Are you wondering how tariffs, whether it’s just the threat of them or the actual thing will affect the prices of used cars? Well, you’re not alone. Almost everyone who is thinking about buying a car in the near future wants to know what tariffs will do to their wallet. While there is still a lot of uncertainty, here are some things you can expect when you go to the dealership.
What Exactly is a Tariff?
Before we get into how tariffs will affect the price of used cars, it’s important to review what a tariff is. A tariff is a tax on goods charged to the importer when they bring a certain product into the country. For new cars, the tariff is 25 percent.
It’s important to note that tariffs can impact the price of cars even if they are made in the United States if parts and materials come from other countries.
New Car Prices Will Increase
The bottom line is that most new cars will become more expensive if the tariffs stay in place. Once the current inventory that car dealers received pre-tariff is sold, they will be replaced by cars that they have to pay an extra 25% for when they cross the border. It’s hard to predict how much of these costs will be passed on to the customer, but it’s almost certain that we will see an increase.
Climbing New Car Prices Will Affect Used Car Prices
So, if the tariffs are only on new cars, why does it matter if you’re shopping for a used car? It basically comes down to supply and demand. If car dealerships have fewer new cars available at affordable prices, more car buyers will turn to the used car market. Since we have a fixed supply of used cars available, it will create a greater demand for used cars, which will in turn, increase the prices.
Slim Pickings All Around
The automotive landscape is similar to what we saw during the pandemic. With the threat of lower inventories and higher prices, consumers are likely to hang onto their current vehicle instead of buying a higher-priced new one. This leaves us with fewer used cars hitting dealership lots.
Should You Plan to Buy a Car Soon?
If you’re planning to buy a car this spring, the turbulence created by the tariffs will likely reduce the number of options you have to choose from and lower your chances of getting a great deal.
Unlike the pandemic, experts are hopeful that automakers will change their strategies for production so they can adapt quickly to the changing manufacturing landscape so we can get back to affordable prices.
You Can Still Save Money by Buying Used Cars
If you’re in a situation where you need to get a car, shopping used is still one of the best ways to save money. Since supply is limited, you might have to expand your search. Look for a vehicle that’s older than what you originally planned to buy or look at dealerships that are outside of your immediate area.
