Will Tariffs Increase the Cost of Cars?

With inflation finally easing but interest rates still elevated, many New Mexicans are wondering: Is this a good time to buy a vehicle?

Whether you’re in the market for a personal car, commercial fleet vehicle, or thinking about upgrading to an EV, the answer depends on timing, your financing options, and—more than ever—policy shifts like tariffs.

New Vehicles: High Tariffs, Tight Supply—but Discount Opportunities

New vehicle inventory has mostly recovered from pandemic-era shortages, but hybrids and EVs remain limited. Prices are stabilizing, yet still 10–20% higher than pre-2020 averages.

The President’s new tariffs on vehicles started in April of this year, with new 25% tariffs on imported vehicles and parts have begun to drive prices up across the board—even for domestic brands, since most use globally sourced components. Manufacturers are discounting the remaining 2024 models to make way for 2025 inventory, creating short-term deal potential for savvy buyers.

Financing rates remain in the 6–8% range but may begin to drop by late 2025 as the Federal Reserve signals a possible rate cut.

Used Vehicles: Prices Cooling, but Still Above Average

Used car prices have dipped slightly from their 2022 peak, but remain high. Budget-conscious buyers are competing for high-mileage models, and demand continues to outpace supply.

Used EVs are becoming more affordable, though battery condition and longevity remain big questions for many buyers. With limited inventory and fewer incentives in the used market, trade-in values for older vehicles are currently strong—something to consider if you’re thinking of upgrading.

Commercial Vehicles: High Demand and Long Waits

New Mexico’s booming logistics, construction, and oilfield sectors are driving strong demand for commercial vehicles. However, lead times remain long—90 to 180 days—especially for upfitted or vocational units.

Financing is also tighter, with many lenders requiring 20%+ down payments. That said, Section 179 deductions and bonus depreciation still offer major tax advantages for businesses purchasing in 2025.

Repairs & Insurance: Costs Keep Climbing

Global supply chains and rising tariffs are pushing repair costs up by as much as 40%, especially when imported parts are involved. That spike is trickling into the insurance industry, where premium increases are being felt across New Mexico.

According to national studies, auto insurance payouts could increase by $7–24 billion in 2025 alone, which may continue to impact consumer premiums into 2026. For all vehicle owners, this means higher total cost of ownership even after the purchase.

EV Incentives: Real Money on the Table

There’s still good news for EV buyers. The federal tax credit of up to $7,500 is available for qualifying models. In New Mexico, the Clean Car Credit program offers state-level rebates, and many local utilities provide additional incentives for home charging station installation.

If you’ve been considering an EV, 2025 remains a smart window to explore tax savings and long-term fuel cost reductions.

Sales Snapshot: The Tariff Rollercoaster

• March 2025: Auto sales spiked to a 4-year high as buyers rushed in before the new tariffs hit.
• May 2025: Sales dipped 10% as prices rose and urgency faded.
• Used car values: A 3-year-old used vehicle now averages over $30,000, closing the gap with new vehicle prices.

Tariffs in Context: What They Mean for NM

New Mexico has over 200 dealerships, service centers, and suppliers—all part of a larger auto ecosystem impacted by these tariffs. According to the National Automobile Dealers Association (NADA), new tariffs could reduce nationwide sales by 2 million units, risk up to 714,700 jobs, and cut $59 billion from GDP.

That impact is being felt locally—affecting consumer choices, dealer inventories, and pricing flexibility.

Final Thoughts: Should You Buy Now?

It may be a good time to buy if:

• You find a strong deal on a discounted 2024 model
• You’re ready to trade in a vehicle at top value
• Your business needs to expense a vehicle in 2025

You might consider waiting if:

• You’re hoping for lower interest rates (likely Q4 2025)
• You’re concerned about tariff impacts on vehicle costs and insurance
• You want to shop during potential late-year incentives or rebates

💡 Brought to You By the New Mexico Automotive Industry Alliance (NMAIA)

At NMAIA, we represent New Mexico’s independent automotive sector— Our mission is to inform, support, and advocate for automotive professionals and the consumers they serve.

📍 Find an NMAIA-Accredited Dealer
Stay Informed. Shop Smart. Drive New Mexico.

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