4 Reasons You Might Not Want To Buy a New Car as Tariffs Go Into Effect
Written by
Jennifer Taylor
Edited by
Jenna Klaverweiden
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Auto tariffs have arrived. If you’re contemplating buying a new car before tariffs have much time to make an impact, you might want to reconsider. On the surface, buying now might seem like a way to save money, but that might not necessarily be the case.
Here’s a look at four reasons it could be best to wait it out a bit before driving off the lot in a new car.
Also see 15 car brands that could see price hikes as a result of tariffs.
Little Room for Negotiation
Many people wouldn’t dream of paying sticker price for a new car, but right now, there might not be much choice.
“If others are hurrying to buy a new car before tariffs kick in, there may be a rush of buyers, which can leave you unable to negotiate,” said Noah Damsky, CFA, principal at Marina Wealth Advisors in Los Angeles.
Low Inventory
A rush of buyers could also mean less inventory, which could result in you settling for something you don’t want.
“If you’re rushing to buy, you may settle for something you don’t want,” Damsky said. “You may end up with a model or features that you don’t really want.”
You’re probably going to spend a lot of time in your car, so it’s important to choose one that you actually like and that fits your lifestyle.
History Could Repeat Itself
In 2009, Damsky took advantage of the “Cash for Clunkers” program but didn’t have a favorable experience. “The government gave me $4,500 to trade in my inefficient ‘gas guzzler’ for a new, fuel efficient car,” he said. “What happened though, was that dealers were marking cars up because of high demand.”
Consequently, instead of saving $4,500 on his new car, he saved only $3,000, because of a $1,500 markup, he said. And he had to pay taxes on the rebate. “That $4,500 rebate was counted as income, so I had to pay tax on it,” he said. “The $3,000 savings pretax turned into $2,000 saved after-tax.”
Ultimately, he said this didn’t allow him to score the deal he thought he was getting. “It’s not uncommon to negotiate a sales price $2,000 below MSRP [Manufacture’s Suggested Retail Price], so buying in a normal environment and negotiating a price under MSRP would have yielded the same savings as ‘Cash for Clunkers’ and without the headache of trying to buy during a buying frenzy,” he said. “Buying stocks when everyone else is rushing to is usually a bad bet, and the same goes for cars.”
Tariff Impacts May Not Be as Bad for Certain Cars
Depending on the kind of car you plan on buying, the price might not rise as much as you think. In fact, Lauren Fix, founder of Car Coach Reports, said a car that’s built mostly in the U.S. will not be as affected by tariffs.
As reported by NPR, a 25% tariff on imported cars is in effect, and a 25% tariff on auto part imports, like engines and transmissions, will go into effect in May. However, goods from Canada and Mexico that are compliant with the United States-Mexico-Canada Agreement are free from tariffs currently, per The Wall Street Journal.
Because of that, Fix explained, “vehicles assembled in the U.S. with USMCA-compliant parts from Canada or Mexico are tariff-free.”
However, she explained that the average prices of cars not built in the U.S. will increase between $3,000 and $6,000. “Cars built in other countries like a Ferrari [and] Porsche will see [a] 10% increase in price and 7% [increase in price], respectively,” she said.
As USA Today reported, there is no evidence that there are any cars fully made in the U.S. But if you’re willing to purchase a car that has more U.S.-made parts, you may be able to avoid some potential price hikes from tariffs.
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