Are Tariffs About To Ruin The Used Car Market?
The upcoming 25 percent tariff on imported vehicles and parts is expected to create new pressure on the used-car market, potentially sending already high prices even higher as more shoppers find themselves unable to afford new vehicles.
Key Points
- A 25% tariff on imported vehicles and parts is expected to raise new car prices, pushing more buyers towards the used car market.
- Due to the effects of the COVID-19 pandemic, the supply of used vehicles remains low, exacerbated by reduced production and fewer off-lease cars from previous years.
- Consumers are acting quicker in purchasing vehicles due to uncertainty about future tariff-related developments and their impact on pricing.
The impact on automakers will vary—BMW said there will be a temporary pause on price increases but there's only so long the automaker will be able to stomach a 25% gut shot.—but analysts expect at least some of the additional cost to be passed on to buyers.
As new vehicle prices rise, used vehicles become a more appealing option for many shoppers. However, inventory levels in the used market remain tight, a lingering consequence of the COVID-19 pandemic and made worse by rampant inflation. Factory shutdowns, chip shortages, and supply constraints reduced production between 2020 and 2022, which means fewer off-lease and low-mileage cars feeding the pre-owned pipeline today.
If the tariffs remain in place for an extended period, elevated used car prices could become the norm, likely lasting for several years or maybe even forever! That outlook, however, remains fluid. A sudden rollback of the tariffs could change everything, and by change everything, I mean allow it to remain exactly as it is now.
The timing is not ideal for buyers. Early spring typically brings a seasonal uptick in used-vehicle sales, with tax refunds fueling consumer demand. The added uncertainty surrounding tariffs may also be accelerating purchase decisions, pulling forward spending that might not have happened until later in the year.
Manufacturing impacts likely won’t surface until the second half of the year as automakers recalibrate production and supply chains in response to the new trade policy.
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An experienced automotive storyteller and accomplished photographer known for engaging and insightful content. Michael also brings a wealth of technical knowledge—he was part of the Ford GT program at Multimatic, oversaw a fleet of Audi TCR race cars, ziptied Lamborghini Super Trofeo cars back together, been over the wall during the Rolex 24, and worked in the intense world of IndyCar.
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Ruin the market for who? Not for used car sellers. You seem very glass half empty on current events.
Chuck Schumer a big Democrat begged for more tariffs when Obama was Preisident. Now his story has changed. I wonder why. (TDS?)