MW Should you buy a car now to avoid tariffs? That strategy has one big potential roadblock.

Andrew Keshner

'Getting an auto loan can be an overwhelming process even in the best of times,' one personal-finance expert says

People accelerating a car purchase to avoid price increases in an escalating global trade war may face an unexpected speed bump: difficulties getting an affordable car loan.

On Wednesday, President Donald Trump announced 25% tariffs on imported cars and certain automotive parts. It was the latest in a wave of levies that are scheduled to start early next month or that are already in effect, and that are part of what the White House says is an attempt to spur more domestic manufacturing.

If the 25% tariff is fully passed along by to consumers, it could add roughly $6,000 to $16,000 to the list price of some popular cars that are currently not made domestically, according to iSeeCars.

One tactic for people who worry that tariffs will increase prices on products is to move up a purchase they are already planning to make, while avoiding the urge to panic-buy.

Of course, it's no easy feat for most people to quickly factor a large purchase such as a car into their budget. And aside from the price of the car itself, there's another factor to consider that might be easy to overlook in the swirl of tariff news: the availability and cost of car loans.

Getting a loan to buy a car increasingly requires a sterling credit score. Nearly half of auto loans in the fourth quarter went to applicants with "super prime" scores that were at least 781 on a spectrum running from 300 to 850, according to the credit-reporting company Experian (EXPGF).

The average credit score for Americans was 701 in February, down from 702 the month before, according to VantageScore. A prime score is 661 to 780, by VantageScore's measure.

At a time when car-loan delinquencies have swung to levels last seen in 2010, lenders may be thinking especially hard about which applicants have the best chance of repaying their loans.

Financing is a must for all but the most well-off car buyers, with the average price of a new car at nearly $50,000 and the average monthly payment now about $750, according to the car-buying site Edmunds.

But an increasing number of consumers say they doubt their ability to get a car loan.

One-third of people said they expect they would be rejected if they applied for a car loan in the coming year, according to a February survey by the Federal Reserve Bank of New York. That's a record high in the more than 10 years that the New York Fed has been asking people about their experiences and expectations in obtaining credit.

Overall, lenders originated $175.1 billion in car loans last quarter, down from $184.2 billion a quarter earlier, according to the New York Fed.

"Getting an auto loan can be an overwhelming process even in the best of times, and adding in the complications of tariffs and a tightening credit market makes it even harder," said Kimberly Palmer, personal-finance expert at NerdWallet.

On top of high prices for cars, buyers face high interest rates, despite the Fed's rate cuts, which were supposed to bring down borrowing costs for consumers.

Banks charged an average 7.82% for a five-year loan on a new car in November, according to the Federal Reserve. It was slightly lower, at 6%, for lenders including dealers' financing arms.

The average amount financed per loan was more than $41,500, up roughly $1,000 from the same point in 2023, according to Experian.

It's not yet clear how much of the new tariff costs car buyers will shoulder and how much manufacturers will absorb. A note from analysts at J.P. Morgan said the tariffs may cost the auto industry billions of dollars, although the impact will vary by company.

Even if carmakers and parts suppliers pay the direct costs, there's "no avoiding the pain" of softer demand and lower production, the note said.

And if they pass the costs along, consumers are "already buckling under the pressure of near-record new vehicle average transaction prices and historically high interest rates," analysts wrote. Americans also facing cost pressures from tariffs on other products, which some estimates say could add $1,200 to $1,600 to a household's annual budget.

Despite the backdrop of tariffs, would-be car buyers shouldn't rush in, Palmer said. Consumers should shop around for affordable rates, get a free copy of their credit report and check for errors that may be dragging down their credit score.

There's no single route to obtaining a car loan, she said. That's good to remember when people may feel constrained in their choices. "You don't have to use the financing option offered at the car dealership," Palmer said. "You can compare your options at your bank, credit union and online lenders to get competitive offers."

-Andrew Keshner

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March 27, 2025 17:15 ET (21:15 GMT)

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