New and used car prices set to rise due to Trump tariffs: experts

Steep U.S. tariffs on all imported vehicles are set to drive prices, already high in part because of pandemic-related disruptions, higher still for both new and used cars, experts say.

Prices are already rising on some used cars as sellers anticipate buyers looking for a better deal compared to a new vehicle, said Sean Mactavish, CEO of used-car marketplace Autozen.

"New car prices go up. People (look) into the used cars, and then that increase in demand drives the prices up for used vehicles," he said.

Consumers are likely to trade down to used cars or even delay major vehicle purchases as they grapple with uncertainty and higher prices, said Mactavish.

Once the tariffs start rolling through the supply chain, prices on new cars are expected to go up too, said Baris Akyurek, vice-president of insights and intelligence at Autotrader.ca.

"It's inevitable that there's going to be an increase in new car prices," said Akyurek.

He added that demand for used cars was rising for weeks before the new tariffs were enacted as consumers anticipated what could be coming.

"We believe that some of those consumers who wanted to get ahead of these potential increases, they've already pulled the trigger," he said. "We've been seeing, especially since the beginning of March, that the used car market is pretty hot."

'You don't want swings, you want constant sales'

The owner of one car dealership in Toronto says news of the tariffs is causing him "trepidation."

Anthony Picilaidis, managing director of AJS Auto Sales in Scarborough, said he is "quite fearful of what the outcome will be for the industry and for us a business." As a small family dealership, the tariffs could have huge impacts, he added.

Picilaidis said he expects prices in the used car market to rise but increased sales can be a double-edged sword. 

"Yes, sales could potentially go up because people are going to be avoiding buying new cars because they're too expensive. But by the same token, supply becomes very difficult and the competition among dealers then becomes much more difficult and therefore the prices tend to go up," he said.

"You don't want swings, you want constant sales."

Tariffs could raise price of vehicles in U.S. by up to $5K US

U.S. President Donald Trump has enacted 25 per cent duties on imported vehicles, with temporary reprieve for some parts compliant with the Canada-U.S.-Mexico free trade agreement.

Prime Minister Mark Carney has announced retaliatory tariffs on automobiles coming in from the U.S., adding more costs to the supply chain.

Trump also enacted steel and aluminum tariffs on March 12, which add more cost pressure for automakers.

The tariffs could raise the average price of vehicles in the U.S. by up to $5,000 US, said TD Economics in a March 27 report. If an exemption for CUSMA-compliant parts is removed, the estimate jumps to between $7,000 US and $10,000 US, while the metal tariffs add another $1,000 US in costs.

Auto industry leaders have warned the tariffs will lead to plant shutdowns. Stellantis has already temporarily paused operations at its plant in Windsor, Ont.

Ontario Premier Doug Ford said Friday that Canada was going to keep fighting the tariffs and protect workers.

"Very clear message. President Trump — these parts go back and forth across the border seven, eight times. One of these car companies go down, it will shut assembly lines down on both sides of the border," he said.

"This whole tariff nonsense with Canada, it's the craziest thing I've ever, ever seen."

Shutdowns will add further pressure to the supply of cars, which also means higher prices, said Mactavish.

"We're going to see those shortages show up," he said.

Used car prices rose during COVID-19 supply crunch

During the COVID-19 supply crunch for vehicles, a similar rise in used-car prices happened, noted Mactavish. This time, it's likely to be particularly concentrated on certain makes and models, he said.

"It depends on where that car is made, not just where the brand is nationally," he said.

The timing of price increases on new cars will depend in part on how much inventory a dealer has, he said.

With the costs of vehicles and repairs expected to rise, this may also drive up insurance premiums, according to Ratehub.ca.

"Increased auto and parts prices could also raise total loss claims, affecting premiums for all Canadian policyholders," said vice-president of insurance Matt Hands in a statement.

Trump has also said the major three automakers have to move production back to the U.S. But this is something that would take the industry years to do, said Mactavish.

"It's pretty tough to pick up a manufacturing plant and just move it to another place," he said.

"If those companies ultimately do pull out, that's some significant downturn to that industry."