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Buying a car: It’s a big deal at any point, but especially now. New tariffs on auto imports threaten to raise the price of a new vehicle by anywhere from $2,500 to $12,000 or more, analysts estimate. And that’s on top of prices that are already much higher than they were before COVID-19. The average new car sold for over $47,000 in March, up from about $38,000 at the start of the pandemic, according to Kelley Blue Book. The average compact SUV — the best-selling segment — goes for over $36,000. In fact, cars are among the biggest purchases most Americans make, and the money borrowed to buy them makes up almost one-third of their collective debt (excluding mortgages), according to Federal Reserve data. Plus, while some people keep their house forever, drivers will definitely buy several cars in a lifetime. The average age of the 286 million cars and light trucks on the road in 2024 was 12.6 years, according to estimates from S&P Global Mobility, though one survey showed U.S. adults keep their longest-held cars for just eight years, on average. Of course, tariffs won’t have a direct impact on the price of cars that are already on the road, and Americans buy about twice as many used cars as new ones in a year. But the average price of a used car — just over $25,000 at the start of April — won’t be immune. Less affordable new vehicles will make existing ones that much more valuable to their owners, raising their resale value, analysts say. Used cars are also still in relatively short supply because of pandemic-era disruptions in manufacturing. For most people, price isn’t the only consideration, either. There’s also the question of how to pay for the purchase. Eighty percent of new cars and 36% of used cars were financed in the U.S. in the fourth quarter of last year, according to the credit bureau Experian. And choosing an auto loan or lease can be tricky even for financially savvy buyers, given how many providers there are — both independent lenders and dealerships — and the range of interest rates and loan terms available. (Interest rates on used car loans can be double or triple the rates on new car loans.) For instance, it might be tempting to extend your loan beyond the typical three to six years in order to lower the monthly payment. But that can increase interest costs — and put you in a bind if you owe more on your loan than the car is worth when you decide to sell or trade it in. This financing guide from the Federal Reserve has more on the risks of going “underwater” — and avoiding unexpected costs. So what? The average monthly payment on a car loan is more than $500 (and over $700 if the car is new) and can easily be your biggest single bill after your mortgage payment or rent. Although you may still be able to find pre-tariff prices on dealer lots, you don’t want to rush into such a big commitment, especially given all the uncertainty about the economy. If you need a car, take your time. Do the research. Shop around. And explore all the financing options.Related Reading
• A Shopper's Guide to Tariffs: What to Know When Buying a Car (Car and Driver)
• Why Your Auto Insurance Could Jump by $446 This Year (SoFi)
• Financing or Leasing a Car (Federal Trade Commission)
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