How Tariffs Will Affect New and Used Car Prices in the USA

In 2024, U.S. Section 232 tariffs on steel (25%) and aluminum (10%) raised automakers’ input costs, and proposed 25% duties on finished-vehicle imports from Mexico and Canada could add thousands to sticker prices.

Understanding how these duties flow through both new- and used-car markets helps consumers and dealers navigate pricing shifts and adopt strategies to soften their impact.

Key Takeaways

Steel and aluminum tariffs are now 25%, significantly increasing automakers’ material costs.
A 25% tariff on imported vehicles from Canada and Mexico, effective since April 2025, has raised MSRPs by up to $6,000.
New-car prices surged 2.5% in April 2025, marking the steepest monthly increase since April 2020.
Used-car prices have risen, with the Manheim Used Vehicle Value Index up 4.9% year-over-year.
Dealers and consumers are increasingly turning to auctions and pre-tariff inventory to find more affordable pricing.
Automakers are offering incentives and financing deals to help offset tariff-induced price increases.

How Tariffs Drive New Car Prices

Tariffs impact new-car pricing in two key ways:

Direct Material Surcharges
Automakers face higher steel and aluminum costs under Section 232 and typically pass these surcharges through to buyers.
Import Duties on Finished Vehicles
A 25 percent duty on cars imported from Canada or Mexico (if enacted) will directly increase MSRPs for those models.

Tariff Type	Rate
Section 232 steel tariffs	25 percent
Section 232 aluminum tariffs	10 percent
Proposed finished-vehicle duty	25 percent

Table 1: U.S. auto-related tariffs under Section 232 and proposed duties.

Indirect Effects on Production Costs

Tariffs ripple through the supply chain beyond raw materials:

Parts-supplier Increases: Raw-material duties prompt parts manufacturers to raise their prices.
Contract Escalators: Many long-term supplier agreements automatically adjust costs when tariffs change.
“Assist” Values: Imported tooling, software, or engineering support adds to customs valuation, attracting duties.
Margin Pressure: If OEMs absorb part of the cost, dealer invoice-to-MSRP spreads tighten, reducing available consumer incentives.

Pass-Through to the Used Car Market

Rising new-car MSRPs lift trade-in allowances and push used-car values higher:

Trade-In Formulas: Dealers base trade-in offers on current new-car pricing models; MSRP hikes translate into higher allowances.
Supply Shifts: Buyers delaying new purchases increase demand for used vehicles, tightening supply.
Residual Floors: Off-lease and rental fleet returns adjust to higher entry prices, setting new price floors for used cars.

According to Kelley Blue Book, used lots imported under earlier duty regimes have pricing advantages, but overall used-car values tend to climb in tandem with new-car MSRPs.

Manheim’s Used Vehicle Value Index has also shown upward pressure consistent with these tariff effects.

Strategies for Consumers and Dealers

Time Your Purchase
Shop models under current tariffs before any new duty increases, or wait for factory-backed incentives after tariff announcements.
Leverage Incentives
Manufacturer rebates and low-rate financing can counterbalance tariff pass-through.
Shop Auctions
Wholesale and online auctions often list inventory imported before tariff hikes, offering price relief.
Negotiate Separately
Secure trade-in values before new-car negotiations to avoid compounded pass-through.
Explore Late-Model Imports
Used imports may have had duties absorbed by previous owners, making them relatively more affordable.
Bundle Value-Added Services
Extended warranties or service packages can enhance deal value without directly raising MSRP.

Why Auctions Are a Smart Choice for Car Purchases

Auctions can be an excellent source for late-model vehicles with clear chains of title and affordable pricing. Twin Cities Auctions, based in Minnesota, is one such reputable auction house that offers a wide range of vehicles at competitive prices.

Key Benefits of Buying from Auctions:

Wide Selection: Auctions like Twin Cities Auctions offer a variety of vehicles, from low-budget cars to high-end models.

Competitive Pricing: Auctions often offer vehicles at prices below retail value, enabling dealers to maximize their profit margins.

Transparency: Auctions provide full vehicle history reports, so you know exactly what you’re buying.

Convenient Bidding: Many auctions offer online bidding for your convenience, making it easier to source vehicles without being physically present.

Twin Cities Auctions: A Smart Vehicle Sourcing Choice

For those in the automotive industry, Twin Cities Auctions offers an excellent platform for sourcing quality vehicles at competitive prices.

Whether you are just starting or expanding your business, this auction house provides transparency, competitive pricing, and a broad selection.

Feature	Description
Inventory Variety	Wide range of cars, trucks, and SUVs available
Competitive Pricing	Below-market pricing allows for higher profit margins
Vehicle History Reports	Detailed history reports for every vehicle
Online Bidding	Convenient online bidding options for dealers
Financing Options	Financing available to help with inventory purchases

Conclusion

Section 232 tariffs on steel and aluminum, combined with proposed import duties on finished vehicles, are driving up both new- and used-car prices.

By understanding direct surcharges, cascading supply-chain impacts, and trade-in dynamics—and by timing purchases, leveraging incentives, and using auction channels—consumers and dealers can mitigate tariff-driven price hikes and maintain more predictable, affordable pricing.

Twin Cities Auctions: No Dealer License? No Problem!

Are you interested in buying or selling a car but worried about the complexities of needing a dealer license? Worry no more! At Twin Cities Auctions, we’ve removed the barriers, making our auctions open to everyone.

Whether you’re a seasoned buyer or a first-time seller, our platform offers a welcoming environment where you can participate freely. Experience the ease and excitement of our next auction and discover just how simple and rewarding a car auction can be!

Looking for more options? Explore our comprehensive list of all available car auctions across the United States. Your next deal might be just a click away!

FAQ

How quickly do tariffs show up in retail prices?

Material surcharges typically appear within 3–6 months; finished-vehicle duties can affect MSRPs immediately upon implementation.

Can electric vehicles avoid these tariffs?

EVs face the same HTS duty structure, although certain battery components may qualify for preferential rates under trade programs.

Do used-car imports pay duties?

Yes—MFN duties apply to used imports and can influence lot pricing and availability.

How do dealers hedge against cost increases?

Dealers negotiate floor-plan interest specials, pre-purchase contracts, and manage mixed inventory to cushion margin impacts.

Are price increases guaranteed?

While pass-through is common, manufacturer incentives, dealer absorption strategies, and auction sourcing can soften the full impact.

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