Whatever your position on President Trump’s proposed tariffs, the fact is they will raise prices on a host of consumer items, including cars. Experts estimate that Trump’s 25 percent tariffs on imported auto parts and automobiles will add as much as $7,000 to the cost of the average-priced new car. Even if last month’s proposed agreement in principle between Trump and European Commission President Jean-Claude Juncker to scrap tariffs between these two trading partners holds up, consumers are already seeing price increases because of U.S. tariffs on steel and aluminum imports.
So, should you buy a new car now, before these additional tariffs hit?
In addition to the increased cost of buying a new car once tariffs are in place, Reuters recently reported that such tariffs could raise insurance premiums, boost repair costs, and even increase the theft of more cars for their parts, based on comments submitted to the U.S. Commerce Department by insurance industry analysts, manufacturers, and trade groups.
And if you think you’re protected because you own an American automobile, guess again, because up to 50 percent of parts for cars assembled in this country are imported. In addition, any new cars not subject to the import tariff would likely see their prices increase anyway.
“If you artificially inflate the price of some cars to be uncompetitive, you give the lower-priced cars a buffer to raise their prices,” Ivan Drury, senior manager of industry analysis at Edmunds, an online auto research guide, told CNBC. “At the end of the day, it would just mean higher prices for everyone.”
Still another consideration is the effect of panic buying. If everyone rushes to buy a car before the tariffs take effect, that in itself could boost prices at least temporarily over and above the new tariff rates.
All this is in addition to the fact that vehicle prices always go up, tariffs or no. And interest rates are rising as well, given the Federal Reserve’s recent moves to stem what it sees as inflationary trends, so the cost of a new car loan is already up.
So should you buy a new car now? Experts are divided. CBS News reported that the U.S. government must go through many steps before imposing tariffs on cars, so “technically it could take months before an actual tariff is implemented.” Indeed, the Commerce Department has until mid-February 2019 to complete its investigation into whether considerations of “national security” can be invoked to raise auto-related import tariffs, the same tack Trump used to impose the steel and aluminum tariffs earlier this year.
Jeff Schuster, president of Americas Operation and Global Vehicle Forecasting for researcher LMC Automotive, disagrees.
“There isn’t more than about 60 days of inventory at dealerships, so it wouldn’t take more than a month or two to affect consumers [once tariffs are implemented],” he told CNBC.
The best advice seems to be to watch the news, and if tariffs are implemented, decide what to do then. If “you’re psychologically there, you want the new car, you have the money and all those things line up, that’s, in my opinion, more important than trying to chase this ghost of ‘when is the perfect time to buy,’ ” Eric Lyman, a chief analyst for TrueCar, told CBS.
We agree. Don’t rush to buy a car quickly unless you’re already contemplating such a purchase. If a new car has already been on your radar, you should be doing your homework before setting foot in a dealership. You should be comparing interest rates and getting pre-approved for a loan. Then start looking. Research all vehicles in your price range, and make a list of must-have features. Never fall in love with a particular make or model, and never buy a car without taking it for a long test drive. Do your research on the various dealers in your area, as well, to make sure you’re dealing with reputable sellers.
A car is the second-largest purchase most people make after buying a house. If you’re a renter, it’s the largest. And if you buy well and maintain it, it’s an asset that will last you for years, long after the payments are over. Don’t let the pressure of impending tariffs or rising interest rates or any other consideration push you into making a move you’re not ready for and haven’t researched thoroughly.
In the meantime, let Billshark take a close look at the bills you already have. You’ll be surprised at how much money we can save you!