BILLINGS — The decision to buy a car can be a daunting one for many consumers, but the upcoming 25% tariff on imported vehicles could make the process even more complicated. Local experts and dealerships in Billings are cautious and uncertain about the impact on prices and availability.
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President Donald Trump announced this week that 25% tariffs on all imported vehicles and parts would go into effect on April 3, with the White House citing using the tariffs as a strategy to boost and protect U.S. manufacturing. Roughly half of all vehicles purchased in the U.S. last year were imported.
The country currently imposes a 25% tariff on imported pickup trucks and a 2.5% tariff on passenger car imports.
“This year this year in automotive is definitely unusual,” said Ernie Lee, a former automotive dealer and dealership general manager in Billings with over 36 years of industry experience. "I've seen a lot of ups and downs a lot of changes a lot of change of thought and philosophy, but having to adapt to possible 25% increase in tariffs on non-U.S. made parts is going to be a challenge if it all finalizes through.”
There is uncertainty about how much of the cost will ultimately be passed on to consumers. Lee anticipates that prices for foreign-made vehicles will increase by around 8-10%, even though not every component will experience a price hike. Cars manufactured in the U.S. could also see price increases due to the use of imported parts.
“When people say, 'Holy cow, this price this vehicle is going to go up 25%,' no, parts of the vehicle are going to go up 25%. Honestly, we will see if this does hold fast and true manufacturing return to the United States," said Lee.
There is also uncertainty on how long it will take for these increases to be felt, however, Lee believes the automobile industry’s resilience will help it adapt. He speculates that if new car prices rise, the used car market may become more attractive to consumers, offering more affordable alternatives.
"Maybe if new car prices go up, used car prices probably will become a lot more attractive," said Lee. “If new car prices go up, maybe leasing will come back. New car prices go up and all of a sudden banks and lending institutions find new ways to make our vehicles that we rely on especially here in Montana so affordable, so this isn't the end. It's just a restart."
Joshua Soares, executive manager of Kia of Billings and GMC of Billings, is more optimistic about the impact the tariffs will have on his dealership. Soares believes the 25% tariff will have little effect on vehicle prices at his lot.
“A majority of the 25% is not going to get passed on to the consumer. It's going to get eaten by the factory and the importers and the suppliers at the end of the day," said Soares. “I don't think any factory is willing to lose up market share just to get an extra buck at the end of the day. Market share is going to be the most important thing for them. At the end of the day, consumers will decide what vehicles are sold for."
Soares also sees the tariffs as potentially beneficial for his dealership, especially since a large percentage of Kia vehicles sold in the U.S. are manufactured in the U.S. or Mexico. He estimates that around 40-50% of Kia vehicles sold in the U.S. are built in North America, allowing the dealership to avoid much of the tariff burden.
“As production keeps increasing, used car prices should keep and continue to fall and get back to normal levels," said Soares. “It's a big nothing burger. We're doing fantastic. I don't think the consumers are going to bear a lot of this because there's a lot of choices. When you have a tariff on something, you'll see more of that tariff passed on to the consumer when there's less choices. The more choices you have, the less that tariff will be passed on to the consumer.”
With prices rising across the board for both imported and domestic vehicles, some consumers might turn to used cars.
“My initial thoughts would be that new car prices will be driven up, and we may see something like we saw during COVID where used car prices kind of followed suit," said BJ Johnson, owner of used car dealership Auto Resource. “I'm sure the average car payment has gone up at least $100, maybe $200, and in this economy, it makes it tough to afford a nicer vehicle."
Johnson anticipates an increase in the cost of car parts, ultimately making repairs more expensive for consumers.
“It'll just make the cost of fixing cars go up. We fix our cars before we put them on the lots. That in turn would get turned over to the consumer," said Johnson.
Johnson believes some manufacturers may move production to the U.S. to avoid tariffs, which could ultimately benefit American-made vehicles in the long run.
“I would guess a lot of manufacturers would allow moving their plants into the U.S. so the tariffs didn't affect them. If anything, it may be a blessing for the American-made vehicles," said Johnson.
For those who are possibly in the market for a new vehicle, despite the anticipated price increases, experts agree that now may still be the best time to buy.
“If you're in the marketplace today, I would probably tell you it might be a good idea to get it done if you're thinking of a marketplace down the road. Maybe your perception of what you need might be changing, so sometimes you have to roll with the changes," said Lee. "We just have to wait and watch."
