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If you’re wondering if President Trump’s tariffs will affect car prices, the answer is probably yes.
The White House may make a new announcement tomorrow, but right now, the cost to purchase new, used, domestic and imported vehicles is probably going up because tariffs will make them more expensive to manufacture. And that means auto leases, loans, and refinancing options are also getting more expensive.
But a better question might be, if you’re thinking of getting a new car, what are your options? Should you wait, or make the purchase now?
In this article, we’ll break down what Trump’s tariffs mean for you, and what steps you can take to stay smart about your finances along the way.
A tariff is a tax on imports, so everything we buy from abroad just got a little more expensive.
The goal of President Trump’s tariff policy is to boost American manufacturing by making U.S.-made products more attractive to buy. Whether or not that’ll work is an ongoing debate. Time will tell.
The tariff rollout was confusing and a bit unpredictable, so for starters, here’s what’s active as of May:
The Trump tariff on automobiles isn’t exactly 25%, though.
It’ll take time for Ford, GM and others to pivot into domestic manufacturing. And in a market where roughly half of all U.S. vehicles are either imported or include foreign parts, a 25% tax is a lot to handle all at once.
So, after pushback from the auto industry, some changes were added:
This isn’t finalized yet, but there’s also talk of allowing people who buy American-made cars to deduct auto-loan interest from their taxes (just like the mortgage interest deduction).
If the Trump tariffs on automobiles are permanent, prices are probably going up across the board.
We have official government data for April, and so far, they say prices haven’t budged. But auto tariffs didn’t even go into effect until May 3rd, and it takes a couple months for a car to go from factory to showroom floor.
Autos Drive America, an organization representing international automakers with U.S. operations, says new vehicle prices would rise by over $4,000.
And while the tariffs only target imported vehicles, there are likely to be price increases even for domestic cars. Most “American” cars use some foreign components, and even if a car is entirely U.S.-made, producers won’t want to sell comparable brands with disproportionate pricing; import taxes will be spread over all brands to compensate.
Trump’s tariffs will affect car prices in other ways as well:
Given these changes, it’s wise to consider how you approach paying for your next car. The key is to stay informed and choose the best option for your personal situation.
As overall car prices rise, financing costs likely will as well. Some buyers will delay car purchases altogether, or look into buying used. Here’s how tariffs may affect car financing loan amounts, monthly payments and interest rates.
One immediate effect of rising prices is that you may have to borrow more for the same vehicle.
If a car that used to cost $30,000 suddenly costs $35,000, you’ll either have to finance the extra $5,000 or make a larger down payment to cover the difference. That means larger loans, larger monthly payments and bigger financing costs.
Bigger loans are riskier for lenders, which will likely push interest rates higher.
However, it’s possible to avoid overpaying on interest by following best practices like:
Oddly enough, one impact of the Trump tariff on automobiles is used cars could better retain, or even go up, in value. That means more favorable auto loan refinancing terms could be on the table.
How?
Let’s say you originally owed more than your car was worth (a common situation in the first years of a car loan). But as used car prices go up, you may have some unexpected equity in your car, which gives lenders room to offer you a better deal.
Being in a favorable position to refinance may allow you to:
But whether or not refinancing is a good idea depends on your personal situation. It’s important to consider the pros and cons of a refinance and how it impacts both your budget and your overall borrowing costs. The best way to ensure you’re getting a good deal is to shop around and compare lender offers to see what you might save.
The trouble with this question is that it requires you to predict the future to be sure you made the right choice.
With a lease, the bulk of your payment is to cover depreciation (how much the value changes in the time you own it) rather than the full price. So if tariffs are permanent and cars turn out to be more expensive in the future, leases limit your exposure. Plus, since buyout prices are locked in at the start of a lease, a future lease buyout could be an attractive deal.
Then again, if your goal is to own your car outright, tariffs are no reason to delay making a purchase. Prices will only go up, and the longer you lease, the less equity you build.
In short? Leasing is a strategic short-term play that lets you wait and see what happens next. It’s a low-commitment decision that you can change later once some uncertainty clears up.
Between rising car prices, shifting loan terms and tariff uncertainty, making the right call on your car can be tough. RefiJet is here to help. Our refinancing resources help you make sense of the process and understand your potential savings, and our online tools make it easy to compare real offers — from real lenders — all in one place. Get started today.
Still have questions? Here are some quick answers about tariffs and auto loans.
Indirectly, yes. Tariffs can raise the price of new and used cars, which could impact interest rates. Additionally, if tariffs impact inflation, the Federal Reserve may raise the economy’s base interest rate to fight it.
The refinancing process won’t change, but as car values change, the terms you qualify for and the cars you can afford may change.
Possibly. If tariffs spark inflation, the Fed may raise interest rates to combat it. In this case, refinancing now may be best. However, if used car prices increase because of tariffs, you’ll qualify for better rates down the road because you’ll have more equity in your vehicle.
Ultimately, whether or not refinancing makes sense depends on whether you qualify for better rates or lower monthly payments. Regardless of what happens with tariffs, it’s worthwhile to get a quote to see how it fits with your budget.
Indirectly, yes. Overall costs for cars, insurance and repairs are going up, which could impact financing terms and interest rates.
Discover how rising tariffs on vehicles and parts could indirectly drive your car loan interest rates even higher. Is now a good time to refinance?
