If you want to make a bad-tasting dish for car buyers and car owners, here’s your recipe. Start with the dough. That’s made of very expensive new cars, which now average $48,039. For the filling, fold in 25 percent tariffs on steel and aluminum. Then, for the topping, ice with more tariffs, on car parts from China and the rest of the globe, not to mention 25 percent duties on cars made in Canada, Mexico, Korea, Japan and the EU.
Blech, that tastes awful!
“So what?” You think. “I’m good, I already have a car.” Unfortunately, that sweet ride is going to be more expensive for you, too. Here are all the ways that tariffs are going to put a dent in every single American driver’s wallet.
For this reporting we consulted with expert analysts at AutoPacific, CarGurus, Cox Automotive and the Insurance Information Institute to garner as many viewpoints as possible, to understand how tariffs will impact you as a car owner and driver. We also cite reporting at CNBC.
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New Car Prices Are Going Up
According to Kevin Roberts, Director of Economic and Market Intelligence at CarGurus, which is a car seller but also sells data intelligence to dealers and dealer networks, tariffs aren’t the only force driving up the prices of cars. Yes, right now carmakers (and consumers) are bracing for the impact as tariffs on products from Canada, Mexico, the EU, and Asia all hit at once. Roberts adds that this is going to harm domestic manufacturing, too, because duties on steel and aluminum, in addition to supply chain disruptions between Canada and Mexico, are going to bite.
“The scale of increases will depend on each automaker’s sourcing and production chain,” Roberts said, “but we can expect larger models, like pick-ups and SUVs, and EVs could see a greater impact since they use more of these materials.”
Roberts also explained that even as car prices became historically high, car loan interest rates are “near multi-decade highs.” So you have a very bad combination that’s going to be compounded this year: High costs of cars, high loan rates, and duties on cars and metals, all increasing.
The natural impulse is to buy a cheaper car if you cannot afford a pricier one. Roberts said that last year this happened; it’s partly what caused the bump in the pursuit of hybrids instead of EVs, because the average price of a new EV had shot up to $61,000, whereas new hybrid prices were $47,600, which is actually below the average price for internal-combustion-only cars.
But Roberts noted that used hybrid prices rose last year, by 4.4 percent, since there just weren’t enough of those cars—or any used cars. That’s in part due to a hangover effect from the pandemic, when carmakers simply couldn’t produce enough of anything, and production fell by as much as 22 percent.
Mark Schirmer, a Director of Insight at Cox Automotive, warns that as new vehicle prices rise, so will used car prices. “The two are joined at the hip,” and said the organization expects used vehicle prices to rise during the spring. They naturally do, anyway, because consumers use tax rebates to apply that money toward new-car purchases.
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Ed Kim, the President of analyst group, AutoPacific, said anyone who remembers “skyrocketing new vehicle prices” during the pandemic is about to experience déjà vu. He called tariffs the biggest price “threat today…on vehicles not assembled in the U.S.” He said it’s only natural then for buyers to look for relief with used cars. “And, when there are more people shopping for used vehicles, that in turn results in lower used vehicle supply, directly leading to higher used vehicle prices.”
|
Used Cars Increase in Price |
Percentage Rise 30 Days |
|
Honda Civic Hybrid |
8.7% |
|
Genesis G90 |
4% |
|
Toyota RAV4 PHEV |
2.8% |
|
Ram 2500 |
2.5% |
|
Subaru Crosstrek |
1.5% |
Just Keep Your Old Car—And Pay More for Parts
Roberts at CarGurus explained that tariffs are also going to impact car parts, which means the cost of maintaining the car you already own will rise. Kim at AutoPacific seconded that, and said that most “…replacement auto parts come from overseas, with Mexico and China being two major sources of replacement parts. Tariffs will balloon the prices of those replacement parts too, only adding to the pain that American drivers will experience should all the threatened tariffs go into effect.”
According to recent reporting by CNBC, only 63 percent of car components imported from Mexico complied with the USMCA trade deal Trump negotiated during his prior term. That’s because many use sub-components that come from outside the trade block, and that means that whether you’re the supplier selling tens of thousands of parts to automakers or the neighborhood auto parts franchisee in your town, you’re going to be paying more—and so are you as a consumer when you bring your car into the shop for a repair.
Car Insurance Rates are Going Up For Everyone — Especially Tesla Owners
The website Insurify, which lets buyers compare insurance costs from different providers, also crunches data. They found that insurance rates for car owners are going to bounce from an already not-great 5 percent increase in 2025 to an 8 percent increase—and in some states that rate of increase is going to be even higher. If that doesn’t sound like much, doing the math is less happy making, because it means the average car insurance payout jumps from $2,313 to $2,502, so that’s nearly $200.
Tesla owners have seen an across-the board increase that’s even higher than for other EV owners, which are already 23 percent higher than comparable gas models, according to Insurify. Tesla Model 3 full-coverage insurance increased 30 percent last year, to $4,364 annually.
Your insurance rates will vary depending on where you live and what you drive. Residents of New York will see rates jump by $489 due to tariffs, the most of any state. (With permission from Insurify, we’ve embedded the entire table of rate increases below, listed according to rate the rise, from least to most.) The simple reason for the rate increase—the higher costs of parts. Insurers know those are jumping, no matter if your car is 20 years old or brand new.
TopSpeed’s Take
You may not think of it this way, but all of this means the car you have now has suddenly become more valuable.
Michel Léonard, an economist at the Insurance Information Institute (III), explained that tariffs cause inflation, and the replacement cost of a car you own could increase by up to 16.5 percent.
III says that’s a faster rise than we saw during pandemic shortages, and even without tariffs, the costs of carrying car insurance has already risen by as much as 30 percent over the past five years.
One hedge here, that the Institute advises, especially if you’re only carrying liability insurance on an older car, is to purchase a higher-deductible umbrella or excess liability policy. That can protect you if you lose your car due to property damage from something like a fire or other accident. Even if you might be out a few grand for the cost of the deductible, umbrella policies tend to be cheap and acts as a bit of a buffer, offering some coverage in case of a non-car-accident loss.
And the other calculus: Don’t be in such a hurry to drop comprehensive insurance. Your car might be worth more than you think. The Institute advises asking your insurance provider to see what your car is worth and if you have enough coverage since, as we’re all about to experience, everything about car ownership is about to get a lot more expensive thanks to tariffs.
