Car-buying frenzy ahead of tariffs continues, pushing new vehicle prices higher
As car buyers rush to get in front of tariffs — which are widely expected to boost sticker prices — the flood of demand has been pushing new vehicle prices ever higher, with the trend unlikely to stop any time soon, experts said.
In Cox Automotive's Auto Market Report published May 13, Chief Economist Jonathan Smoke said the trend of rising prices continues into May.
'May so far looks like a continuation of April, with urgency to buy diminishing, but the retail vehicle market and the U.S. economy both holding up relatively well," Smoke said.
The job market is "good enough so far," but hiring is slowing, Smoke said, noting that borrowing money to buy a car is getting more expensive. He said the number of low-interest rate deals has decreased by 7 percentage points year-over-year, with interest-free loans also declining.
Smoke's remarks come on the heels of a report from Cox Automotive's Kelley Blue Book published May 12 showed the average transaction price for new vehicles in April surged 2.5% to $48,699 compared with March. Prices rose 1.1% compared with April 2024. Cox said it was the strongest April sales since 2021.
The buying frenzy meant automakers did not have to offer big discounts. Cox said new-vehicle sales incentives fell to about $3,262, or 6.7% of the average transaction price. That's down from 7% of the average transaction price in March. Cox said incentives were at the lowest point since the summer of 2024. Prior to April, the six-month average was 7.4% of average transaction price.
On April 3, President Donald Trump put a 25% tariff — the tax an importer pays on a good when it crosses international borders — on all imported vehicles to encourage more U.S. manufacturing.
Trump was set to then enact 25% tariffs on all imported parts starting May 3. But on April 29, the administration modified the tariffs on foreign auto parts. In a complex formula, the executive orders Trump signed will now allow automakers to be reimbursed for some of those tariffs for the next two years to give them time to find domestically sourced parts.
Still, a Michigan economics group, calculating tariff impact, has estimated that the least-impacted vehicles will still face a $2,000 tariff-induced price hike and the most impacted will see a $15,000 impact.
Cox Executive Analyst Erin Keating explained that new car prices are rising on the heavy demand to get the goods before manufacturer's suggested retail prices go sky high to offset carmaker's tariffs costs.
More: Trump tariffs will slow Michigan growth, kill 13,000 auto-related jobs, experts predict
'Ever since President Trump announced auto tariffs 47 days ago, the cost of new cars has been steadily climbing," Keating said. "Even though there was a surge in shopping and sales early on, the manufacturer's suggested retail prices haven't budged. The pricing landscape is varied depending on the automaker, car segment and specific models — some are cutting incentives, others are in high demand, and the supply isn't evenly distributed across the board.'
Ford Motor Co. has been running a national employee-pricing program that started in early April and runs through July 6. The Dearborn-based automaker is relying on a message of 'holding prices steady' and touting its 'built in America' leadership.
Cox said Ford brand prices and incentives in April were mostly unchanged from March with one standout: The Maverick pickup, which Ford assembles in Mexico, saw lower prices in April. Ford's incentive spending on the Maverick increased to an all-time high of 6.6% of average transaction prices on record monthly sales of 20,183 Mavericks sold in April, Cox said.
More: Tariffs call USMCA's future into question, experts say
In early May, Ford said it is hiking prices on three of its Mexico-produced models effective May 2, becoming one of the first major automakers to adjust sticker prices in response to tariffs. Prices on the Mustang Mach-E all-electric SUV, Maverick and Bronco Sport will increase by as much as $2,000 on some models.
At General Motors, Cadillac, Chevrolet and GMC brands all posted higher average transaction prices in April compared with March, with little change to incentives, Cox reported. Buick, however, saw lower prices and higher incentives in April.
Import brands Acura and BMW also held prices lower and increased incentive spending last month compared with March.
In the ultraluxury segment, sales of Porsche and Land Rover models accelerated in April because both brands will face higher future costs given 100% of their vehicles are imported, Cox noted. The average transaction price for Porsche led the industry in April at above $114,000, with Land Rover just behind at $113,000. April was the best sales month this year for both brands, pushing the overall industry average transaction price higher.
Car buyers even flocked to all-electric vehicles last month. The Kelley Blue Book team initially estimates new EV prices in April to be $59,255, a 3.7% increase from the year-ago period and a 0.2% increase compared with March. Cox said the March EV average transaction price was revised lower to $59,132.
Jamie L. LaReau is the senior autos writer who covers Ford Motor Co. for the Detroit Free Press. Contact Jamie at jlareau@freepress.com. Follow her on Twitter @jlareauan. To sign up for our autos newsletter. Become a subscriber.
This article originally appeared on Detroit Free Press: Car-buying frenzy ahead of tariffs continues, pushing prices higher
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