New Car Tariffs?!? Keep Your Cool. Here’s What You Need to Know To Keep Your New Car On Track
Buying a new car is scary and confusing as it is. But if you’re shopping for a car right now you may hear that tariffs imposed by the White House will drive up the price of a new car as much as 25%.
But as with anything, there will be timing windows that allow buyers to get ahead of the squeeze, exceptions that let you work around the rules and unscrupulous people out there trying to pass off markups as tariff increases. Keep your cool; if you’re on the hunt for a new car, you can get what you need.
Here’s what you need to know about buying a car in the midst of a trade war.
This story is 100% human researched and written based on actual first-person knowledge, extensive experience and expertise on the subject of cars and trucks.
New Car Tariffs Apply to Only Certain Countries and Only Certain Parts
First, almost every car is built with some number of parts imported from other countries, most commonly in the US they come from Mexico, Canada and China. But often the entire car isn’t imported— just certain components like chips, motors or internal parts. So almost all cars will be impacted.
Here’s what you should look out for as you shop for a new car:
Read: The Best Cars and SUVs to Buy in Tight Times: Tariffs, Rising Inflation, Uncertainty
Look at the Dealer’s On Sale Date Carefully
Cars already for sale before tariffs are applied won’t be impacted by new car tariffs, which apply to cars or parts imported after tariffs take effect. That means there are hundreds of thousands of cars already on dealer lots for sale.
What that doesn’t mean is that dealers will be honest about tariffs. If a dealer marks up the price of a car that was offered for sale before tariffs were enacted, it’s a fraudulent markup. Keep shopping.
New Car Tariffs Are Paid By the Manufacturer, Not (Necessarily) the Consumer
Tariff costs are paid by the manufacturer not the car retailer or the consumer. Some manufacturers will choose to pass along the cost in a price increase, others won’t —we’ve seen news of that in recent days. It may depend on the total amount of the tax (keep reading for how that works); if its a small increase, buyers may not feel the pinch. Again, if there’s a “tariff markup” on a car, keep moving; the dealer is lying to you.
Tariffs Are Not a Tax on the Entire Car
Tariffs may only apply to a portion of a car’s parts and not necessarily the entire car. For example, a 25% tariff on a Mexican-made part that costs the manufacturer $500 is $125. In the grand total of the price of the car, this is small. And as we’ve seen in the past, smaller costs may not be passed on to the buyer.
A tariff may be charged on the entire car, too, if it’s assembled in Canada or Mexico. However, there will not be tariffs on the components made in the US or non-tariffed countries. So, for instance, if a car maker ships all the components to Canada for assembly but those parts equal 90% of the vehicle and are not subject to tariffs, the tariff will only apply to the remaining 10% of of the price of the car. Here’s the math: Cost of vehicle: $48,000; portion subject to a tariff: $4,800; resulting tariff: $1,200, which may or may not be added to the final price of the car.
Read: Looking For the Ultimate Budget Ride? These are the 8 Best Cars Under $25,000
Foreign-Made Car Parts are a Fact of Car Manufacturing
Just because a car is built in the US doesn’t mean it won’t have foreign-made parts. It most likely will. From chips made in China to wiring harnesses built in Ukraine to small motors built in Mexico, the auto industry is a multi-national business. Companies build (or buy from suppliers to build) and ship huge lots of parts so they have them on hand for final assembly. The Volvo EX30 (above) is assembled in Belgium but includes US, European and Chinese made parts.
Any given car on the road may have parts built in a dozen countries or more.
Tariffs Only Apply to a Growing Number of Countries
Not all foreign-built cars are included in current tariff directives. For now, those built in Europe, Japan, Korea and other places are not levied, though they may still include parts from countries subject to tariffs so they may not be completely exempt, either.
For instance, a car assembled in Belgium and shipped to the US may contain chips from China or parts from Mexico, and those chips or parts would be subject to a tariff. Confusing, I know. Look carefully at the MSRP and ask questions if you are unsure.
And, all this applies to only new cars. Used cars are not included.
The MSRP Sticker Shows the Origins of a Car’s Parts
A little box usually on the lower right of the Monroney window sticker details the origin of a car’s parts and its point of assembly. The US government decided years ago to require car sellers to list the amount of parts built in the US, though this is a percentage and not a dollar value of those parts, which can number over 30,000.
So, you might see only 10% of parts built in Mexico, though the value of those parts may be higher than 10% of the car’s price if they were expensive. While the Monroney window sticker is not a tell-all, it will help you to know if any parts of a car are produced outside the US, and if so, where.
Yes, There Will Be Exceptions
Once a rule passes, large companies dispatch their lobbyists to Washington to fend off the parts that will damage their business. Car makers are no different. Already the US Government has issued exceptions for US auto makers and proposed other exceptions that would protect their businesses.
There may be others, too, so if you’re in the market for a car in the coming weeks for months, watch the news and which companies are excluded from the rules.
Ask To See The Invoice as Well as the Window Sticker
Gather all the information you can to be sure you’re getting what you’re paying for. An invoice may (or may not) show tariffs or markups due to tariffs. You can also compare what a dealer is paying the manufacturer for a car and get a better picture of the true cost of your new car.
No matter how you slice it, it’s going to be sticky and it will likely be confusing. But don’t let the threat of tariffs derail what you want and need to do when it comes to your new car.
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