When President Trump unveiled his tariff plans on cars and car parts in April, he said, “you’re going to see prices go down.” Unfortunately, the reality is different. A new study from Cars.com on dealer inventory in the first half of 2025 indicates that the supply of new cars under $30,000 is slowing down.
The study notes that the under-$30,000 segment is the most exposed to tariffs, as 92% of the models within it are imports. Just two, the Honda Civic and Toyota Corolla, are built in the US, and even then, some Corolla and Civic variants come from outside the US. In terms of dealer inventory, the segment saw 3.9% growth year over year (YoY), but that lags behind the 5.6% overall increase YoY for new-car inventory.
The study also shows that dealers stocked up on inventory before tariffs began in April, and sales increased in March and April, up by 3.9% YoY compared to the first half of 2024. This has had a few interesting effects. There was a greater supply of used vehicles as a result of trade-ins from customers looking to get into a new car before the tariffs hit, and those cars started selling quickly. Used car prices dipped slightly in the first quarter of 2025 but rose by 1.6% YoY in the second quarter.
Now, the supply of pre-tariff new cars is dwindling, and with that, the study says we should expect price increases. So far this year, average new-car prices rose by just $97, but vehicles from the UK got over $10,000 more expensive. EU-built cars, meanwhile, saw an average increase of nearly $2,500. Chinese, Canadian, and Korean cars saw prices drop, as did US-built cars, to the tune of $200 on average.
For the second half of 2025, we can expect higher prices and smaller demand. “The pace of sales and inventory movement will depend on the scope of tariffs, with automakers likely to adjust production to align with a smaller, more price-sensitive buyer pool,” Cars.com says in the report.
Cars.com has some other interesting insights. It surveyed EV buyers, and 53% of respondents said Federal tax credits were a main reason for buying their cars. With both the $7,500 credit for new EVs and $4,000 credit for used EVs going away after September, this will have a big impact on EV affordability. The study says it may be “difficult” to sustain the momentum of 28 months of consecutive new EV inventory growth. Cars.com also thinks the market for used EVs is bottoming out.
The study also notes that automakers are increasing production of lower and higher vehicle trims, with mid-level trims seeing a small decrease. Lower trims are obviously appealing to more price-sensitive buyers, especially in a world of increased prices overall, while higher trims are more profitable. Shifting the model mix seems like it could alleviate some of the effects of tariffs.
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