If you’re shopping for a new car, you’re probably keeping a close eye on tariffs.
President Donald Trump has announced a 25% tariff on certain imports from Mexico and Canada starting April 2 — a move that could send car prices soaring, according to a recent analysis by Anderson Economic Group. However, as of Monday, it’s looking less likely that auto imports will be included in that rollout, though final details remain unclear.
In the meantime, other tariffs already in effect could start pushing prices higher. A combined 20% tariff on imports from China took effect March 4, followed by 25% tariffs on steel and aluminum on March 12.
Automakers in the U.S. rely on complex supply chains that often include parts imported from China, Mexico and Canada. Because of that, Trump’s tariffs are expected to drive up manufacturing costs and, in turn, push new vehicle prices higher later this year, according to AEG’s data.
How much more could cars cost?
If the proposed 25% tariffs on vehicle imports from Mexico and Canada take effect, new car prices could rise by as much as $12,200, per Anderson Economic Group. That estimate also factors in likely retaliatory tariffs from Canada, Mexico and China.
Even without those tariffs, prices are expected to rise due to other trade measures already in place — including steel, aluminum and China tariffs — though the overall impact would likely be smaller.
Here’s a closer look at how prices could be affected, according to Anderson Economic Group:
- With 25% tariffs, most North American-assembled models could increase by $4,000 to $10,000 per vehicle
- Also under those tariffs, prices for fully electric vehicles, which rely heavily on imported batteries and electronics, could increase up to $12,200
- Without tariffs on Canada and Mexico, car prices could still increase by more than $2,000 on some North American-built models
- An additional $250 to $2,500 per vehicle from 25% tariffs on steel and aluminum could affect nearly all models
Anderson Economic Group’s original estimates were based on a 10% China tariff, so the actual price impact could be even higher since the rate has doubled to 20% as of March 4.
North American-assembled vehicles — especially SUVs, pickup trucks and electric crossovers — face the biggest potential price hikes under 25% tariffs on Canada and Mexico, adding anywhere from $5,000 to as much as $12,200, according to Anderson Economic Group data provided to CNBC Make It.
In contrast, most vehicles assembled in Europe and Asia are likely to see smaller increases, generally around $2,000 to $3,000, as they’re mostly affected by steel and aluminum tariffs. However, some European crossover models sourcing parts from China may face slightly higher costs, per AEG.
Should you buy now?
With prices likely to rise, some financial experts say that if a new car is already in your near-term plans, it may make sense to buy sooner rather than later.
If you were thinking about buying “in the next couple of years, it might not be a bad idea to make that purchase now if you can afford it,” says Monica Dwyer, a certified financial planner in Ohio.
Another option is buying a used vehicle, which tends to be less expensive than a new one. The average price gap between new and used vehicles is about $16,000, including the down payment, according to recent Edmunds data.
Used car prices don’t always move in lockstep with new ones, but they tend to rise when new car prices go up — as seen in the years following the Covid-19 pandemic.
Even without tariffs, purchasing a late-model used vehicle is often the best financial decision, says Dan Honsberger, a CFP in Virginia.
“A car’s value should depreciate by 20% to 30% after the first two years, so if you can find a low-mileage vehicle that’s been in service for one to two years, that often makes good financial sense,” he tells CNBC Make It.
Keeping a car for 10 years or more is the best way to maximize its value, whether it was bought new or used, Honsberger says.
“It’s rare to know changes are coming and have time to act,” he says. “If you’re in a position to buy a car now, it could be a great time before prices rise. But affordability matters — only buy if it truly fits your situation.”
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