Watch for Higher Used-Car Prices Under Latest Trump Auto Tariffs

Car prices are expected to rise under the latest tariff policy—and not just for new ones.

Higher production costs driven by Trump administration trade moves will likely push up new vehicle prices, analysts said. That could send more shoppers looking for used cars and trucks, pushing up prices for secondhand vehicles in a market where drivers are already hanging onto their wheels for longer.

The latest tariffs—President Donald Trump announced Wednesday that his administration plans to impose a 25% tariff on cars assembled abroad beginning next week—stand to hit a market that has already seen prices move higher in recent years. Average monthly payments are up 26% for new cars and 30% for used cars over the past five years.

“Some consumers get priced out of new vehicles, and they have to trade down to used vehicles—and that puts more pressure on the value of used vehicles,” said Jeremy Robb, senior director of economic and industry insights at Cox Automotive.

The precise shape and effect of Trump tariffs is yet to be seen. Engines, transmissions, electrical components and other parts are expected to be subject to the 25% import tax soon. Parts coming from Canada and Mexico may not be subject to tariffs until a system is in place to assess what portion of the item was sourced in the U.S., according to J.P. Morgan.

Manufacturers are expected to charge more as the cost to produce each vehicle rises at least $3,000, according to Cox. Dealers may be less inclined to keep prices down if supply plummets, as may happen when tariffs are imposed in an industry where models may cross the border six or more times during assembly, Cox said.

Asked on Friday whether Americans should buy cars to avoid tariffs, Trump said “No, I don’t think so.”

The tariffs could cost the auto industry $82 billion annually, according to J.P. Morgan’s estimates. If this is offloaded entirely on consumers, car prices may rise an average of more than 11%, the analysts said. Imported cars may cost $5,000 to $15,000 more, while domestic models may sell for $3,000 to $8,000 more if the higher costs are completely shouldered by consumers, according to Goldman Sachs.

 “Under the new scheme, virtually all automakers will face significant pressure to raise prices, making it more likely domestic automakers will be able to effect price increases to better offset tariff costs without the risk of material market share loss,” JP Morgan analysts wrote Thursday.

Tariffs are likely to be “fairly inflationary” for used vehicles, according to Robb, at Cox. Wholesale values were already expected to grow, and prices could climb further as people migrate to the used market, he said. Demand may slow if the tariffs trigger a slowdown, but only so much, Robb said.

Morgan Stanley analysts said earlier this month that passing on costs without slowing sales may be “challenging,” given that car payments are already near record highs. Fresh data showed signs that consumers are falling behind on auto-loan payments.

Manufacturers aren’t expected to bring much assembly back to the U.S. because, in many cases, domestic production is more expensive than importing items, analysts have said. Once nations retaliate with tariffs and the industry adjusts, car and auto prices are expected to rise about 6%, according to estimates the Budget Lab at Yale compiled early this month.

“We expect disruption to virtually all North American vehicle production,” Jonathan Smoke, chief economist at Cox, said during a webinar held hours before details about the new tariff policy were announced. “Over the longer term, we expect sales to fall, new and used prices to increase and some models to be eliminated.”