Today’s Car Market: Are Car Prices Going Up or Down?
With auto tariffs now in effect, new and used car prices are expected to rise.
Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
Table of Contents
When 2025 began, the average transaction price on new and used vehicles was ticking down from past highs, but tariffs implemented by the Trump administration are contributing to an increase in car prices.
According to automotive data company Edmunds, the average transaction price of three-year-old and newer used vehicles was $30,522 in the first quarter of 2025. That's an increase of 2.3% from a year ago and the first time used car prices have surpassed $30,000 since 2023.
Several major automakers have stated publicly that tariffs will cause significant reductions in company profits, which could push prices higher for certain new car models.
In an email to NerdWallet earlier this month, Ford spokesperson Said Deep confirmed upcoming sticker price increases for three popular models — the Mach-E electric SUV, Maverick pickup and Bronco Sport — attributing them to "usual mid-year pricing actions combined with some tariffs we are facing."
Deep noted these increases (starting at about $600) aren't immediate and would apply to vehicles that start arriving at dealerships in late June.
How will Trump's tariffs increase car prices?
The convoluted implementation of auto tariffs has made it difficult to predict specific outcomes. In general, car buyers should anticipate higher car prices related to tariffs in the coming months, as dealerships deplete pre-tariff inventory.
On May 28, the U.S. Court of International Trade ruled to halt Trump's reciprocal or "Liberation Day" tariffs on goods from most countries, as well as other tariffs specific to Mexico, Canada and China. The next day, a federal appeals court ruled to temporarily reinstate these tariffs.
These rulings do not apply to industry-specific tariffs on imported autos and certain auto parts, which were implemented under a different trade law. For now, the following auto-related tariffs remain in effect and unchanged:
A 25% tariff on imported passenger vehicles and light trucks and a 25% tariff on foreign-made auto parts — including engines, transmissions, powertrain parts and electrical components.
A 25% tariff on vehicles imported under the United States-Mexico-Canada agreement, but the tariff applies only to the value of vehicle content not made in the U.S.
Some auto parts that don't fall under the industry-specific 25% tariff are subject to reciprocal tariff rates, which vary by country. The federal trade court ruling would have eliminated those tariffs, but for now they remain in effect.
In late April, Trump signed an executive order to eliminate the stacking of tariffs for auto manufacturers. For example, if a carmaker pays a tariff on an imported part made of steel, it won't pay a separate tariff on imported aluminum and steel. Another order enables carmakers to apply for partial reimbursement of tariffs on imported parts, if the vehicle is assembled in the United States.
A tariff is a tax imposed by the government of a country on goods imported from another country. A government might use tariffs to regulate trade, protect domestic interests or raise revenue. The purchaser of the goods — such as a carmaker buying parts — pays the tariff and may choose to pass that cost on to consumers.
How much will new car prices increase?
The final cost of a car depends on many factors, and adding tariffs to the mix makes cost predictions complicated. Prices will depend not only on where the car is fully assembled, but also on how many parts are imported and what percentage of tariff costs the carmaker passes to buyers.
Consultancy firm Anderson Economic Group analyzed vehicles with the lowest and highest potential tariff impact to project cost increases to consumers. For the lowest-tariffed American cars, the expected additional cost is $2,000 to $3,000. For the highest-tariffed vehicles, cost could increase by $10,000 or more.
Still, much will depend on the actions of each auto manufacturer. Ford's announced price increases do not pass full tariff costs on to customers, and according to Deep the company's "approach throughout this evolving situation continues to be doing what’s right for our customers — and our business."
Are tariffs affecting used car prices?
Although not directly, tariff costs do affect used cars. As the supply of tariff-free new cars decreases, more buyers are likely to turn to used cars — tightening supply, increasing demand and pushing prices higher.
Although it was improving, used-car inventory was already tight when the first auto-related tariff announcement came in late March. After the announcement, sales of both used and new cars rapidly increased, as buyers hurried to beat tariffs. The result was a decline in new and used car inventory.
According to the Cox Automotive Auto Market Report for May 27, the rush to buy cars slowed some in May. Used car inventory improved, but remained "below historical norms," and used car prices dipped slightly.
Why are cars so expensive now?
Beyond any impact from tariffs, new and used car prices were already high for three reasons:
High consumer demand following the Covid-19 pandemic enabled car manufacturers and dealers to keep prices high.
Ongoing inflation increased manufacturing and labor costs, which car manufacturers and dealers have passed on to car buyers.
Many new cars come with advanced technology, larger infotainment screens, driver-assistance systems, and hybrid/EV powertrains — all adding to the cost.
At the height of the pandemic, supply chain disruptions and semiconductor chip shortages were responsible for slowing, and even halting, vehicle production. As car inventory decreased, new and used car prices skyrocketed and remain elevated today.
Explore the auto-buying platforms from our partners below.
AD
Edmunds - New Cars Purchase
on Edmunds
CarsDirect - Car Purchase
on CarsDirect
New car prices climbed 22% since 2019
According to the consumer price index (CPI), which is a Bureau of Labor Statistics measurement of inflation and prices paid by consumers, new vehicle prices have increased 22% since 2019. New car prices decreased slightly in 2024 and ticked back up at the end of the year. CPI reports showed the new car index increasing by 0.1% in March and staying unchanged in April,.
However, Kelley Blue Book reported the average transaction price of new cars increased to $48,699 in April, a month-over-month increase of 2.5%. KBB bases this information on actual vehicle sales transactions from various sources. KBB also noted that in the past decade, only April 2020 produced a larger month-over-month increase at 2.7%.
Currently, new car prices continue to hover near 2022’s all-time highs, which KBB places at $49,958. They’re also approximately $11,000 higher than before Covid-19.
What about auto financing rates and payments?
On top of paying high car prices, car buyers who finance are likely to continue paying elevated interest rates and payments. Average auto loan interest rates increased to their highest level in years during the pandemic, and they’ve barely budged down. According to J.D. Power, the average new car payment was on pace to be $748 in May.
Although presidents don’t control interest rates, their policies may influence them. When prices overall begin to rise, the Federal Reserve usually increases the federal funds rate to slow economic activity and reduce inflation. When the federal funds rate changes, auto loan rates typically follow. The following chart shows movement of the federal funds rate since 2021.
To help with vehicle affordability, Trump has proposed making loan interest on U.S.-made vehicles tax-deductible. But it’s unclear how or if such a proposal would actually be implemented.
Rising car ownership costs eased in April
The upfront price of cars hasn’t been the only financial pain point for consumers, as shown by the NerdWallet Vehicle Ownership Costs Index, which is a measurement of inflation and spending figures from the BLS.
Vehicle repair and car insurance costs may also increase because of tariffs. Many vehicle parts are sourced globally, so the higher cost to repair a car could be passed on at the body shop or through insurance premiums.
Is now a good time to buy a car?
If you anticipate needing a new car in the next few years and can afford to buy now, it may be a good idea to do so. Although car prices, auto loan interest rates and ownership costs are higher now than they were five years ago, they may climb higher if tariffs remain in place.
To increase your chances of finding a car that meets your needs, shop around and be flexible about make and model. While some car brands have already started raising prices, some have not and others say they will hold prices flat as long as possible. Also, price increases so far have not been extreme.
Also, look at auto manufacturer websites for any special pricing promotions. Some automakers are offering specials to motivate car shoppers who are still on the fence about buying. For example, Ford shared that a "From America, For America" employee pricing promotion has been extended through July 4 weekend and includes the three models with planned price increases.
To reduce car costs as much as possible before buying, here are a few other steps to follow.
Check online pricing guides, such as Kelley Blue Book, Edmunds or NADA guides, to know what price you should pay.
If financing, know the ins and outs of getting a car loan ...
Use an auto loan calculator to determine the best scenario — loan amount, interest rate, term and down payment — for a monthly payment that fits your budget.