Automotive Tariffs & Potential Price Increase For Vehicles
There’s been a lot of talk in the news recently surrounding the trade changes hitting Canada and the United States. The NAFTA age is over, but that doesn’t mean it’s done causing a lot of stress headaches on both sides of the border. Donald Trump-President of the United States of America is imposing 25% worldwide auto tariffs on cars and this is causing people to really evaluate their vehicles. The cost of new cars and leases are only going to go up due to unfortunate trade restrictions/laws.
For context, a 25% tariff on auto imports would add an additional $6400 in costs on a US $30,000 vehicle according to a report by U.S. consulting firm Trade Partnership Worldwide. In Canada, it could add about $5000 extra to a car costing $40,000.
USMCA
Luckily at the 11th hour of trade negotiations, it seems Canada and the U.S. has reached an agreement to exempt Canada from auto tariffs (for now). If President Trump does eventually move forward with worldwide auto tariffs, Canada would be included in those measures.
The first 2.6 million vehicles exported from Canada will be avoiding the trade tariffs, but after that tariffs will apply. On the other hand, to agree on the new deal Canada never got out of the aluminum and steel tariffs being imposed by the United States. The devil will be in the details for this deal.
The deal won’t immediately increase car prices, but the auto industry will still take a hit as vehicles are made with steel and aluminum. With the costs of raw materials used to build cars and car parts rising due to impending tariffs, it’s likely the outstanding costs will be put onto the consumers.
The deal also helps stamp out the idea of the United States losing out on labor to cheap Mexican labor. In the new USMCA deal, 40 to 45 percent of automotive parts made in Mexico must be created by workers who earn at least $16 an hour.
With workers being paid more, and the threat of tariffs still strong we can still expect a price increase on auto parts/vehicles.
So this puts drivers with a lot of questions. Should they buy a new car now? Do they wait out the tariffs and repair the one they own? Or Do they purchase a used vehicle?
Canada has been shipping used vehicles to the United States for a long time. Should tariffs proceed further, it’s likely there will be many more used cars available. As more used cars are going to be available, the market will reflect that and we can see a potential price reduction in the used car market.
For people who already own a vehicle, they may have to settle with the realization of having to accept more expensive service jobs. This may come as a surprise to a lot of people. So many people lease and just buy new cars after a few years of use and never needed to endure a costly repair.
Due to these tariffs, wasteful car habits will need to be adjusted. Car owners are going to have to settle for routine maintenance and avoid breaking the bank on new cars.
So when it comes down to it, people need to take better care of their vehicles. People need to drive vehicles like they OWN them
How will this affect mechanics
As drivers refuse to purchase new cars due to rising costs, it’s essential for them to maintain their vehicles. Keeping on top of regular mileage maintenance outlined in the owner’s manuals will help keep vehicles running.
We are likely going to start seeing more people approving and needing expensive repairs done as. These bigger jobs, like timing belt changes and sway bar fixes (I just needed to get these fixes done to my car-not fun), will seem like a lot to people. The thing is, they will still be spending less than blowing an extra $5k on a new car on top of the purchase price because of tariffs.
Drivers are also going to be investing in other services to maintain their car for as long as possible to ride out the trade war. Services like: rust protection, tires, windshield fixes, paint and detailing. These services will make drivers feel like they’re driving a new car (but in reality, it’s just their 2008 Civic.) These smaller jobs will be able to be stacked on to repair orders and drive up shop revenue.
What Can You Do To Create Customer Trust
To some drivers, it may feel normal to avoid regular service and refusing bigger service jobs on their vehicles. When mechanics inform them service of any kind is needed they may not even believe the mechanic. Get over this distrust with AutoServe1’s digital vehicle inspection tool.
Incorporate digital vehicle inspections into your auto shop. Digital inspections will create trust between you, and your customers who can be educated in what repairs are needed. Mechanics can share images, video, and text explaining just why repairs are crucial. They will see exactly what mechanics see. This can increase your average repair order by 25%!
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