shopping.

Caldwell said that buying a new electric vehicle is currently one of “the best deals in the marketplace” because of that tax credit. “A [car] lease is only three years, so you’re not even paying for the full cost of the vehicle, and then you take $7,500 off of that, and that’s how you get to a pretty cheap lease payment,” she explained. That’s why, if you were thinking of buying an electric car in the next six months, you might want to rush that timeline now.

In general, the last month of the year is a good time to buy a car because car dealerships “want to clear out all the 2024 model years,” Caldwell noted.

At the same time, Caldwell does not think you need to buy a car now if you were not planning to for the next two years, because “that’s quite a while. A lot can change.”

Don’t let Trump’s promised tariffs be the deciding factor for how you buy your next car. “People will probably be hyperfocused on this tariff issue, but then there’s some basic car-buying stuff they’re not even thinking about,” Caldwell warned. “We will respond to what’s in the news cycle, but maybe not the fundamentals, and then end up with a bad deal.“

So if you do buy a new car in the next few weeks, be strategic. For one, don’t just accept the car loan your dealership offers. Try going to your bank or your credit union, and seeing if you can get a better rate on your car loan, Caldwell advised.

And two, shop around for good prices for any used car you trade in, and look up how much you could earn through different dealerships and car retailers like Carvana and CarMax. “If you know how much you’re going to get on your trade-in, then that helps you establish how much you should be paying for your loan and for your vehicle,” Caldwell said. You might end up pleasantly surprised with a larger new-car budget than you had hoped for.

Ultimately, cars are some of the biggest purchases Americans make in their lives, so don’t rush this decision without thinking every detail through. Caldwell said that according to Edmunds data, the average transaction price for a new car was $47,612 this October.

Regardless of whether that price goes up next year because of tariffs, you want to be thoughtful of how and when you buy your next car. Take it from Pérez: “I’m looking at a lot of different cars just to see the different deals, because the prices really do change,” she said. “I’m casting my net wide.”