With buzz mounting over tariffs driving up car prices, Ian Adams and his 9-year-old son Raiden stopped by Toyota of Anaheim last week to check out a 2025 Tacoma truck.
Adams was looking to replace a 2009 sport utility vehicle with something new and was lured by a lease offer that seemed to good to be true: $138 a month for three years with $7,000 down.
“Our plan is to make more out-of-state vacations this year, with a goal of visiting more national parks,” said Adams. “I wanted something more reliable with safety features.”
The lease offer is one of many enticements Southern California dealerships are using to draw customers into their showrooms as new duties on imported vehicles are expected to drive up costs by thousands of dollars in coming months.
While dealerships struggle to anticipate demand later in the year, foot traffic is up in recent weeks even as dealers hedge on how to stock their inventories.
The tariffs are a defining moment for U.S. President Donald Trump who sees them as a way to bring manufacturing — autos in this case — to the United States.
On April 3, his administration started a 25% tariff on all cars and light-duty trucks imported into the U.S. In addition, effective May 3, a 25% tariff will be charged on imported auto parts, including items like brake hoses, camshafts, electrical components, engines, transmissions, valves and powertrains.
Also see: Trump pauses steeper tariffs for most countries, while hiking levies on China
“We did see increased car buying activity in the final week of March,” said John Sackrison, executive director of the Orange County Auto Dealers Association. The group represents 122 dealerships that employ 12,000 workers and generated a combined $859 million in sales taxes in 2024.
Sackrison said dealers told him the end of March was “exceptionally busy.”
The tariffs will have an impact on car sales, he said. “What that impact will be, we don’t know yet. Are they going to be something that is permanent, or something that lasts until the end of the year? That’s the kind of challenges facing our industry right now. It’s just the unknowns.
What is known, he said, is the looming hardship for buyers.
“These tariffs are going to make it harder for an increasing number of Americans to buy new and used vehicles,” he said.
More on tariffs: CEOs brace for recession even after tariff reprieve boosts markets
So, why the rush to buy now? Sackrison said there’s 60 days of pre-tariff inventory in the marketplace.
Trickle down duties
For sure, the effects of the tariffs imposed on the automobile industry will trickle down to consumers, said Ivan Drury, director of auto insights at Edmunds.com.
He estimates that new model prices could rise anywhere from a few thousand dollars to $10,000 per vehicle when new vehicles begin arriving in showrooms this summer.
Also see: Potential impact of trade war sends consumer sentiment plunging
“I think there was that initial knee-jerk reaction where some shoppers decided that they wanted to buy now instead of in three months,” Drury observed. “What’s the point of waiting, because nothing indicates pricing will get better. If they wait longer, in fact, it’ll just get worse from a pricing point of view and on the selection of what is available.”
The tariffs are top of mind for auto dealerships, many of which are taking a cautious wait-and-see approach.
For now, they’re offering incentives, which have ranged from leasing deals to those offering shoppers “employee pricing” at McPeek’s Anaheim, a dealer with Chrysler, Dodge, Jeep and RAMs, and Ken Grody Ford in Buena Park. Employee pricing offers are the same discounts offered to a dealership’s employees.
Ford of Downtown LA is offering leases on a new 2024 Bronco Sport Big Bend for $216 a month for three years with $4,989 down.
Riverside Kia is offering 2.9% interest rate financing on K4 and K5 compact sedan models for up to four years.
Diamond Chevrolet of San Bernardino is offering 0% interest rate financing for five years on 2024 Chevy Tahoe and Suburbans.
John Patterson, owner and president of OC Auto Group and its five Kia, Mazda and Hyundai dealerships, said he’s noticed an uptick of about 10-15% in sales.
“Most of the conversations with customers have involved something to the effect that they were going to buy a car sometime in the next year, but since they don’t know where these tariffs are going, they figure they’ll push that purchase forward just a little bit,” explained Patterson, who runs a $900 million enterprise that employs 300 workers.
Falling sales
Patterson anticipates the tariffs will push down sales slightly in the second half of 2025.
Across California, a lot is at stake for auto sales.
The California New Car Dealers Association, which will publish its 2025 first quarter registrations for car and light truck sales later this week, said registrations in the state fell to 1.759 million vehicles in 2024, down 0.3% from 1.764 million reported the previous year. In Southern California, passenger car registrations dropped by 10.3%, while light truck sales grew 5%.
Going forward, registrations in Southern California’s 2025 first quarter are expected to remain “fairly flat,” according to the group.
In 2024, domestic vehicle registrations fell 8% to 588,100, while European vehicles fell 0.2% to 261,300, and Japanese vehicles rose 5.2% to 734,800, and Korean by 5.8% to 174,800.
But tariffs, Patterson explained, will get applied unevenly on brands depending on where they are built and assembled. Some vehicles could conceivably get hit with more tariffs depending on how many times parts and cars cross the borders of Canada and Mexico in the manufacturing and assembly process — ultimately driving up costs to consumers.
“Most of the dealers have somewhere between a 30- and 75-day supply of new cars on the ground. So what does that mean? The cars that are on the ground now are not affected by the tariffs, and the bulk of the sales in April will not be affected by tariffs, and neither will the bulk of sales in May,” Patterson said. “But if a dealer has a very tight supply, if they’re running on a 10- or 15-day supply, it’s probably a little bit more likely to affect them.”
While tariffs are worrisome, Patterson cautioned that his dealership faced far greater challenges during the supply dislocations faced in the pandemic, and last June’s major disruption caused at car dealerships across North America that were hit with back-to-back cyberattacks on CDK Global, a company that provides accounting and financing software for more than 15,000 auto dealers.
“The attacks were really difficult. It was like turning back the clock,” Patterson said. “Imagine somebody unplugging that system and making it impossible to transact anything other than in a handwritten manner for sales and service and parts. It was extremely taxing on our teammates.”
The tariffs aren’t only causing headaches for car dealerships.
“It’s a weird market right now because nobody really knows what’s going to happen,” said Chuck Sargeant, operations manager for M. Park Maintenance of Orange. His landscape crew specializes in trimming grass, trees and shrubs for more than a quarter of OCADA’s dealership members.
“We’re just gardeners, but we will get affected by the tariffs. When business slows up, so does our business,” Sargeant said. “We keep up on the monthly registration of cars because if they go out of business, we’re out of business.”
Plugging away
Not everyone is worried about future sales.
David Hanson, general sales manager of McPeek’s in Anaheim, described customer traffic at his dealership in recent weeks as “status quo.”
“Traffic hasn’t spiked, and it hasn’t decreased. It’s been consistent,” Hanson said. “I think in our demographic in Orange County, we aren’t influenced by the media and talk of tariffs and recessions. It’s business as usual.”
“We’ve been through it all, recessions and fires,” said Hanson, who pointed out that auto dealerships were hard hit during the Great Recession of 2008-2009.
“Those were probably the hardest times because that’s when the banks collapsed, and nobody was financing anything. I don’t see the hard times now the way the media has been painting it here with the tariffs. It’s not going to cause homelessness, or force people to scrape by,” he said. “The Trump administration has a plan to monetize inflation and get interest rates lower. This is just something that is in negotiations right now.”
Meanwhile, others feel priced out of the market.
Chris Rodriguez of Fullerton continues to commute roundtrip from Fullerton to Orange for his job, using the transit system.
“I’m not looking to buy a car,” he said. “I have a BWW with over 100,000 miles sitting in my yard. It needs an oil container. I don’t make enough to afford a new one.”
