Car Market Crash Is This the End of the Road?

Car Sales Plummet Following Pre-Tariffs Panic Buying: ‘The Party is Over’

The United States auto market is facing headwinds as carmakers, dealers, and consumers grapple with a confluence of challenges: rising tariffs, increasing vehicle prices, and growing economic uncertainty. After a promising surge in sales earlier this year, recent data indicates a significant slowdown, suggesting the market may be entering a more challenging phase.

The downturn follows President Trump’s implementation of auto import tariffs, which have prompted automakers to re-evaluate pricing strategies and brace for potential disruptions. The impact is already visible in sales figures.

Key Highlights:

• The annualized automotive selling rate dropped to approximately 15 million in June, a substantial decrease from 17.6 million in April.
• This marks the slowest sales pace in the last 12 months.
• While Q2 sales showed a modest 2.5% increase year-over-year, attributed to shoppers rushing to showrooms to avoid anticipated price hikes, this momentum has now waned.

Jonathan Smoke, chief economist at Cox Automotive Inc., succinctly summarized the situation to Bloomberg News: “The party is over.” He added, “It’s clearly slowing. It’s because of affordability getting worse and forcing what we think will be production declines to keep supply in balance.”

The Pre-Tariff Rush and Subsequent Slowdown:

• Early 2025 witnessed a spike in US auto sales as consumers accelerated purchases to preempt Trump’s new tariffs.
• This frontloading of demand contributed to the current slowdown.

Despite fears of soaring prices, the average new car cost in June 2025 saw only a modest increase.

Key Price Trends:

• Average new car cost in June 2025: Up just 1% year-over-year.
• However, auto prices have risen by 28% since 2019.
• Analysts attribute this broader increase to pandemic-related supply chain issues and inflation, rather than solely to the recent tariffs.

Smoke forecasts an annualized monthly US auto sales rate of around 15 million for the second half of the year, down from 16.3 million in the first six months of 2025. For context, approximately 16 million cars and light trucks were purchased in the US throughout the previous year.

Impact at the Dealership Level:

Dealers are already feeling the effects of the slowdown. Peter Petito, a Honda dealership manager in Queens, New York, reported a cooling of sales after an earlier surge. He likened the initial rush to panic buying before a snowstorm.

Economic anxiety has surpassed high interest rates as the primary deterrent for consumers considering car purchases, according to recent Cox surveys. Beau Boeckmann, president of Galpin Motors, highlighted the impact of uncertainty on consumer behavior: “And during times of uncertainty, people put off a major purchase.”

The Affordability Factor:

Affordability remains a central concern. The average new car cost reached $48,799 in June, a 1% increase from the previous year and a staggering 28% higher than in 2019, according to Cox data.

Charlie Chesbrough, senior economist at Cox, warned, “Given the impact of tariffs, prices are likely to start rising at a much faster rate. Higher vehicle prices are coming to the new vehicle market.”

Despite these pressures, automakers have largely avoided broad price hikes, opting instead to trim incentive spending and selectively increase prices on models most affected by tariffs.

Financing Trends:

• Average monthly car payments reached a record $747 in June, a $22 increase year-over-year, according to JD Power.
• More buyers are opting for longer car loans, with 84-month loans (seven years) accounting for 12% of all auto financing in June, up three percentage points from last year.

Tariff Impact and Future Projections:

Mark Wakefield, global auto market lead at consultancy AlixPartners, attributed the June slump to a post-surge drop-off. AlixPartners anticipates that automakers will pass along 80% of the cost of Trump’s tariffs to consumers, resulting in vehicle price increases of nearly $2,000 per car. “We don’t see the full pass-through until the end of the year,” Wakefield noted.

The Trump administration imposed 25% tariffs on imported vehicles and key auto parts, ending USMCA exemptions and applying the duties broadly, including to imports from Canada and Mexico.

US-made vehicles qualify for partial rebates, and a trade deal with the UK reduced tariffs on British-made cars to 10% for up to 100,000 vehicles annually.

Analysts estimate the tariffs could raise car prices by $5,000 to $10,000 and warn of broader supply chain disruptions and consumer affordability concerns.

In conclusion, the US auto market is navigating a complex landscape of tariffs, economic pressures, and evolving consumer behavior. While the initial surge in sales provided a temporary boost, the market now faces the challenge of affordability and uncertainty. The road ahead will likely require automakers and dealers to adapt to changing conditions and carefully manage pricing strategies to maintain consumer demand. The long-term impact of these tariffs and economic factors remains to be seen, but it's clear that the automotive industry is entering a new era of challenges and opportunities.

Source: https://nypost.com/2025/07/01/business/car-sales-plummet-following-pre-tariffs-panic-buying-the-party-is-over/