Auto Lenders and Tariffs Are Setting Some Car Shoppers Back
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Here's your Money Briefing for Friday, May 9th. I'm Julia Carpenter for The Wall Street Journal. President Trump's sweeping auto tariffs sent some Americans rushing to the dealership before car prices went up. But getting a new car might not be so easy.

In recent years, a lot of big auto lenders have actually tightened standards. They're lending more to people with higher scores. If you have a lower score, you may not be rejected or you may be approved, but only at an even higher interest rate. It doesn't mean that fewer loans are available, but more of the loans that are available are going to a select few.

So what's a car shopper to do if they want to beat the tariff increases? Wall Street Journal reporter Imani Moise will join me to talk about what's changed in the auto lending world and what options remain for eager buyers. That's after the break.

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Executives at big car companies say the Trump administration's tariffs could jack up new car prices by thousands of dollars. But at the same time, a lot of auto lenders are getting way more selective. Wall Street Journal reporter Imani Moise joins me. Imani, you reported that auto lenders have been tightening standards since the pandemic. So when everything shut down because of COVID, the supply chains were really, really messed up, which meant that

It was harder to get new cars on the lot, which led to a supply shortage, but demand didn't change. So prices shot up. And as the car values got higher, lenders had to make bigger and bigger loans so that people could buy those cars. But it turns out those loans were too big and people fell behind on their bills. And now we're seeing delinquencies soar and lenders are getting a lot more cautious. So even today, they are more selective in who they give loans to and how much they lend.

And are we still feeling the effects of that pandemic environment when it comes to auto loans? Absolutely. When people stopped paying their bills, that led to losses for auto lenders. And they responded by really taking a more cautious stance and tightening the reins, being more selective in who they lend to, which meant that you needed a higher credit score or a larger down payment in order to get approved. And at the same time, a lot is changing for the auto industry, right?

What is happening with tariffs right now? It feels like it's changing day by day. But at one point, there were tariffs as high as 25%, which regardless of where a car is manufactured, is going to increase car prices because even the ones that are manufactured here rely on parts that are imported. So analysts were expecting that this was going to raise car prices by an average of $6,000. And that's triggered a surge in demand, people scrambling to buy a car now before it might get more expensive later.

And what's happening with auto loan rates at the same time?

Auto loans are much higher. So if you bought your last car before the pandemic and now you're in the market for a new car, expect a much higher rate. At the end of 2019, auto loan rates were around 5%, and now they're 7%, which that 2% difference may not sound very big, but on top of a larger loan period, that can mean a much higher monthly payment. Are consumers right in thinking that they should go buy a new car now if they want to avoid paying tariff-affected prices?

It's too soon to say. Part of what audio manufacturers are seeing and what consumers are feeling is a lot of whiplash because one moment tariffs are really high, the next moment they're being softened. So no one really knows how this is all going to play out. But what we're seeing happen is that people would rather lock in a price now than deal with any sort of extended uncertainty.

So you spoke with some analysts and people who are studying consumer expectations, consumer behavior. What did they have to say about what's happening right now? They painted a very complicated picture because there's not really a way for consumers to win or guarantee that they're getting a good deal. It might be beneficial to buy now, but buying now also means

paying a higher interest rate if you're financing. It also means that you're facing a lot of competition for cars because demand is high, which can lead to paying over sticker price. But if you try to wait it out, then maybe you get a better deal, but maybe you're paying much higher prices because...

Things escalated again geopolitically. One analyst said it's choose your own venture right now. But the one potential benefit of buying now is that if the tariff environment stays the way it is right now, then the trade in value of your vehicle is definitely going to be higher. And I want to clarify something, Imani. When we say that auto lenders are tightening standards or getting more selective, what does that mean exactly?

That means that they're requiring higher credit scores. They're lending more to people with higher scores. If you have a lower score, you may not be rejected or you may be approved, but only at an even higher interest rate. It doesn't mean that fewer loans are available, but more of the loans that are available are going to a select few.

So if you're someone who's always had a pretty good credit score, you should have less to worry about. Absolutely. If your score is good, those lenders are in the business. They really want to lend to you. You should just be wary that prices are much higher than they were probably the last time you were in the market for a car. So you're probably going to need to

apply for a larger loan, and those interest rates are still high. What are some things someone with a lower credit score could do in the meantime? The first thing that you want to do is build your credit, but that can be a bit of a slow process. If you really need a car and you need it now, you can try to line up a co-signer before you walk into the dealership because that will increase your chances of being approved a

Of course, save money, try to buy in cash if that's possible. Or you can look into applying for an auto loan from a credit union because they tend to have more flexible terms.

That's WSJ reporter Imani Moise. And that's it for your Money Briefing. Tomorrow we'll have our weekly markets wrap up, what's news in markets. And then we'll be back on Monday. This episode was produced by Zoe Kolkin. I'm your host, Julia Carpenter. Jessica Fenton and Michael LaValle wrote our theme music. Our supervising producer is Melanie Roy. Aisha Al-Muslim is our development producer. Scott Salloway and Chris Sinsley are our deputy editors.

and Falana Patterson is The Wall Street Journal's head of news audio. Thanks for listening.