Should I buy a car now? Here’s what you need to know about tariffs

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U.S. President Donald Trump announced Wednesday that he would impose a 25% tariff on all car imports early next month. Since many of the parts used in U.S. cars are made in Canada, tariffs may raise prices, making it harder to find a deal. The new tariffs will come into effect on April 2, and Trump also expects to introduce other reciprocity tariffs that day, which he called it “Liberation Day.” Canada is in the midst of a federal election and it is unclear whether the government will respond with retaliatory tariffs. Liberal leader Mark Carney met with his Canadian-U.S. cabinet committee to discuss Thursday’s response in Ottawa. With more uncertainty in uncertainty, is this the right time to buy a vehicle, or should consumers wait? Here’s everything you need to know.

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Will the prices of vehicles in Canada rise?

Fraser Johnson, professor of operations management and director of index at IVEY purchasing managers, said several factors are increasing costs. Existing steel and aluminum tariffs have increased the cost of auto parts and vehicles imported from the United States and Mexico by $1,000 to $1,500. If additional automatic tariffs are met on April 2, prices may rise.

“If these tariffs pass, prices could rise another $3,000 to $4,000, while SUVs and trucks could increase $8,000 to $10,000,” he said. “If these tariffs go into effect, car prices will certainly rise.”

In the context, the average price of an SUV or truck ranges from around $30,000 to around $50,000, while the average price used may range from $15,000 to $35,000 depending on the make, model, age and condition.

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Purchasing before tariffs can help consumers avoid these price increases.

Is there any excess car inventory in Canada?

According to Johnson, it depends on the type of vehicle.

“Some brands and models have left over, but no one has the stock for everyone,” he said. “You might find a lot of stuff on the Stellantis dealer sedan, but if you’re looking for a Toyota Rav4 hybrid, you’re probably waiting for six months.”

One segment of electric vehicles (EVs) is clear surplus.

“Auto companies are committed to electric vehicle production, and many auto companies generate too much inventory,” Johnson said. “If you’re looking for something like the Ford Mustang Mach-E, you might find discounts and good financing options.”

After years of shortage, as inventory levels have improved, the market has moved to the buyer’s market.

Can consumers find a deal before prices rise?

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Yes – if they act quickly.

Johnson stressed that dealerships provide promotions for clearing inventory, especially when they own the remaining stock.

“If you need a car, now is a good time to shop,” he said. “But you may have to compromise on the brand and model to get the best deal.”

According to the Canadian Automobile Country, dealers adjust full-year pricing based on inventory, sales quotas and manufacturers’ incentives. Some of the best times for shopping include:

• At the end of this month: Dealers are eager to meet sales quotas and may offer discounts for closing transactions.
• End of the year: The dealer clears the older models to prepare for the new version.
• When the new model arrives: When the new model is on the showroom, dealers are eager to sell older stock.
• Festival sales: Manufacturers often offer special incentives during major shopping periods.
• Models for discontinuation: When a vehicle is about to undergo a major redesign, dealers tend to offer discounts to sell outgoing models.

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According to Tabangi Motors, if you are looking for a deal, consider using reliable and highly respected models like Toyota, Honda and Mazda while avoiding models with poor reliability or high repair costs. They list the top used cars in Canada for reliability and value in 2025:

• Honda Civic
• Toyota Crown
• Mazda 3
• Modern Accent/Elantra
• Kia Soul
• Nissan Sentra
• Subaru Impreza
• Toyota RAV4
• Honda CR-V

How will financing and lease options change?

If the tariffs come into effect, automakers may introduce more incentives to keep sales going.

“This is where we can see 0% financing or cash rebates,” Johnson said. “For example, if you pay cash, you might get $3,000 in rebates. If you have funds, you might get 0% interest in five to six years.”

However, he warned that higher interest rates have made financing more expensive. They may not drop to zero.

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Here are the current car loan rates in Canada – depending on your credit score and loan term:

• New Vehicle: Average 3.5% to 7.5%
• Used cars: Average 4.5% to 10%

What about the price of used cars?

If new car prices rise, used car prices will follow.

“Used cars are directly affected by the pricing of new cars,” Johnson said. “If the price of the new Volkswagen Passat goes up, then using Passats will be used. That’s the basic supply and demand.”

During the pandemic on the 19th, a shortage of new cars led to record used car prices. If tariffs increase the cost of new cars, demand for used cars will rise, which could increase prices.

The final advice for Canadian car buyers

With tariffs approaching, excessive inventory of some models and available dealer incentives, if you buy a car in the market, waiting too long can mean higher prices and fewer options.

“Do research,” Johnson advises. “Check inventory levels, compare brand incentives, and look for low-interest financing or cash discounts. There are a lot of deals out there – but you may need to make sacrifices.”

Currently, buyers still have a chance to get a deal before prices rise.

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