Car prices are already rising in the US due to President Donald Trump's tariffs. Often, customers can't see it directly. Even though the fixed price of a particular model of a car has not changed, car manufacturing companies are quietly reducing rebates and putting a stop to cheap financing deals.
That's increasing customers' monthly payments by hundreds of dollars, even though companies are saying they didn't raise prices. According to Edmunds.com Inc., many companies have also increased delivery charges from $40 to $400. Morris Smith III, a Ford dealer in Kansas, calls it "stealth." These stealth increases help car companies cope with Trump's 25% tariffs.
The impact of these subtle price hikes of the auto industry has started to show. According to Kelley Blue Book, the average sale price of a new car jumped 2.5% in April. This was the largest monthly increase in five years, and the price reached about $48,699. Earlier, the incentives to reduce prices used to be up to 10%, but now they have been reduced to 6.7%.
According to Cox Automotive, zero-percent financing deals fell to their lowest level since 2019 in April. For example, on America's best-selling Ford F-150 pickup, a 6-year loan was previously available at a 1.9% interest rate. Now, 1.9% financing is available only on three year loans, which very few people take.
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While these steps have so far prevented companies from raising prices directly, there are now outright price hikes to come. Ford Motor Co. has told dealers it will raise the sticker prices of three of its Mexican-made models - the Maverick pickup, Bronco Sport and electric Mustang Mach-E - by up to $2,000. Subaru Corporation of Japan.
Increasing the prices by $1,000 to $2,000 to offset the costs of tariffs. Hyundai Motor Co. is considering a 1% increase in the suggested retail price of each of its models, which would be an increase of hundreds of dollars. Some automakers are increasing the prices of their new 2026 models, but they are attributing it to the change in model-year and not tariffs. John Murphy, an analyst at Bank of America Corp., said that "raising the price of a new product is not 'raising the price."
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All these changes - increased sticker price, lower incentives and higher fees - will be more visible to car buyers in the coming weeks. Since the 25% levies came into effect on April 3, dealers have been selling from the depleting stockpile of pre-tariff cars. The process is almost complete. By the end of June, dealers will have cars that have cost more to bring into the country.
"There's nothing that can stop this effect," said Sean Tucker, editor of Kelley Blue Book. He believes that the biggest change will be seen only when dealers stop selling pre-tariff cars. According to a survey by CarEdge.com, 65% of new car buyers will back out of buying a car even if the monthly payment increases by just 5%.
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Automakers can't just raise the prices of imported cars. They can also increase the cost of their more expensive, US-made models, so that the entire burden of tariffs does not fall on cheaper cars made abroad. For example, General Motors Co. imports more than 400,000 cars from South Korea annually, including the $20,500 Chevrolet Trax. Sean Tucker said that GM does not need to raise its price by 25% to pay the 25% tariff on the Chevrolet Trax, because its customers are very price-sensitive.
Instead, GM may increase the price of the Silverado pickup. Cox estimates that tariffs can increase the price of imported cars by 10% to 15%. According to Cox, domestic sales could fall from 16 million in 2024 to 15.6 million this year. J.D. Power estimates that tariffs could reduce U.S. auto sales by about 1.1 million vehicles annually. Automakers are also reducing production. All of this is interconnected, making vehicles more expensive and reducing their demand.
Source: Bloomberg
