Tariffs have been the looming word of the new presidential administration, but the used car market has experienced a strong start to 2025 despite tariff threats.
Are there going to be increased tariffs on foreign goods? Every month, it seems the story starts with an aggressive round of new charges on goods coming into the country, which are only to be drawn back a few days later. At some point, the current government officials might find the sweet spot that causes the least grumbling, but for now, it’s a seesaw that is getting a little old.
Used cars show strength
It shouldn’t come as much of a surprise that the used car market has had a strong start this year; with looming threats of tariffs, this is one area of the automotive market that shouldn’t be impacted. The used car market seems to have bounced back from the issues created by COVID-19, but a new threat could cause many shoppers to look for pre-owned models instead of new vehicles. This disruption in the automotive world comes with one word: tariff, which could cause new vehicle prices to increase significantly.
Will new car prices skyrocket?
Without the new tariffs, the average price for a new car is more than $48,000. That’s a pretty significant figure for most shoppers. With higher interest rates than in recent years, some shoppers will pay more than $1,000 per month for a new vehicle on a 72-month loan, and that’s not for a luxury car. Still, new car sales have been steadily increasing over the past few years, but that could change when these new tariffs are imposed. The cost of these fees will go directly to the consumer, causing car prices to increase significantly. How much each vehicle’s price will increase is yet to be determined, mostly because there are many factors at play.
Are used cars tariff-proof?
Technically, the used car market should be tariff-proof. These vehicles were built and sold before the threat of newly added chargers to imported goods. Some would think this might create a stronger market in the pre-owned vehicle world, and it has, for now. Used car sales have grown steadily despite prices barely moving from the COVID-19 shortages. With a strong beginning to 2025, it might be the right time to shop for vehicles with more than 150,000 miles on the odometer.
Why such high mileage?
Can a vehicle actually run for more than 150,000 miles and still be deemed a good item to buy for the next shopper? It can if it’s been well-kept and properly maintained. Modern vehicles are much more reliable at higher mileage than in the past. Most recalls are associated with small issues with programming and not major mechanical flaws. This means many cars last much longer than before, and you shouldn’t turn your back on a vehicle simply because it has six digits on the odometer. That said, you should consider paying cash or taking a short-term loan for a high-mileage vehicle.
Will the used car market burst again?
In a doomsday scenario, new car prices could skyrocket to the point of disinterest. If prices are too high, millions of drivers won’t be able to afford to buy new vehicles. This will cause massive increases in used car sales, which will eventually cause the used car prices to increase significantly again. There is a delicate balance of supply and demand when it comes to maintaining affordable pricing, which we saw what happens when this is disrupted during COVID-19. During the summer of 2020 and into 2021, used car prices increased to levels that caused some pre-owned models to cost more than when they were new.
What should most drivers do?
If you’re looking for another vehicle to drive, the used car market has some great deals for you right now. Until tariffs are actually pushed through, new car prices shouldn’t increase much, which means you still have both markets to turn to for now. If these new tariffs are added to the automotive market, things could turn upside down, but it will take some time for that to happen.
If you’re not ready to buy your next vehicle, its time to take a hard look at how well you maintain your current vehicle. You might consider having it properly serviced and keeping up with the service schedule, it could be the car you drive for the next several years.
The used car market has seen a surge to begin 2025, but will this continue or are we on the brink of another automotive disruption caused by newly enforced tariffs?
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