Saturday is May 31st, the end of the month, and as such, the current incentives for new vehicles will go until Monday night, June 2nd. That's great news if you missed the Memorial Day sales. Unfortunately, starting early in June, the car buying landscape will likely change, and not in your favor. We know the tariffs are about to hit prices, and I would be bet big bucks that incentives will go down. If you’ve been watching the Tariff Talk each week, you know all the automakers are lowering profit expectations, and that means they’ll be watching spending very closely, and this includes incentives.
Many people think there is nothing to worry about if a vehicle is made in America. That could not be more wrong. The vehicles made inside our borders will go up in price so the ones made in Mexico, Canada, Japan, and other parts of the world will not have to go up as much. In simple terms, every automaker is blending prices and it is a complicated formula. Much depends on what percentage of vehicles sold in America are made in America. Even those car companies like Tesla that only produces in America uses primarily parts from other countries, and those are being tariffed, too. No automaker gets out of this unscathed.
Many automakers assemble cars in the United States and also made in other countries. For instance, Camry’s sold in America are made in America and also Japan. RAV4 is made here and Japan and also Canada. Accords sold here could be made here, or also in Japan. CR-Vs sold in America are made in Indiana, but also in Canada, Mexico, and Japan. The point is automakers, nor dealers want different prices on identical vehicles based on where they were produced.
Note: At some point really soon, the new vehicles that have been on dealer’s lots will also go up in price. Dealers will be re-invoiced at a higher price, and new Monroney (window stickers) will be sent to the dealers to put on all the existing inventory.
We learned many lessons during Covid and the microchip shortage that will come in handy as the tariffs go into effect. What we saw then and likely will see again is a drop in incentives, new vehicle prices escalate, and some vehicles are likely to become short in supply and automakers cut back production to current market conditions of sales slowing down.
We also saw trade values skyrocket, which we are seeing currently. I’ve told you for six weeks in a row, prices were going up at the auction. The used car reporting sites are all reporting the same thing I am. In fact, according to a new report from auto industry experts, used cars are more expensive than they've been in years. A May 22 report from Edmunds indicated that in the first quarter of 2025, the average transaction price for used cars 3 years old or less jumped above $30,000 for the first time since 2023. So, the one bright spot of all this is if you have a trade-in, the increased value will take up a lot of the slack of higher new car prices. That is really good news if you find yourself in the position of being forced to by a new vehicle.
Thinking about a new car later in the year? Should you do something now if you are? My opinion: a resounding YES. A listener last week on the show asked a great question: When the tariffs are all settled, will new car prices go back down? The answer is no. They never go down after they’ve gone up. Think about that.
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