Tariffs Drive Up Prices, but Savvy Car Buyers Still Have the Wheel

By Aaron Bickart, Executive Vice President/General Manager, OfferLogix

Tariffs have already pushed prices higher across segments, but falling interest rates, dealer incentives, and evolving buying strategies are giving consumers a fighting chance to stay in the driver’s seat.

In April 2025, the U.S. imposed a sweeping 25% tariff on imported vehicles—part of a broader strategy aimed at pressuring foreign governments to shift manufacturing to U.S. soil. While the full scope of future trade policy is unknown, one thing is clear: the U.S. automotive industry is bracing for lasting impact, especially if a standoff with China escalates into a full-blown trade war.

So what’s an average consumer to do? And how can dealers attract them?

Up-Front Costs versus Total Cost of Ownership

It can be discouraging to learn that new vehicle prices are expected to increase by $5,000 to $10,000, with J.D. Power predicting monthly payments averaging $840 or more. Tariffs on imported parts, especially from China, are already driving up maintenance and repair costs—particularly for tech-laden models or those reliant on global supply chains. Batteries, semiconductors, and key EV components are particularly vulnerable, and shortages could send price increases rippling through available inventory in the coming months.

But some industry analysts believe the long-term cost picture might not be so dire. For one thing, consumers are catching a break in financing. As the Federal Reserve continues cutting rates, auto loan interest rates—which were north of 7% last year— have dropped closer to 5% for buyers with good credit. This rate relief is helping offset some of the sticker shock by easing monthly payment pressure.

“Without the Fed’s rate cuts, we’d be facing a far more acute affordability crisis,” cautions Jessica Caldwell, executive director of insights at Edmunds. “It’s not solving the problem, but it’s buying consumers time and options.”

OEMs and Dealers Respond

Automakers are moving quickly to shield both themselves and their customers by offering cash incentives and loyalty programs, low-APR financing, prepaid maintenance and warranty extensions, and lease flexibility.

The tariff noise may be more than many consumers can keep up with, but digital tools embedded in dealer and syndicated partner websites will ensure they stay current with car-buying opportunities when they’re ready, serving up real-time pricing and offer updates, automated payment calculations, and transparent payment disclosures each time a buyer visits a site.

“While upfront costs are certainly higher, we’re not expecting a massive jump in total cost of ownership,” notes Sam Fiorani, Vice President of Global Vehicle Forecasting at AutoForecast Solutions. “Between improved vehicle durability, lower financing costs, and expanded maintenance packages from dealers, the overall expense over five to seven years may end up relatively stable.”

In fact, arming sales and marketing teams with comparative financial examples that they can share with customers may be the single best tool an owner/manager can provide to help them manage their business through these changing and challenging times. Imagine a graphical representation of the cost of a car before and after tariffs, including incentives, interest rates, and other quantifiable breaks that a shopper can review online or in the finance office to help them see the total cost of ownership and make an informed decision.

Keeping Drivers in the Driver’s Seat

Uncertainty around how far tariffs will go is adding turbulence to the auto market, but certain segments are hanging in there. State and Federal EV incentives are still strong for U.S.-made models, used car trade-ins are retaining high value, and subscription and flexible financing models are expanding for buyers wary of long-term commitments. With interest rates falling, OEMs offering rich incentives, and digital tools providing realtime data, there are still ways for savvy buyers to come out ahead and know their penny perfect payment when it’s time to buy.

For now, the market may be unsteady—but opportunity hasn’t left the showroom floor.