Car Prices Are Climbing Again in 2025 as Tariffs Hit Buyers and Dealers Alike

If you’ve been thinking about buying a car this year, brace yourself — vehicle prices are climbing again, and the culprit isn’t just inflation. New tariffs implemented by the Trump administration are now playing a direct role in pushing both new and used car prices even higher, adding yet another hurdle for consumers already grappling with steep costs and tight inventory.

When 2025 began, there was cautious optimism that prices — which had soared in the wake of pandemic-era supply chain woes — would continue to cool. But that trend was short-lived. According to Edmunds, the average transaction price for a three-year-old or newer used car climbed to $30,522 in Q1, marking the first time used cars have crossed the $30K threshold since 2023.

New cars aren’t faring much better. Ford has already confirmed price hikes for its popular Mach-E, Maverick, and Bronco Sport models, with increases starting at $600. While these hikes won’t kick in until late June, they’re directly linked to what the company calls “mid-year pricing actions combined with some tariffs.”

So how exactly are these tariffs impacting the car market? As of now, automakers are grappling with a 25% tariff on imported passenger vehicles and parts, along with specific tariffs on content imported from countries like Mexico and Canada. Although some tariffs were briefly blocked by a U.S. trade court in May, a federal appeals court reinstated them the very next day.

As dealerships run through pre-tariff inventory, expect to see sticker prices reflect the new cost burden. Consulting firm Anderson Economic Group predicts tariff-related price hikes of $2,000–$3,000 on low-impact models, and as much as $10,000 or more on high-tariff vehicles.

Even buyers looking for used cars aren’t immune. As new car prices spike, more consumers are shifting their focus to the used car market, tightening supply and causing prices to rise. Cox Automotive’s latest report confirms that used inventory remains below historical norms, despite a slight improvement in May.

But tariffs and supply constraints aren’t the only reason you’re seeing eye-watering price tags at the dealership. Technological upgrades—from giant infotainment screens to advanced driver-assistance systems—have added thousands to base prices. Meanwhile, manufacturers are passing along rising labor and material costs, driven by ongoing inflation.

Since 2019, new car prices have jumped over 22%, according to the Bureau of Labor Statistics’ Consumer Price Index. In April 2025, Kelley Blue Book reported the average new car sale hit $48,699, climbing 2.5% from the previous month. That figure is nearly $11,000 higher than pre-COVID levels.

And if you’re planning to finance your new ride, prepare for more pain. The average new car payment now hovers around $748, according to J.D. Power, while interest rates remain elevated in line with the Federal Reserve’s anti-inflation stance.

In the end, whether you’re eyeing a new SUV or a gently used sedan, 2025 might not be the best year to buy unless you absolutely have to. With tariffs, limited supply, and stubbornly high financing rates, consumers are being squeezed from all angles. And unless something gives—whether in trade policy or the economy—the road ahead for car buyers looks anything but smooth.