Buyer’s market, we hardly knew ye.
Going into 2025, there were high hopes car prices were leveling off after their five-year period of lurching upward. “If you’ve been waiting to dip your toes into the market, now might be the time,” AutoTrader’s Baris Akyurek wrote in early October 2024.
A few months on, some analysts say the high price tags could be back, as U.S. President Donald Trump threatens tariffs on all Mexican and Canadian goods as soon as Saturday. The move would almost certainly jack up vehicle costs, since many auto parts cross the border up to eight times before ending up in a vehicle.
Here’s what’s going on in the market, and what buyers might watch in the weeks to come.
Economic outlook: Analysts from S&P Global Mobility predicted this week that consumers will bear the additional cost of importing autos from Canada and Mexico into the U.S.—an average US$6,250 per vehicle in a 25 per cent tariff scenario. Market-wide, retail prices of vehicles could rise by an average US$3,000, according to data cited by TD Economics.
At the same time, incentives to purchase EVs, like the iZEV program and Quebec’s Roulez vert are being suspended. Companies like Tesla are already adding thousands to their price tags.
How we got here: The effect of tariffs could erase hard-won progress the auto industry made after prices overheated between 2020 and 2023. Factory shutdowns during the COVID-19 pandemic, a semiconductor shortage and rising interest rates all added to costs.
In 2024, wait times for cars finally normalized, while interest rates inched down and labour disruptions proved less costly than feared. Hopes rose. By September, average prices of new vehicles were down nearly two per cent year over year, and used vehicles were down nearly nine per cent, according to AutoTrader data.
Blink and you missed it: It’s not clear that the shift to a buyer’s market made an impression on the driving public. As a Cox Automotive report notes, lower transaction prices were “results of discounts and incentives, not lower-priced automobiles.” So consumers were still looking at daunting sticker prices until they started dealing on a car in earnest.
The high prices of the pandemic period, meanwhile, may be weighing on today’s market.
Dan Park, CEO of auto e-tailer Clutch, told The Logic late last month that some buyers who purchased at the peak of the market now find themselves owing more on their vehicles than they’re worth. The company has used artificial intelligence models to help consumers—who may feel they’re in no position to upgrade—better track the price of their vehicles.
Silver lining, please: Not all hope is lost for those who fear they missed a buying opportunity. Park noted that tariffs, if they do come to pass, could stem the outflow of used vehicles from Canada to the U.S., giving Canadians more affordable purchase options.
Huw Williams, a spokesperson for the Canadian Automobile Dealers Association, acknowledged that tariffs are bad for consumers, and expressed worry about the ending EV incentives. Still, he noted, falling interest rates have boosted consumer confidence, while automakers are applying their best technology to more affordable models. Honda, for example, is reportedly planning to announce a sub-US$30,000 EV for North America.
“Consumers are definitely excited about the product lineup that’s out there,” said Williams.
Read Shift—The Logic’s authoritative weekly newsletter on automotive technology industry news—for more; and if you know someone who should be reading it, they can sign up here.
