How to shop for a car and save in a time of trade disruption

Tariffs are taxes on imports. President Donald Trump’s new car tariffs add at least 25% to the cost of affected new vehicles and auto parts. No business in the automotive supply chain has high enough profit margins to support a 25% tariff without raising prices.

Many cars imported into North America could see price hikes. Some industry experts suggest the impact could vary from $2,000 to more than $12,000, depending on the model.

Credit: SPECIAL

Credit: SPECIAL

It’s unlikely that manufacturers will pass along the exact tariff increase on every model to consumers. Even domestically assembled vehicles, including the Honda Civic and Toyota Camry Hybrid, are not immune.

Prices on automobiles and “American” models like the Ford Explorer and Chevrolet Equinox could increase because the vehicles use imported parts.

High prices boosted by more costs

These additional costs layer onto already high prices. Kelley Blue Book data shows the average new 2025 model-year car sold for more than $47,000 before the tariffs. For those financing their purchases, the price surge pushes monthly car payments beyond the traditional affordability guideline of 10% of take-home pay, with some loan payments consuming up to 15% of income.

Used cars also feel the pressure. Many buyers turn to the used market as new vehicles become more expensive. That shift increases demand for pre-owned models and drives up prices even though used cars are not subject to new tariffs.

Watch the Kelley Blue Book Fair Purchase Price of the cars you’re interested in to understand how tariffs impact prices. The Fair Purchase Price reflects recent transactions in your area, making it an effective tool to predict what you’ll have to pay.

Financing in a challenging market

The auto loan market remains difficult for buyers as interest rates stay high. The Federal Reserve held its benchmark rate steady this month despite cutting rate cuts in 2024, which had little effect on auto loans. Experts believe new tariffs may increase inflation, making the Fed reluctant to lower rates further. This uncertainty has made some car shoppers hesitant, as higher interest rates raise borrowing costs.

Credit: Courtesy of Georgia Ports Authority

Credit: Courtesy of Georgia Ports Authority

Cox Automotive data from April shows the volume-weighted average new auto loan rate at 9.4% and 14.2% for used cars, down slightly from March. The decline offers some relief, mostly for borrowers with good credit.

Automakers’ financing arms, or captive lenders, grant a significant portion of car loans. Some industry watchers say those lenders, often offering better loan rates than banks, could raise rates to offset tariff expenses.

Credit standards are tight in response to increased delinquencies and economic uncertainty. According to credit bureau Experian, the average credit score for new car loans reached 755 at the end of 2024, up nine points since 2021, indicating that loans are favoring strong-credit borrowers.

Tariff announcements led to a temporary surge in car buying as consumers rushed to avoid higher costs, tightening supply. Even before the tariffs, high vehicle prices led to larger loans, tempting buyers to stretch repayment terms to 72 or 84 months.

Smart car-buying strategies in 2025

Despite these challenges, you can take steps to navigate the market wisely.

Avoid the temptation to extend the loan term. While longer terms reduce monthly costs, they significantly increase the total interest paid over the life of the loan, sometimes by thousands of dollars. Long-term loans put buyers at risk of being “upside down,” owing more than the vehicle is worth for years.

Set a realistic budget. Assess what you can truly afford and factor in the expense of insurance, maintenance, fuel and loan interest. Aim to keep transportation costs close to 10% of your take-home pay.

Check and improve your credit score. A higher score can secure better loan rates, which is especially beneficial when borrowing costs are elevated.

Shop around for loans. Don’t rely only on dealership financing. Credit unions often offer lower rates than banks, and captive lenders may raise rates to offset tariffs.

Get preapproval for financing. Before visiting dealerships, get preapproved from a bank or credit union. Preapproval strengthens your negotiating position and allows time to understand the loan terms fully.

Credit: AP

Credit: AP

Consider larger down payments. Putting more down on your car purchase reduces the amount you borrow, lowering monthly payments and total interest paid.

Explore leasing. Leasing can be an alternative to buying for those concerned about affordability. Leases may offer lower payments to help meet your monthly budget, but you don’t build equity.

Look at used and certified pre-owned models. These vehicles avoid new tariffs and may offer better value, though demand has caused prices to increase. CPO vehicles come with manufacturer-backed warranties, providing peace of mind.

Focus on models with less tariff exposure. Cars assembled domestically with mostly North American parts may see smaller price increases. The vehicle identification numbers for U.S.-built automobiles begin with 1, 4, 5 or 7.

Negotiate smartly. Know the vehicle’s Fair Purchase Price. Negotiate remotely with multiple dealers and focus on the “out-the-door” price. Be wary of unnecessary add-ons and “junk fees” that inflate costs.

Leverage your trade-in. With rising used car prices, your current vehicle might be worth more than expected. Get multiple trade-in quotes to maximize your bargaining power.

Buy now or later?

Buying sooner may help you avoid price hikes before dealers clear out pre-tariff inventory. However, rushing into a purchase without thorough research or beyond your budget can lead to financial strain. If you aren’t in urgent need, holding off and maintaining your car while monitoring market developments might be wise. Tariffs could be adjusted or lifted, and automakers may introduce incentives or new financing options to ease affordability.

New tariffs on imported vehicles and auto parts have made car buying more complex and costly. Prices are rising, financing is tightening, and the effects are rippling into used car lots. Avoid extending new car loan payments beyond 60 months. Use careful budgeting, credit management, research and strategic shopping to finance a vehicle that fits your needs without overextending your budget.

Chris Hardesty is a veteran news researcher and editor who provides advice on buying, owning and selling cars for Kelley Blue Book and Autotrader.

The Steering Column is a weekly consumer auto column from Cox Automotive. Cox Automotive and The Atlanta Journal-Constitution are owned by parent company, Atlanta-based Cox Enterprises.