In a case of 20/20 hindsight, I think I was preparing for not getting a new car this year.
First, I was going to wait until around the traditional August/September time period for buying a new car or last year’s model, so I decided I’d get the brakes replaced this spring because they needed it. That was an extra expense so worn brakes wouldn’t count against the trade-in value. Same with the shocks and struts a few months ago.
Then there was the illegal U-turn in front of me that led to being rear-ended. Not a lot of damage and insurance covered it. Deductible and rental costs took more money.
Then I use an online estimator and find out whatever I’d get on trade-in probably wouldn’t make that huge a difference in the price of a new or new-ish car. Okay, plan on keeping current car and have a backup in the future. Maybe use it making trips to the store or for vacations so that mileage doesn’t accumulate on the new car. Need to find the appropriate amount of insurance to keep on it.
And then came the 2024 election. Trump was declared the winner the next morning, and on the next day, Goldman Sachs reduced their estimate for growth in the 20 countries in Europe that use the Euro for their currency, citing Trump’s tariffs as a big factor. Germany was already hurting, especially with the shakeup in their government, and Volkswagen announcing a couple of months prior they will be laying off workers and closing at least three auto plants doesn’t help.
Nissan and other auto makers are also looking at layoffs and plant closures. Quite a few created the problem for themselves by making the decision to sell less vehicles but have a higher profit margin on each one. Prices have gone up a lot because of those decisions, leading to a lot of unsold inventory.
Normally, these kinds of conditions would be a buyer’s market until the excess inventory gets used up as output decreases. Maybe wait just a little bit to see how things go before heading to the car lot.
Trump’s tariffs threw buying a new/new-ish car out the window. Over in the Politics is Stupid topic on October 26, I broke down the costs the tariffs will have on your average vehicle as it crosses the borders of Canada, USA and Mexico the seven times it typically takes during assembly. It isn’t a fixed 10% increase in the cost. It would be more like compound interest where each trip across a border is tariffed on a higher-value product.
The blanket 10% tariff on anything imported is the more widely-known tariff, along with the 60% or higher tariff on imports from China. What hasn’t gotten as much attention is the 200% tariff Trump wants to put on any car or truck made in Mexico that’s exported to the US. Or it could be 500%. He said he doesn’t care what the actual number is. To me, he wants to punish US automakers for moving their plants down to Mexico, even though his policies during his first term gave companies incentive to do so.
Even with higher prices coming in the near future, I could get a car now and avoid that. The problem is it’s only possible because the purchase would be subsidized by my employer with reimbursement for using it as part of my job. The amount paid includes depreciation and such if it’s 0 to 6 years old. After that, it’s lot less, which is what I’m getting now for my current car.
If I lose this job, I don’t have the reserves to take over the entire monthly payment. The car will be repossessed and my credit score will take a big hit.
From what I see and economists have seen, Trump’s tariffs will have a cascade effect that will hurt the country instead of helping it. It’s to the point where I now have to plan for the likelihood of furloughs or layoffs where I work. I can’t risk chaining myself to the additional debt of a car purchase right now.
Because of this decision, I’ve already started a smaller cascade effect, because there’s now a car dealership that will have one fewer sale until I know for certain it’s safe for me to proceed. Will that one fewer sale be the tipping point for a salesperson in an already shaky market that determines if they will still have a job? If not, the cascade continues.
The bright spot out of all of this is that if I hadn’t put extra money into maintenance and repairs this year, I would have a new car right now and I would be very worried about my ability to continue making payments on it, based on what’s likely to happen as Trump’s tariffs go into effect.
