What tariffs can be for car prices
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elected president Donald Trump voiced about its potential raising tariffs on imported goodsAccording to experts, it can increase car prices.
Trump talked about the implementation of the annex 10% tariff on goods imported from Chinaalso adding 25% tariffs on all products from Mexico and Canada. Active FridayTrump told the European Union that it must reduce the trade gap with the United States by buying oil and gas, or face tariffs.
Tariffs are taxes paid on imported goods by US companies importing those goods.
Tariffs have the potential to disproportionately affect vehicle prices because the materials used to assemble a vehicle come from different parts of the world. According to Ivan Drury, director of research at Edmunds, some components cross U.S. borders multiple times before reaching the factory.
“There is no such thing as a 100% American car,” Drury said. “Even though it’s something that looks simple, there’s a lot of complexity.”
Component tariffs could add $600 to $2,500 per car on parts from Mexico, Canada and China, according to estimates in a Wells Fargo analyst note. Cars assembled in Mexico and Canada, which make up about 23% of the cars sold in the U.S., could increase prices by $1,750 to $10,000.
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If the tariffs go into effect, the sticker price drivers pay at the dealership will eventually increase, experts say. But automakers and dealers may also have to shoulder some of the costs.
“The cost will be spread across all stakeholders: automakers, dealers and consumers,” said Erin Keating, executive analyst at Cox Automotive. “No company is going to pass all those costs directly onto their consumers.”
Here’s what you need to know.
Why might cars be subject to higher tariffs than other goods?
According to experts, the automotive sector’s supply chain is unique because some parts move back and forth across international borders as parts are built and assembled.
“People don’t really know where their cars are built and how they’re assembled from parts all over the world,” Drury said.
Take the steering wheel for example. Electronic sensors or other parts that go into the steering wheel come to the United States for assembly from countries like Germany, Drury said. The steering wheel is then sent to Mexico for sewing, only to be returned to the US and installed on the car.
Keating said that given the supply chain, vehicles “could be subject to progressively more tariffs” than other products.
Carmakers may not be able to pass on the entire markup to the buyer if the tariffs are added to production costs, experts say.
Automakers and dealers may have to “carry some of the burden,” Drury says. “If you look at how much expensive vehicles can get at these rates, there’s no way they can move that many (cars).”
However, there is a silver lining — many cars that will be on lots in early 2025 have already been assembled or are currently in production, adding to next year’s available supply, Keating said.
What can expect car buyers in 2025
According to experts, car buyers in 2025 are unlikely to see prices affected by the new tariffs. Initial prices will remain roughly the same, and dealers will offer more incentives next year to attract buyers.
According to Keating, the average transaction price of new cars is expected to vary between $47,000 and $48,000. As of November, the average price was $48,724, up 1.5% year over year. per head Kelley Blue Book data.
While the average price is higher than pre-pandemic levels, “the good news is that it’s relatively stable. We’re not fluctuating across the board,” Keating said.
As of December, the average auto loan interest rates for new cars were 9.01%, and loan costs for used cars were 13.76%. per head A lot of cars. Average interest rates for both types of loans are low nearly a full percentage point from a 24-year high earlier this year.
“We expect consumers to see even lower rates through the spring, creating the most normal and favorable buying environment since 2019,” said Jonathan Smoke, chief economist at Cox Automotive. he wrote in the report.
For now, experts are optimistic for the auto market next year, with increased inventory and bargain opportunities.
“Tariffs or no tariffs, there will be more incentives,” Drury said.
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