April 7, 2025

Navigating New Auto Tariffs: What Dealerships Need to Know

On April 3, 2025, a new 25% tariff on imported vehicles went into effect, bringing big changes for auto dealerships across the country. Nearly half of the new vehicles sold in the U.S. each year come from countries like Mexico, Canada, South Korea, Japan, and Germany. The added cost of these tariffs is expected to influence vehicle pricing, inventory decisions, and customer demand at the dealership level.

In the days leading up to the change, buyer activity spiked. Cox Automotive reported a 30% increase in traffic to sites like Kelley Blue Book and Autotrader, as shoppers rushed to lock in prices before increases took hold. But that rush may not last. Many experts expect sales to slow by summer as prices rise and consumers start to hold off on purchases.

Automakers are responding in different ways. Some are holding prices steady for now, while others are adjusting pricing or production plans. For dealerships, staying on top of these changes and preparing early will make a difference. To help clients, prospects, and others, Wilson Lewis has summarized the key details below.

Understanding the Impacts

• Vehicle Pricing — The new tariffs are expected to raise vehicle prices. According to the Center for Automotive Research (CAR), the average price of a new vehicle could increase by about $2,750, though that figure will vary widely depending on the make and model. Vehicles priced under $30,000 are particularly vulnerable, with nearly 80% subject to the 25% tariff. For models like the Honda Civic, Toyota Corolla, Nissan Sentra, and Chevy Equinox, prices could rise by 10-15%. Even models not subject to the full tariff could see prices rise. Industry analysts expect an overall increase of around 5%, driven by supply chain adjustments and broader market pressure. For dealerships, that means revisiting price strategies and preparing for more price-sensitive shoppers.
• Consumer Behavior — The auto market initially experienced increased sales activity as consumers rushed to purchase pre-tariff inventory. According to AutoPacific, 18% of shoppers moved their planned vehicle purchases forward to avoid anticipated price hikes. But longer term, higher prices could drive more buyers to the used-car market. CAR forecasts that new-vehicle sales could drop by as much as 1.3 million units in 2025. To keep vehicles affordable, many dealerships are adjusting financing options. Since nearly 97% of U.S. car buyers finance or lease, extended loan terms and lower interest rates are becoming more important. As one analyst noted, dealerships can focus on keeping the monthly payment within reach.
• Inventory Management — In the short term, dealerships with higher inventory levels, especially vehicles delivered before the tariff took effect, may have an advantage. Brands like Ford, Nissan, and Hyundai have more cars on the lot, giving some flexibility as prices begin to climb. Others, like Toyota, Honda, and Subaru, typically operate with lean inventories, which could lead to shortages. While pre-tariff inventory is a valuable asset now, dealerships will need to adjust their ordering strategies moving forward. Balancing stock levels to avoid overexposure, while still meeting demand, will be key to staying competitive.
• Supply Chain Disruptions — For years, automakers relied on free trade across North America to build a cost-effective supply chain. Under agreements like NAFTA and later the United States-Mexico-Canada Agreement (USMCA), vehicles and parts moved freely across borders, often crossing multiple times during production. That system is now under strain. Some automakers have paused production, delayed shipments, or held vehicles at the border as they reassess operations.
• Operational Costs — Starting May 3, new tariffs on imported auto parts could bring another round of price increases. These added costs will impact more than just service and repair; they’re also expected to raise the cost of building vehicles, which could lead to higher sticker prices. For dealerships, this means taking a closer look at pricing strategies, evaluating parts sourcing, and finding ways to manage expenses across departments.

Market Dynamics: How Automakers Are Responding 

Automakers are taking different approaches to manage uncertainty and maintain buyer confidence. Hyundai committed to holding prices steady through early June. Ford and Stellantis introduced promotional offers, including employee pricing programs. Nissan cut prices on several popular models, including the Rogue and Pathfinder.

Luxury brands are adjusting as well. Ferrari announced price increases of around 10 percent on most models but is covering the added cost for select vehicles. BMW is absorbing tariff costs on its Mexico-produced vehicles through at least early May. These actions show how varied the responses have been and how dealerships can be proactive, at least in near-term planning and promotions.

Additional Considerations

These vehicle tariffs are part of a broader shift in trade policy. New tariffs on raw materials like steel and aluminum are also affecting production costs. While the full impact isn’t yet clear, many expect costs to continue rising across the industry.

The National Automobile Dealers Association (NADA) and the American Truck Dealers (ATD) have spoken out against the tariffs, warning of higher vehicle prices, reduced demand, and job losses. The United Auto Workers (UAW) supports the move in hopes that it will lead to more domestic manufacturing. Analysts warn, however, that any long-term gains could be preceded by short-term layoffs.

There are broader economic implications as well. About 1 million U.S.-made vehicles are exported to Canada and Mexico each year. If those countries respond with their own tariffs, U.S. automakers may need to scale back production, cut hours, or reduce staffing.

Potential Opportunities

Despite the challenges, dealerships can take practical steps to adapt:

• Scenario Planning: Model different outcomes to prepare for shifts in pricing, inventory, and demand.
• Inventory Management: Monitor supply levels closely and adjust orders to align with consumer demand.
• Customer Communication: Be transparent about tariffs, pricing, and make/model availability to build trust over the long term.
• Operational Efficiency: Look for ways to streamline service operations and control costs.
• Adaptability: Stay flexible and ready to adjust as new information and guidance become available.

Contact Us

Tariffs have introduced new challenges for dealerships, but preparation and clear strategy can make a difference. Dealerships that act early and stay informed will be better positioned to manage uncertainty and support their customers through the months ahead. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.