Despite two months of tariffs, car prices aren't going up. Is now the time to buy?

Yahoo

6 hours ago

American car buyers braced for the worst when President Donald Trump's auto tariffs started taking effect in April. But so far, prices are little changed.
However, industry experts don't expect that will remain true for long if tariffs stay in place— so Americans may want to buy a car now before prices start to rise within a few months.
'So far there's a mismatch between the expectation of what would happen, and the reality of what has happened with prices,' said Ivan Drury, director of insights at car buying research site Edmunds.com. 'But I still think we're still going to prices start to take off in two to three months.'
Even with 25% tariffs on all imported cars and auto parts, prices are mostly being kept in check.
The price paid for new cars in May fell 0.2% on average compared to the month before, according to data from Edmunds, and they rose only 2.5% compared to the pre-tariff period in March. That was also reflected in the government's consumer price index for May, which reported both new and used car prices dipped when adjusted for seasonal factors.
There are numerous factors keeping prices steady. Tariff fears kept buyers away in April and May, and reduced demand limited the dealers' ability to raise prices. Experts CNN spoke to say the auto industry is also concerned about announcing big price hikes that could anger the Trump administration.
But mostly, dealers are still working through their supply of pre-tariff cars. Most of the cars that have been sold since the imposition of tariffs in April were either imported into the United States or built before the tariffs went into effect, Drury said.
'The impact is not there yet,' he said.
In March, automakers had between a 30- and 77-day supply of cars on the lots, depending upon the manufacturer, according to Edmunds.
Additionally, the customer demand simply is not there. Some buyers rushed to buy cars in March before the tariffs were put in place, creating a surge in sales in the first quarter and weakening demand since then. Plus, concerns about the economy and job security, along with high interest rates, could be keeping some from making a big purchase.
While Edmunds has yet to give a second-quarter sales forecast, Drury said 'the odds are good' that trend will continue and sales will be down or, at best, flat compared to the same time last year.
But Drury said the lack of price increases could start to draw consumers back into the car buying market later this year. The Conference Board reported in May that 12.1% of Americans consumers were considering purchasing a new car in the next six months. That's a significant jump from the 10.6% who said the same in April, and more in line with normal seasonal interest in car purchases.
When customers do jump back into the market for a car, they may see prices creep up.
Every automaker is affected by the tariffs. Except for Tesla, every major company imports cars they sell at US dealerships from foreign plants, accounting for 46% of US auto sales in 2024, according to S&P Global Mobility. Even those built at American factories use imported parts.
Drury said some manufacturers are already raising costs in ways that don't show up in the price, like adding fees and reducing incentives offered to buyers. But as tariffed vehicles begin to hit the lots, experts expect them to eventually pass some of that cost on.
Car prices are not set by the automakers – they're negotiated between dealers and buyers. But automakers do set a 'manufacturers' suggested retail price' or MSRP, also known as the sticker price.
Adam Jonas, auto analyst at Bank of America, thinks that automakers will likely raise the MSRP later this year when the 2026 model year cars start being delivered to dealers.
'We're hearing price hike announcement slowly,' Jonas said at a recent Bank of America conference. 'I think with the changeover to 2026 models, (that) will be the opportunity for companies to raise prices on new vehicles so they don't enrage certain folks that might come down on them for raising prices.'
Until then, automakers are willing to pay some of the cost of tariffs out of reduced profits, partly due to weaker demand from buyers, partly to avoid angering the Trump administration.
Drury said even when do automakers raise prices, they will be careful not to attribute the increases to tariffs.
'I think they've learned there's nothing good that comes from doing that,' he said.