U.S. auto prices are as good as they’re going to get, with consumers rushing to buy new trucks and SUVs before tariffs drive up costs, analysts say.
Why it matters: The reality of President Trump’s tariffs on imported vehicles and auto parts is sinking in, with the consensus that vehicle prices will go up and the industry’s financial outlook will darken.
The big picture: The impending tariffs are giving people a reason to go out and buy a new car now —ahead of the traditional spring selling season — even if they’d been on the sidelines, fearful of a worsening economy.
- “Consumers likely have a narrow window to buy new or used vehicles before prices increase by 10% or more,” said Jonathan Smoke, chief economist of Cox Automotive.
Zoom in: There’s been a massive range of estimates, from a variety of sources, about how much car prices could actually rise as carmakers look to pass along their extra costs.
- One reasonable estimate comes from the Yale Budget Lab, which forecasts vehicle prices will rise 13.5% on average, or about $6,400 on the average new car.
Reality check: No one really knows for sure yet.
- “We’re still trying to figure out what the rules are,” a spokesperson for one major automaker said.
Catch up quick: Trump on Wednesday announced 25% tariffs on autos and auto parts that are not produced in the U.S., effective April 2.
- That’s the same day the administration says it will unveil reciprocal tariffs on a slew of imports.
- Trump’s order effectively ended more than 30 years of free trade across North America, while imposing hefty tariffs on vehicles from other key trading partners, including Germany, Japan, South Korea and Sweden.
By the numbers: With three days to go in March, car and truck sales jumped about 19% over February’s sales, and 15% from March 2024, according to estimates from S&P Global Mobility.
- That translates to a seasonally adjusted annual sales rate (SAAR) of 16.3 million units in March, well above last March’s 15.7 million SAAR.
Yes, but: That might be the high mark for a while, according to S&P principal analyst Chris Hopson.
- “Downside risks to the auto demand and production environment abound,” he said.
- “I expect we’ll see relatively strong sales activity for a month or two, but prices will rise, and sales will slow noticeably before the end of Q2,” added Cox’s senior economist Charlie Chesbrough.
- People who can’t afford a new car will trade down to the used-car market, which will drive up the prices of pre-owned vehicles, too.
The bottom line: Cars probably aren’t getting any cheaper.