Consumer News: Calm before the storm: Car prices set to rise sharply by after a brief period of stability

• After a brief period of stability, new car prices in the U.S. are poised for a steep climb, driven largely by incoming import tariffs and a scramble for pre-tariff inventory.
• March figures from Kelley Blue Book show a modest dip in the average transaction price (ATP) of new vehicles to $47,462 down slightly from February and up less than 1% year over year. But according to Cox Automotive, that pricing lull is likely to vanish in the months ahead.
• All signs point to higher prices this summer, said Erin Keating, executive analyst at Cox Automotive, in comments to Wards Auto. There is no way around it. Tariffs are going to push new-vehicle prices higher in the U.S.

---

Tariffs take a toll

The upcoming 25% tariff on imported vehicles is expected to be a game-changer. While the policy directly affects only foreign-assembled cars, the market impact is broader, as dealers and consumers rush to secure vehicles before the increases take effect. Even domestically manufactured models could see price jumps due to tightened supply and increased demand.

Vehicles facing the new tariffs may experience ATP hikes between 10% and 15%. Cox Automotive anticipates a minimum 5% rise in prices across the board due to market pressure alone.

Budget-conscious shoppers will likely bear the brunt of the changes. Only 26 vehicle models carried ATPs under $30,000 in March, comprising just 14% of U.S. new-car sales. Many of these, including the Chevrolet Trax, Honda HR-V, Kia Soul and Mazda3, are assembled outside the U.S. and are among the most vulnerable to tariff-related price increases.

March Madness: Sales surge ahead of tariffs

U.S. consumers appear to have responded to early warnings. New-vehicle sales soared in March, with 1.59 million units sold a 30% jump over February and the strongest monthly total in nearly four years. Buyers rushed to take advantage of stable pricing before the expected tariff impact hits.

Incentives steady, but uneven

Incentives remained steady in March, holding at 7.0% of ATP, matching Februarys rate and slightly up from 6.7% the previous year. However, deals were uneven across segments. While luxury cars, compact SUVs and full-size pickups offered generous incentives, categories like small/midsize pickups and full-size SUVs offered as little as 2.6% of ATP in discounts.

EV prices defy expectations

Despite increasing competition and maturing technology, electric vehicle (EV) prices continued to rise. EV ATPs reached $59,205 in March, up 7% year over year and 25% above the industry average. Incentives dropped to 13.3% from 14.3% in February, indicating waning manufacturer support even as prices climb.

Tesla played a major role in this trend. The companys March ATP increased to $54,582, with Model 3 and Model Y prices up month over month and year over year. Still, Teslas Q1 sales dipped more than 8% from a year ago, a sign that higher prices may be weighing on demand.

The road ahead

As spring progresses, much hinges on how long pre-tariff inventory can sustain current price levels and how automakers adjust pricing strategies for new arrivals. For now, consumers hoping to score a deal may need to act fast before summer brings an inevitable price surge across the board.