Auto tariff price hikes: When is the best time to buy a car?
According to an analysis from the Anderson Economic Group, auto and auto-part tariffs could add at least $2,000 to the price of vehicles. However, many automakers are absorbing costs or raising prices modestly.
Kelley Blue Book executive editor Brian Moody joins Wealth to explain that buyers already in the market should act soon, as used car prices are set to rise with shrinking inventory.
To watch more expert insights and analysis on the latest market action, check out more Wealth here.
25% tariffs on imported cars and car parts are expected to create cost burdens of at least $2,000 per vehicle, according to an analysis from the Anderson Economic Group. And that estimate pushes upwards of $15,000 for certain electric vehicles and European and Asian luxury cars. Car companies are responding in kind. Hyundai, weighing 1% price increases across the board, according to Bloomberg. And starting July 5th, Ford will start raising prices on three Mexico-built models. Here with more, we've got Brian Moody, executive editor over at Kelly Blue Book. Great to have you here with us, Brian. Are we seeing some automakers mull price increases due to the tariff environment and how much do you expect will actually be passed on to the consumer?
Well, it might vary model by model, but what we're seeing right now is that there hasn't really been much of a price increase on new cars. In fact, year-over-year, it's about flat, less than 1% of an increase on new cars. That's the average transaction price. But that's because certain automakers have chosen to sort of, you know, absorb that increase, while other automakers, Nissan specifically, have actually lowered the prices on specific models that are built here in the US. So some prices will go up, the ones that would be the most greatly impacted would be a car that arrives here to the US, almost already completely built. That's the car that's going to incur the largest tariff.
And so, which companies are best navigating and best positioned, I guess, going forward to also navigate that tariff risk as it relates to the consumer price?
Well, Hyundai Group is one that's positioned well, even though they are considering a 1% price increase across the board. But they do have a relatively new plant in Savannah, Georgia, which is positioned to build cars and SUVs for all of their brands, and that could be a wise move. Now, that was already in play long before the current crisis or the current administration. So that could have ended up being a wise move. Kia is also in a good position. Mercedes-Benz has actually said that they have their plant in Alabama, where they're going to ramp up production of models that maybe they did make outside the US, and they're going to build them here in the US. And those companies that can do that, that have the option of doing that, are going to be in the best position. Also, Ford builds a very large majority of their cars here in the US.
So when is the best time to buy a car in this current environment right now?
Well, if you're already in the market for a new car, and when I say that, I mean, don't let headlines move you into the new car market. Let's say you're already there, your lease is ending, you've had a wrecked car or your car just won't last any longer. Make that process speed up just a little bit. Don't jump in because you're afraid about what the prices are going to be if you have a good car now, but if you're already in the market, speeding that process up will help. I just don't see how waiting can help in any way, especially since we know used car prices were already going to go up, no matter what.
And so, what is the outlook for the summer that you're anticipating?
Um, gradually increasing used car prices, gradually shrinking used car inventory, a relatively healthy new car inventory, but prices, prices will gradually creep up on many cars that you typically thought of as low price. So what we don't know is how they're going to spread out the price increases. What we do know is that there probably will be increases.
While we have you, Brian, we're also keeping tabs on the Republican tax bill that passed the House headed to the Senate. In the bill, there is a proposal for a tax break for car purchases. Americans would be able to deduct up to $10,000 a year in eligible auto loan interest. So how impactful could this be for buyers and what are some of the details from the best assessment that you've been able to kind of put together?
Right. So that could be a very good thing for consumers. And here's why. The affordability of new cars has been decreasing, meaning they're just becoming more expensive, not just the price of the car, but the price of purchasing credit to buy that car, and the price of servicing and the price of parts. So that kind of relief could move more people into the market. You should still be reasonable and get a low-priced car based on your budget, but that kind of thing is the sort of hidden fee that many consumers don't like, the interest rate or the service plan. So it could help greatly. Another place to look for consumers is the used electric car market. That's a great place for some bargains.
What are you making right now of just the sentiment among car brands, especially as we think about the EV landscape and how Tesla has been losing some of its, its luster internationally? Is that something that's also transpiring here domestically?
Yes. Well, yes, but this past month, GM, Nissan, and Tesla had pretty good months because there was increases in their electric vehicles. And remember, Tesla only sells electric vehicles. But yes, Tesla market share will continue to go down and that's simply because there's more options. Think about when Tesla first introduced the Model S and the Model X, you know, years ago, there wasn't much competition. Today, there's plenty of competition from brands like Nissan, Ford, Honda, and others.
Brian, great to see you. Thanks so much for taking the time here with us today.
Thank you.
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