Buying a car has been a challenge in recent years. The semiconductor shortage caused costs to surge during the pandemic, and now consumers are dealing with expensive auto loan rates. In fact, Edmunds reports that in many states, a substantial number of buyers are now paying more than $1,000 every single month in car payments.
Sadly, things are going to get worse, too. If you are buying a new car, you can expect that it’s going to be a lot more expensive than in the past — and that’s thanks to new tariffs on imported vehicles as well as new tariffs on many imported goods used to manufacture vehicles made in the United States.
Just how much extra could it cost? Recent research suggests that the least affected vehicles are going to be priced at around $2,000 more, and the vehicles that are most impacted could be as much as $12,000 more expensive than they were in the past.
How much more could your car cost?
The Anderson Economic Group (AEG) conducted research into the impact of tariffs and found that the price increases varied by vehicle type.
EV crossovers could be as much as $12,000 more expensive, in large part because of import fees for many popular models of these vehicles, as well as because even made-in-America cars have parts that crossed the border many types as the vehicles were produced. This makes the cost of the tariffs even higher.
Standard gas-powered crossovers wouldn’t see quite such steep price increases, but are still expected to be around $3,500 more expensive as a direct result of the tariffs. And, pickup trucks will typically face around an $8,000 price increase while small cars go up by $6,200 and full-size SUVs end up being $9,000 pricier.
Should you wait to buy a car?
President Trump has put a pause on some announced tariffs, but has also been clear that he intends to impose new taxes on foreign imports if trade deals aren’t reached to his satisfaction. As a result, car buyers can’t count on the tariffs disappearing anytime soon.
Still, with auto loan rates already high and prices potentially rising, waiting to buy a car may not be the worst idea. Unless you are really in need of a new vehicle, putting a pause on your purchase until things settle down could help you avoid paying more than you should.
If you are considering moving forward with buying a vehicle, it’s also important to set a strict budget and ensure that your car payment is affordable. You don’t want to compromise your ability to save for retirement or accomplish other financial goals because you devote too much money to monthly car payments, so find out how much you can afford and say no to any vehicle that isn’t within that range. This may mean you need to buy used instead of new, or accept fewer options.
A financial advisor can help you to determine if buying a car is something you can afford and can work with you to determine exactly what your monthly budget should look like in terms of car payments, retirement savings, debt paydown, and other goals. With the right help, you can ensure you use your money as wisely as possible to create the most secure future for yourself — even during times of economic turbulence like we’re currently experiencing.
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