Lorraine Explains: How will tariffs impact car shoppers?

As we’ve seen, even the threat of substantial tariffs can send cracks through industries and nations. For consumers on the edge of a large purchase, like a vehicle, it can throw careful planning into a tailspin. I asked several industry experts what consumers can expect in the coming days and weeks, and how to navigate the unknowns, if possible.

Francois Desjardins is an auto consultant based in Toronto. “There are so many moving parts right now, so many changes happening. The wholesale value of the used market is making so many aspects of this industry unpredictable,” he says. I asked him what advice he’d give a family member buying a car. “Ideally, I’d tell them to wait. This market is so volatile, anyone who thinks they know what’s going to happen is very likely to be wrong,” he said. Every person I contacted said a version of the same thing. If you can hold off, hold off. Your best option, if possible, is to maintain your current vehicle in good condition. We’re coming into tire swap season, so share any issues you might be having with your tech and get a checkup. Give them a heads-up so they can plan accordingly.

What if you need a new car now?

But. If you need a car. “Hunt out low interest rates and a high residual, and I would lease it,” says Desjardins. “Don’t go into a black hole of an 8-year loan at high interest — you’ll be underwater far longer, out of warranty, and who knows what the value of the car will be? That’s the problem right now.” Whispering in the background of every conversation is the other side of tariff impacts: many jobs could be threatened, and taking on a huge loan could tip your personal finances should you find yourself impacted by a change in jobs.?

Daniel Ross, senior manager at Canadian Black Book in charge of Industry Insights & Residual Value Strategy, points to other areas of uncertainty in the current climate. “We don’t know if tariffs, if they come, would apply to used cars or just new product,” he says. So much of the current situation is unprecedented, and you would not be wrong to think it’s being made up on the fly. “The U.S. buys a lot of our large SUVs and luxury used cars because our dollar is weak [and getting weaker] in comparison. High tariffs — if they applied to used product — would erase that advantage for that market.” Another “unknown” wrench in the pile.?

Will tariffs impact used car prices?

Baris Akyurek, Vice President of Insights & Intelligence at AutoTrader, says tariffs would mean new car prices could be on the rise. “Demand for used vehicles has already been increasing, and if more buyers shift from new to used — similar to what we saw during peak COVID — prices in that segment could trend upward again,” he explains.

But if tariffs are applied to these coveted high-end used vehicles, more would stay home, forcing used vehicle prices down. At the same time, it would drive down the value of the car you own, reduce the value of trade-ins, and in some cases, push you upside down on a car loan for far longer. As Desjardins says, “if you have no car in your driveway, and buy a used one with cash, that’s the only good combination in this equation.”

Take delivery of your new car before March 1

“Look for the incentives,” suggests Ross. “Some manufacturers, like Stellantis, are having trouble moving big vehicles that have been in their inventory too long and are offering huge incentives. Buyers could take advantage of that.” That inventory factor is very important. “Buy before March 1,” Ross advises, referencing the next date the U.S. has threatened to revisit the tariff talk. Anyone assembling vehicles in Canada and Mexico, is rattled by tariff threats of course, but there’s no skirting that GM would be heavily broadsided by such actions. All its Equinox and Blazer models are made in Mexico, and half of its Silverado and Sierras come from either Mexico or Canada. Whatever stock you’re buying from, take delivery of it before that March 1 deadline if you’re in the market right this second.

If you sign a contract for a new vehicle before March 1, but don’t take delivery until after that time and tariffs are applied, would you have to pay the new tariff? We don’t know. I put the question to a sales manager, a consultant, an economist and an industry strategist, and nobody knows.?

Earlier this week, all packages originating in China and Hong Kong and heading to the U.S. were suspended from delivery by the U.S. Postal Service as American tariffs against that country came online. The move was reversed 24 hours later. I bring it up because the USPS, as it reversed the action, said going forward it would “implement an efficient collection mechanism for the new China tariffs.” This could mean (again, details are in the ether) that consumers who ordered goods pre-tariff will now be charged the new tariff. It’s not the answer to the question of how tariffs might apply mid-delivery on a vehicle, but it’s a strong indicator.?

Akyurek agrees on timing. “Acting sooner rather than later may help you avoid potential price increases,” he says, recommending consumers in the used market should seek Certified-Pre-Owned for added protections. “If you need a vehicle now, locking in a deal before market shifts occur may help you get the best value.” The consensus is about ‘locking up” your purchase — if it must be made — before possible tariff introductions on March 1. Whether used cars go up due to increased demand, or sag if they have tariffs applied has made this a wide-open game at this point. What Desjardins said about the volatility and instability in the market is apparent.

Buy Canadian-made vehicles

In addition to buying a vehicle in inventory, remember to shop at home. Our comprehensive list of Canadian-made vehicles is here. Ross explains that though many vehicle components cross the border — often multiple times — before final assembly, those parts would be impacted by tariffs but a “parts tariffs would be partial as opposed to the full vehicle tariff on fully assembled vehicles coming in. Canadian-made vehicles would be less impacted.”

You can also research vehicles without an American component. Canada imports vehicles from other countries including South Korea, Japan, Mexico and Germany among others, so hopping in a Hyundai (a dealer I spoke to said they would bring in stock from South Korea instead of Alabama) or a new Porsche might save you some angst.?

Banks and OEMs develop strategies based on data. The absence of that data in the face of a mercurial hand on the levers is rattling an industry struggling with the unknowns. Ross says CBB’s approach is to strategize for numerous scenarios, as war rooms everywhere are doing right now. “The chaos right now is unprecedented,” he said. “Everyone is just preparing for multiple outcomes until this is finally settled.” That “settled” means a new trade agreement of some description, which will possibly end up with some kind of tariff, though everyone is just throwing darts right now.

Best- and worst-case scenarios for the Canadian automotive market

I asked Ross what the worst- and best-case scenarios would be. “Worst? That 25 per cent across-the-board tariff. Best? Nothing would be best,” he says with a tired laugh. He admits the uncertainty surrounding the issue is pretty damaging, too, though, and the instability means we can’t rule out anything. The shift across this country due to the threat-and-climb-down, at least until March 1, has rattled but also refocused it. “Inaction is not a long-term plan,” says Ross. “A trade deal will be hashed out, and we’ll determine our best direction to balance incentives, reset the supply and demand measures and make people want to buy cars.”

In the meantime, buy Canadian, buy from friendly countries, buy before March 1 if it is a U.S. product, consider a lease with attractive interest rates and keep an eye out for how tariffs might impact the used vehicle market. We’ll keep you posted.??

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