Rising tariffs are beginning to push new and used car prices higher across the U.S. as pre-tariff inventory dwindles and automakers raise prices in response to increased import costs. Consumers who rushed to buy tariff-free vehicles helped fuel a sales boom this spring, but dealers now face constrained supply, especially on affordable models, and are paying more for trade-ins to restock their lots.
According to Cars.com data, the average new car price rose to $49,530 in April, up 0.8% year-over-year, as dealers began to run out of tariff-free stock. Automakers have already begun raising prices, particularly on vehicles manufactured in countries hit the hardest by the new import duties. For instance, Mexican-built models saw a $1,102 month-over-month price increase, and Canadian imports rose $267. Meanwhile, Nissan discontinued its $20,000 base Versa, the last new vehicle below that price, citing higher costs and lower demand.
However, notably, sales surged in anticipation of tariffs, reaching 17.8 million in March and 17.3 million in April. That includes one of the highest March sales totals in nearly five decades. But as tariffs take hold and supply tightens, inventory is slowing. New-car inventory rose only 3.7% year over year in April, while available stock on dealer lots declined by 5.2% from the start of April to May.
Due to a limited number of new cars available, especially in the sub-$30,000 price range, many shoppers are now turning to the used car market. However, this segment is also facing challenges because of reduced production during the COVID-19 pandemic and a significant decline in lease returns. As a result, there is a shortage of used inventory, which is expected to reach its lowest point in 2025, with many listings consisting of older vehicles with higher mileage.
The most sought-after used vehicles are late-model options priced between $20,000 and $29,000.To replenish inventory, dealerships are offering higher prices for trade-ins. In April, trade-in values rose $820 year over year, the first April increase since 2022, and jumped $388 from March, marking the highest month-over-month gain since May 2023.
In addition, Cars.com noted a sharp increase in sub-$10,000 listings; however, those vehicles averaged 135,000 miles and tend to sit unsold for longer periods. Meanwhile, demand is strongest for lower-mileage vehicles that can serve as more affordable alternatives to increasingly expensive new models.
Unfortunately for shoppers, financing offers aren’t easing the pressure. Despite a 1% interest rate cut by the Federal Reserve in late 2024, new-car loans have grown more expensive. The average APR on a new-car loan rose 0.08% from Q3 2024 to April 2025. Used-car loan rates dropped slightly but remained high at 11%.
