EYE ON AUTOS: Should I Hurry Up and Buy?
Cars are a major purchase. Be cautious before jumping into a purchase based on a fear of what might happen.
By Martin Davis
EDITOR-IN-CHIEF
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For people in the market for a car, Tuesday’s statement from President Donald Trump about imposing tariffs “in the neighborhood of 25%” on products, including automobiles, surely has them thinking it’s time to hurry up and buy.
Before jumping on a deal, however, it pays to step back and take a look at your situation.
Let’s start with what Trump actually said.
How Much and When
According to the Wall Street Journal, Trump’s threat has more than a few ambiguities.
First, they would be “in the neighborhood of 25%,” but whether they’ll be in the heart of the neighborhood or the outskirts is unknown. Further, he suggested a “phase-in” period so that U.S. companies can bring production back to the United States (more on the difficulties associated with that, below).
That could be just the start. Trump is also floating tariffs on steel and aluminum — key to every car produced. And he’s also threatening reciprocal tariffs.
Fortunately, it’s unlikely any action would be taken before April 1, as a trade policy review is underway and not expected to be done before then.
However, if they are levied, the impact could be substantial. Hard numbers are hard to come by at this point, but the CEO of Ford, Jim Farley, has made his feelings plain.
Speaking on Tuesday, he said the moves could “blow a hole in the U.S. industry that we have never seen.” Acknowledging Trump wants to move manufacturing back to the U.S., Farley said it would be a significant accomplishment. “So far,” however, he said “what we’re seeing is a lot of costs and a lot of chaos.”
Chaos to be sure, but the costs aren’t likely to hit until April 1. Not a lot of time, but enough that one shouldn’t feel pressured to close a deal this weekend.
Bringing It Home
The logic behind Trump’s strategy, as Farley noted, is to bring auto production back to the U.S.
However, supply chains in the automotive industry would have to be reworked, and the U.S. would have to significantly change a number of policies to make this viable.
So could manufacturing return? Yes. Will it? No time soon.
According to Industry Weekly, “North American automotive assemblers have spent the last two years organizing their supply chains to take advantage of the incentives offered in the Inflation Reduction Act. Significant BEV assembly and battery capacity increases have been approved, betting on stability through 2030.”
Trump’s tariffs would upend all this and lower production. In short, things would get a lot worse before they got better.
First Takeaway
If Trump follows through, and a new car is necessary, then it’s a good time to act.
However …
Complex Decision
With some 270 models on the American market to choose from, buyers have a lot of options on the lots. Rushing into a decision for fear of what might happen could land the buyer into a $40,000 or more mistake they’ll be paying on for the next 7 years or more.
A new car is not a decision anyone should rush into. With the abundance of information online, a great deal of the work can be done without leaving the house. But that’s no replacement for actually sitting in a car and driving it for a bit.
It’s more important now than probably at any time in the history of the automotive industry. The range of technology can be intimidating, a driver’s comfort level with self-driving technology will vary from model-to-model, and standard worries about comfort and those oh-so-popular cupholders remain.
For those who need to buy a car, there’s still time to do that level of homework and make a solid decision.
Bottom line — Do not rush this decision.
Consider Used
Used cars don’t come as cheap as they once did. However, they’re still considerably less expensive than new cars.
There are, of course, more risks with used cars. Buying from a reputable dealer like CarMax does offer some advantages — namely, the ability to return the vehicle, and a brick-and-mortar business you can deal with should things not be as they appear with the car you are purchasing.
For those choosing used, always take it to a certified mechanic for a good going over.
A used car is still a major investment.
Second Takeaway
Even if Trump acts, remember that any car purchased is likely to be in the buyer’s driveway for a decade or more. That’s a long time to have a car that doesn’t meet the buyer’s needs, or even appeal to them.
If a new car is required, and if the plan was to buy one within six months, then yes, it’s probably a good time to act.
If budgets are tight, then yes, it’s probably a good time to act, as prices are almost sure to climb.
But if a new or used car is something the buyer would like to have but doesn’t need, it could pay to be patient and let things settle down a bit before acting.
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