Car Purchasers Face Tariff Turbulence: Dealerships Might Act as Obstacles or Aid
In recent times, the automotive industry has been experiencing a significant transformation, with the cost of new cars steadily climbing since President Trump announced auto tariffs. According to Erin Keating, executive analyst at Cox Automotive, this trend has led to a shift in consumer demand towards American-made vehicles.
The average new-car transaction price rose to $48,699 in April, a 2.2% increase from the previous month. This upward trend has been a concern for many, including Cox Automotive Chief Economist Jonathan Smoke, who expects 2025 to be a "rollercoaster" for the auto industry.
The recent sales pace has been positive, lifting current market sentiment higher for franchised dealers, as per Smoke. However, the announcement of auto tariffs triggered a dramatic buying frenzy, with early April new-vehicle sales surging nearly 50% year-over-year.
Before the new tariffs, the U.S. had zero tariffs on autos from Canada and Mexico, and generally low tariffs from other countries. The new 25% tariff on all imports raised costs significantly, causing a rise in the average industry-wide vehicle price by $97 between January and July 2025. Some import prices rose by thousands, especially UK imports, which saw a $10,000+ increase.
In response to these changes, dealerships have been employing several strategic approaches. They are optimizing inventory to focus on models less reliant on imported parts, using flexible, data-driven pricing strategies, enhancing customer communication and education, strengthening relationships with local suppliers, offering varied financing options, and leveraging digital marketing to highlight the benefits of American-made vehicles.
These measures aim to help consumers navigate the changes and maintain affordability amid rising prices. Over half of consumers surveyed said tariffs influenced them to consider American-made cars, and more than 73% would consider purchasing U.S.-built vehicles to mitigate tariff-related cost increases.
The tariff-induced wave also affected the used market, with sales jumping 24% year-over-year. Both new and used markets, according to Roberts and Smoke, are demonstrating "remarkable resilience" despite tariff-induced volatility.
However, the unpredictability of auto tariffs has made the market very unstable, as stated by a Chevrolet dealer. A Toyota dealer expects challenges in the second half of the year. Dealers, as per Cox, say these factors are holding back business.
Despite having no control over tariffs, dealers can be proactive and transparent in explaining which cars are affected by tariffs and which aren't. Auto dealers can help customers understand the impact of tariffs on imported vehicles and their prices, providing information about different trim levels and offering varied financing options to maintain customer affordability amid rising prices.
As purchasing a vehicle is considered a luxury item due to rising prices, according to Kevin Roberts, director-economics and marketing intelligence for CarGurus, it is crucial for dealers to maintain transparency and trust with their customers. The current political climate and the unpredictability of auto tariffs have made the market very challenging, but dealers are adapting through strategic inventory management, pricing flexibility, and enhanced customer engagement to mitigate affordability challenges.
- In light of the rising costs and unpredictability of auto tariffs, dealerships have been employing strategic approaches such as optimizing inventory, flexible pricing, enhanced customer communication, varying financing options, and digital marketing to maintain affordability for American-made vehicles.
- In order to help consumers navigate the changes and preserve affordability, auto dealers are being transparent about which vehicles are affected by tariffs, providing information about different trim levels, and offering varied financing options to better cater to consumer needs.
