President-elect Donald Trump’s plans to raise tariffs on imported goods, including a 10% tariff on Chinese imports and 25% tariffs on goods from Mexico and Canada, could lead to significant price increases for car buyers. The tariffs are taxes on imported goods, paid by U.S. companies that import them.
The automotive sector’s unique supply chain, which involves parts being assembled and reassembled in different countries, makes it more susceptible to price increases. According to experts, tariffs could add $600 to $2,500 per vehicle on parts from Mexico, Canada, and China, which could lead to price increases of $1,750 to $10,000 for vehicles assembled in Mexico and Canada, which account for about 23% of vehicles sold in the U.S.
The cost of the tariffs will not be entirely passed on to consumers, as carmakers and dealers will also have to bear some of the burden. However, the sticker price for car buyers will increase, and experts predict that the average transaction price of new cars will likely remain stable, with dealers offering more incentives to buyers in 2025.
The average price of new cars is expected to hover between $47,000 and $48,000, and auto loan rates are currently at 9.01% for new cars and 13.76% for used vehicles, which is down from a 24-year high earlier this year. Experts predict that consumers may see even lower rates by spring, creating a more normal and favorable buying environment since 2019.
