- Americans start to with car sales companies Before President Donald Trump's car tariffs, they cause higher vehicles. However, when arguing with expensive vehicles and high interest rates, consumers may not be financially equipped to make purchases of these large tickets, leading to non-execution of bonds or abandon holidays and other purchases to compensate for the impact of the loan.
New car buyers who want to evade car tariffs may suffer from unintentional financial consequences as a result of long loan conditions and high interest rates.
President Donald Trump's 25% car tariff Introduced at the end of March, the US has caused frantic new car purchases, but as a result of their big tickets purchases, new car buyers can take loans, which will take longer and have higher interest rates than they should wait for the vehicle to buy.
Even before Trump's car tariffs threatened to hike both cars and insurance prices, the car prices were already high as a result of the pandemic –approaching $ 48,000 For an average transaction price on the Edmunds website of the car purchase website. If interest rates are more than 7%, buying a car usually requires borrowing a good piece of change, said Edmunds driver Jessica Caldwell, said A treasure.
To alleviate these sudden prices, Americans expand the length of their loans, about 20% of car loans are now seven years old, Edmunds reports. It may be that consumers are in a hurry to evade the price increases caused by tariffs, they have saddened themselves with a greater financial burden.
“People quickly buy something because they know that there is a schedule,” Caldwell said. “The real risk of many people is that they get into a car they may -that they may not necessarily be ready to buy, or bought a little earlier and made a kind of Snap decision. They could register for unfavorable loan conditions or monthly payments that seem difficult.”
Inevitability of raised car prices
Car sales companies have seen activities when consumers compete with a new vehicle before they bring more extensive tariff cars to their lots. Hyundai announced his all -time sales of all time, seeing 19% growth, while Nissan also saw that the US was growing by 10% in March. According to the Economic Analysis Bureau data On the sale of seasonally adjusted vehicles. In the same months last year, the annual rate was about 16 million.
According to Kishore Kulkarn, Economic Professor of Metropolitan State University in Metropolitan, this trend is justified: buying a new car to circumvent the tariffs is a financial reasonable for many.
“We are almost guaranteed to see the price increase in the future,” Kulkarni said TreasureTo. “And if you are ready to buy a car, it is better to buy it today.”
There is indeed on the car prices remained year ago from year to year according to the Consumer Price Index of the Work Statistics Bureau $ 9,000 more expensive If they were before the pandemic. Although Trump has alleviated the influence From car tariffs, taking back taxes from certain imported auto parts, consumers should still assume that price tags will increase as a result of tariffs, Jason Miller, associate professor at the Michigan National University Supply Chain Management, said. With a car dealership so thin profit marginsThey have no choice but to raise prices.
“As their margins have fallen back where they were before the absolute TreasureTo.
Although new car owners may avoid tariff headaches, they are not free of financial risks. The terms of less-ideal loan conditions can cause more for the car than its actual value or negative equity, which makes it difficult to trade it. Negative equity shares or percentage of borrowers who are more than their car is worth, increased in March by 0.4%, respectively data COX of Automotive, which refers to an increase in default rates in the future.
Moving around tariffs also puts dealers in a difficult situation, Edmunds' Caldwell said. As much uncertainty as the tariffs appear, dealers can be reluctant to receive trade. They can buy cars at a high price due to tariff prices, only to make taxes no longer relevant if the car resold-thousands of them.
Financial compromise
At speed, the decision to make a big ticket is a spectacular impact on financial matters. Consumers are likely to pinch the impact of car loans on the budget to make up for other purchases, Kulkarni said. For higher -income Americans, this may seem like giving up holiday plans. For families with lower income, this may mean buying food or clothing.
Consumers can also do long -term trade. Recent car buyers now decided to pay a higher interest rate on the vehicle, instead of waiting for their loans to be reduced and then refinanced, Miller said. But interest rates are likely to remain the same. By the time they are low enough to refinance more favorable conditions, consumers are likely to have greater financial problems.
”[The Federal Reserve] It would be incredibly good to confidence that these tariffs are not inflationary, or until they see evidence that the economy is slowing down so much that they have to do something, “Miller said.” And unfortunately, this usually means that we usually go into a recession. ”
Despite these risks, as interest rates are unlikely to fall soon – and the costs of new cars will inevitably increase in the coming months – Caldwell said that if he were looking for a new car in many Americans, he would be among the crowds.
“The motivation for buying a car is very different from something else,” she said. “When people need a car, they need a car.”
This story was originally reflected on Fortune.com
