Rick Vanderkniff, Neldovalette
My wife and I bought a new car last month.
It turns out we weren’t alone. This was revealed by a crowd of dealers who purchased the hybrid hatchback on March 30, confirmed in a new report on retail sales figures in March.
The US Census Bureau’s advance estimate for retail sales for March, released today, showed car and parts sales, an increase of 5.3% in March of the previous month, compared to a 1.6% decline in February. Looking back at March 2024, car sales increased by 8.8% from the previous year.
Overall, retail sales in February increased by 1.4% from February, according to Reuters. This is the biggest increase in the month in over two years, exceeding expectations for the month. In addition to cars, categories that saw growth over the month include building materials (up 3.3%) and groups that include sports goods, hobbies, musical instruments and bookstores (up 2.4%).
Economists would usually praise these figures as signs of a healthy economy, but in this case the consensus is that the march is a former splurge with the rocky ocean ahead.
“March was basically a big clearance sale in the eyes of many consumers,” Washington Post economics columnist Heather Long posted on X. “This is unlikely to continue.”
I’ll shop ahead of the customs duties
The March rise in retail sales is a response to countless widespread tariffs that have begun to move since President Donald Trump took office in January. The resulting trade war is expected to rekindle the inflation of a wide range of items, from everyday necessities such as food and clothing to luxury items like cars and large ticket purchases.
While many tariffs are currently valid for goods coming into the country, existing inventory is priced primarily at pre-duty levels. Of course, these stocks will not last forever. According to Cox Automotive estimates, 91-day supply of new vehicles across all brands recorded at the beginning of March had been reduced to 70 days by April 1st.
Stock levels are much lower for certain brands in demand, Lexus, Toyota, Honda and Subaru are under 50 days.
Once these stocks are gone, the dealer begins to fill the lot with a tariff-hit vehicle, which is paid by the importer but usually remains at the final selling price. Among the currently announced automotive operations, the currently in effect is a 25% tariff on imported vehicles and light trucks that take part in a 25% tariff on auto parts manufactured outside the US by May 3 (with some partial exceptions to certain models assembled in Canada and Mexico).
Trump has encouraged consumers to buy American cars and trucks, but after decades of supply chain and manufacturing globalization, there is no single car model fully made in the US. The Tesla Model y is closest, but the top 10 vehicles in Cars.com’s 2024 “American Index Report” include Honda, Toyota, Volksvagen and Lexus models.
Thanks to tariffs, car prices are expected to rise over $2,000 for some economic models and $20,000 for luxury models.
Used cars are not directly affected by tariffs, but just like the thick of the pandemic, inventory is shrinking there. Kelley Blue Book reported that the average car dealership was supplying used cars for 43 days in early March.
Finally I’ll buy that second car
Trump signaled his love for tariffs through his campaign and began to implement them through executive orders as soon as he took office. He announced a 25% automobile fare on March 26th.
My wife and I didn’t waste any time. On March 30th, we signed paperwork on a bright blue Honda Civic (assembled in Indiana and made in Japan engine and drivetrain).
We tend to save cash and pay cash on new cars, and hold them for over a decade. Our adult sons were outside the house and we have reached quite well in one car over the past few years. This is a reliable Subaru Star, perfect for reaching western Washington, but with ideal fuel economy.
We were thinking about a second car, which is more fuel efficient, especially for all these local trips. We had the money set aside, but the decision was not urgent – until the announcement of that tariff.
It is clear that many people who bought it in March were on similar boats. Thinking it’s time to buy a new car, we accelerated that decision and based on the sudden price hike that is approaching.
When I sat down with my sales manager to finalise my contract, it was the Sunday after Wednesday’s tariff announcement. He said the sales team has been running a full tilt ever since, and the popular model has quickly disappeared. I bought the last two of the models I targeted.
When I asked him that he thought our car would cost us after customs duty, he ran the numbers on the calculator. He said at least $6,000.
America (and i) appeared on ex-marriage sprurge in March and originally appeared in Nerdwallet.
