Detroit – U.S. new and used cars are expected to rise particularly this year amid a new and used car price, according to a new analysis from industry experts at COX Automotive.
Automotive data and advisory companies expect the taxation to add thousands of dollars to the costs of imports and domestic trucks. These price increases are expected despite potential slowdowns in sales compared to previous expectations, according to the company.
New expectations arise ahead of the 25% tax on auto parts scheduled to be implemented by May 3 as the auto industry responds to Trump’s 25% tariff on imported vehicles that took effect on Thursday.
“We expect tariffs to pass and supply will be tightened, supply tightened, supply tightened, supply tightened and price rise accelerated,” Cox Automotive chief economist Jonathan Smoke said during the virtual event Monday. “In the long term, we expect production sales to fall, newly used prices will rise and some models will be eliminated.”
Smoke described the current automotive market as a “roller coaster ride.” This is because demand declines based on the economic uncertainty that affects consumer purchases as it declines based on the country’s regulatory environment.
Automakers respond to customs duties in a variety of ways. Mainly domestic manufacturers Ford Motor Chrysler’s parents Stellantisannounced a temporary deal on employee pricing, but others, such as the British automaker Jaguar Land Rover, have stopped US freight. Hyundai Motor also said it will not raise prices for at least two months to alleviate consumer concerns.
Regarding the new vehicle, Cox estimates an increase of $6,000 on the cost of imported vehicles due to a 25% tariff on non-US assembled vehicles and an increase of $3,600 on vehicles assembled in the US due to a 25% tariff on auto parts. These add to an increase of $300-500 as a result of previously announced tariffs on steel and aluminum.
According to Wall Street analysts, automakers and suppliers may be able to cover some of the increased costs, but they are also expected to pass on to US consumers.
While customs duties do not directly affect the sales of used cars, changes in price, production and demand for new vehicles will affect the used car market. This is how the majority of Americans buy the vehicle.
Cox Automotive expects to increase the wholesale price of used cars, Manheim used cars, which tracks the prices of used cars sold at US wholesale auctions, to 2.1% to 2.8% by the end of this year. This is compared to a relatively stable previous estimate of 1.4%.
According to Cox, the average list price for used cars was around $25,000 as of mid-March.
Consumer retail prices have traditionally followed changes in wholesale prices, but have not fallen as quickly as wholesale prices in recent years.
“Hopefully we’ll see some volatility in pricing over the year,” Jeremy Robb, senior director of Cox’s Economic and Industrial Insights, said at the virtual event. He noted that it could peak sales this year after auto tariffs were confirmed.
According to Cox, changes in used car prices are expected to be far less dramatic than the unprecedented increase seen by the auto industry during the coronavirus pandemic. These increases were led by robust consumer demand, low interest rates, and historically low availability of new vehicles due to parts and distribution issues.
Ryan Rohrman, CEO of Indiana-based Rohrman Automotive Group, describes the currently in use vehicle market as unstable for dealers, even resembling the disruption during a global health crisis.
“We see the wholesale car count really rise, but the problem is that we can’t get a car on the second-hand side as much as retailers, and that’s pushing us to go to auction.
Automakers are expected to cut production, and while some have decided to halt imports into the US amid tariffs, they are not expected to be as radical as the early 2020s due to other market conditions.
“It’s going to reduce demand for vehicles. I think that demand components will keep the lid off what you might see in the price viewing of used cars,” Smoke says.
