How Trump’s Tariffs Could Boost Already High Car Prices
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But now, auto tariffs have put prospective buyers in a pickle. Should I buy a car now or wait it out? We don't truly know what's ahead, and it's just kind of hard to plan for what might happen to car prices and tariffs in general. But delaying on something that you already know you might need could lead to some regret later. Today, we'll chat with WSJ reporter Joe Pinsker about what you need to know. Stick around after the break. ♪

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But this is very exciting to me. This is the automobile industry, and this will continue to spur growth like you haven't seen before. WSJ reporter Joe Pinsker joins me to talk about it. Joe, it's tough to keep up with where we're at in this trade war. But as of now, a 25% tariff on foreign-made vehicles and extensions to cover car parts are set to hit the American economy.

How could these tariffs affect buying or owning a car? The main effect is that buying a car stands to get a significant amount more expensive. We're talking about thousands of dollars added to the prices of new cars and potentially used cars as well. It's a little bit harder to tell what will happen in that market because those cars aren't being tariffed themselves, but demand is expected to go up. And then there are also sort of sneakier ways that tariffs increase the costs of

not just buying a car, but just owning one in general. If car parts are subject to tariffs, that makes repairing cars more expensive. And all of this also makes insurers have to pay more money when a car gets damaged and they're paying for repairs, or if the car gets totaled and they have to buy a new one, tariffs are affecting each of those things as well. And so even people who aren't shopping for a car right now might be

in the medium term, find that their costs of owning a car rise as well. And this information leaves people at a crossroads, especially if they're in the market for a new car. You have to decide between buying now or trying to wait it out for a few months. You and our other colleague Veronica Dagger spoke to people who are at that crossroads right now. What did they say?

The main thing I heard was just uncertainty. One car shopper that my colleague Veronica spoke to said that he was pressured by a dealer who texted him after he left saying, hey, tariffs are going to go up soon. You might want to act on that car. And this particular shopper ended up holding off. He just felt that things were too uncertain. Wherever people come down, I think this just sort of complicates the decision around a pretty big financial choice that a lot of people make when they buy a car.

Following this as a reporter has been tough and following it as a consumer has as well. I think there's just a lot unknown. They could be around for a while. They could be around for not that long. We're waiting to see as it develops. In your story, which we've been talking about and listeners can find in our show description, you explain how car prices change.

before these tariffs and before this back and forth have already been high for Americans. How did we get here? New and used cars have gotten just a lot more expensive in the 2020s. There were supply chain issues during the pandemic, and particularly a chip shortage a few years ago led to a lot fewer new cars.

Meanwhile, just the costs of, again, owning a car and not just buying one have gone up a lot. Repairs, insurance, both of those things have risen a lot in cost. And those trace back to the rising cost of cars themselves and also the labor that it takes to repair them. How much of someone's budget do financial advisors recommend you spend on a car loan? Yeah, there's no hard and fast rule here, but one common rule of thumb, it's a bit rough, that gets thrown around is the idea that you shouldn't spend money

more than 10% of your take-home pay on a monthly car loan payment. And I had been thinking about that rule and was wondering how it matched up with the typical American income. And again, these are kind of rough ballpark calculations, but they still illustrate an important fact about where things stand with affordability for driving. And if you sort of match up the typical American

used car loan payment with the typical American income, you're already kind of at that 10% threshold without tariffs. So tariffs would kind of take you beyond that. Meanwhile, for a new car loan payment, you're above 10%. You're more in the 13 range and you might go as high as 15% after tariffs. This complicates the decision for any buyers who've been waiting for car prices to drop, right?

Totally. And as I've written about in the past and in other stories, people are just holding onto their cars for longer. They're looking around at what's happening with car prices and they're saying, you know what, I'm just going to squeeze a little bit more life out of my old thing and see how long it can last. Looking ahead, timing is on a lot of people's minds. How long could it take for tariffs to hit the auto industry? In terms of the prices people see on dealers' lots, on average, what I was hearing is that

Dealers typically stock about two months or so of supply. And so maybe price increases don't start to materialize immediately because there's some inventory to work through. But for really in-demand models, there's a chance that prices start going up sooner. Joe, there's a lot of uncertainty and questions floating around when it comes to what happens next. For car buyers who are on the fence right now,

What could give them some clarity? I've been talking with some experts in the car world this week, and what I'm hearing from them is that if you know that you need to buy a car in the near future, their advice is really to buy it soon. We don't truly know what's ahead, and it's just kind of hard to plan for what might happen to car prices and tariffs in general, but...

delaying on something that you already know you might need could lead to some regret later. Of course, at the same time, don't rush a decision if you aren't ready to buy a car. But if you kind of already have your mind made up, it seems like a good time to act. That's WSJ reporter Joe Pinsker. And that's it for your Money Briefing. This episode was produced by me with supervising producer Melanie Roy. I'm Ariana Aspuru for The Wall Street Journal. Thanks for listening, and we'll see you tomorrow. ♪

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