Car Sales Stay Strong in April, But Tariffs and Affordability Shake Consumer Confidence

April Auto Sales Stay Strong — But Shoppers Are Starting to Flinch

After a red-hot March, the U.S. auto market stayed resilient in April. New-vehicle sales grew 11.1% and the seasonally adjusted annualized rate (SAAR) reached 17.3 million, up 7.8% year over year — marking the second consecutive month above the 17 million mark. It’s a rare feat not seen since the post-pandemic demand surge of 2021. But as strong as the headline numbers appear, signs of stress are emerging beneath the surface.

Sales Hold Steady, But Inventory Growth Slows

April’s sales pace moderated from March’s 17.8 million SAAR peak, suggesting the early rush to beat rising import tariffs may be running out of steam. The pull-ahead effect — where consumers accelerate purchases to avoid future price hikes — helped drive record activity, but dealers are now facing a different challenge: supply tightening just as demand becomes more cautious. Inventory levels rose just 3.7% year over year in April, a steep slowdown from the double-digit growth seen as recently as January. Many automakers have adopted a “wait-and-see” approach, reassessing the impact of tariffs across their product lines before flooding the market with new stock.

Consumer Confidence Wavers as Tariff Effects Take Hold

Perhaps the most telling indicator of market uncertainty is consumer behavior. According to a Cars Commerce survey of over 4,000 shoppers, more than a third changed their purchase timeline in early April due to tariff fears — mostly accelerating their plans. But by mid-May, that urgency had reversed, with more shoppers delaying purchases instead: 52% of new-car shoppers now expect to pay more because of tariffs, and brand loyalty is weakening as buyers cast a wider net. On average, tariff-affected shoppers are considering more than four brands — up from just 1.6 for those not influenced by policy changes.

In addition, interest in imports is beginning to decline. Countries like Canada, South Korea, Germany and Japan — which account for nearly a quarter of dealer inventory — have all seen dips in shopper consideration since February. Conversely, sentiment toward U.S.-built vehicles is slowly improving.

Adding to the uncertainty, a major ruling May 28 by the U.S. Court of International Trade found that the administration exceeded their authority under the International Emergency Economic Powers Act when implementing broad-based tariffs, including the proposed 10% reciprocal tariffs and others that targeted China, Mexico and Canada. However, tariffs tied to the Trade Expansion Act, which covered automobiles, steel and aluminum, remain in place. The administration plans to appeal the decision, so further changes could be ahead.

Prices Begin to Rise as Affordable Options Shrink

At the same time, vehicle prices — which have held relatively steady around $49,000 for over a year — are beginning to tick upward. Average list prices in April rose 0.8% year over year, and with 2026 model-year vehicles entering the market with fewer discounts and higher production costs, further price increases are expected. Much of that pressure is landing hardest on the most affordable vehicles, especially those priced under $30,000.

That segment, which once accounted for over a third of all new-car inventory, now makes up just 13%. The majority of these vehicles are imported — nearly 90% — making them especially vulnerable to new tariffs. As a result, automakers are focusing production on higher-margin models, and consumers searching for entry-level options are finding fewer choices. Only three sub-$30K models are currently built in the U.S.: the Toyota Corolla, Honda Civic and discontinued Chevrolet Malibu. 

Tariffs Reshape Pricing by Origin

Tariffs are also shaking up pricing dynamics by country of origin. Vehicles built in Mexico — typically among the most affordable for American shoppers — saw a $1,100 spike in average price in April as dealers raced to import models ahead of the April 3 tariff hike. Now that this inventory is being depleted, prices are likely to rise further. Meanwhile, vehicles built in the U.S. now carry an average price tag above $53,000, significantly higher than the national average.

Rate Cuts Fall Flat for Auto Financing

Despite a full percentage-point interest rate cut from the Federal Reserve in late 2024, borrowing costs haven’t eased much for car buyers. In fact, the average APR on new-car loans in April was slightly higher than it was in the third quarter of last year. Used-car loan rates have come down somewhat, but they still hover around 11%. On top of that, automakers and their in-house lenders are pulling back on lease incentives — especially among European luxury brands that rely heavily on imports and leasing to make high-priced vehicles more accessible. The result is fewer deals, higher monthly payments and growing affordability concerns across the board. 

Used Market Sees Growth, But Value Varies by Price Tier

In the used market, inventory rose 5% year over year, but value varies widely depending on price tier. At the low end, vehicles priced under $9,000 are plentiful — but they come with an average of 135,000 miles on the odometer and tend to sit on lots longer as buyers weigh the risks of potential repairs. Mid-priced used cars in the $20,000-$29,000 range are performing best, offering a solid mix of condition and affordability. These vehicles are moving quickly, as buyers increasingly view them as a reasonable alternative to new cars. On the high end, used vehicles priced above $50,000 are seeing slower turnover. Despite low mileage and factory warranty coverage, shoppers are wary of paying new-car prices for used inventory.

There is one bright spot for consumers: Trade-in values are on the rise. April marked the first year-over-year increase in trade-in value for that month since 2022, with values up $820 annually and $388 month over month. Dealers are paying more for used vehicles as they brace for increased demand in the face of rising new-car prices.