President Donald Trump is right about one thing: There is an affordability crisis in America’s car market.
The going price for a new vehicle these days pushes $50,000. Average monthly payments have soared to around $745. A record share of Americans—nearly one in five—now shell out more than $1,000 per month for their cars.
Trump and his allies in Congress say they’re working to make cars affordable again. But experts who have examined the policies they’ve both proposed and enacted say the problem is likely to get even worse.
“It does not appear like any of the policies will result in people paying less to buy and own vehicles in 2028 or 2029 than they do today,” said Chris Harto, a senior policy analyst at Consumer Reports.
Take tariffs, for example. When Trump announced 25% tariffs on imported cars and car parts in April, he audaciously said: “You’re going to see prices go down.” While record-high post-pandemic inflation is finally cooling off, this promise ignores the very basics of what a tariff is. The whole point is to make the domestic industry more competitive by driving up the costs of importing a particular good.
Despite some automakers’ vows to keep prices low, any economist will tell you that vehicle prices will increase over time. It may not happen immediately—prices have remained remarkably stable this spring so far—but it will happen sooner or later.
U.S. tariffs will cost the auto industry $30 billion in 2026, the consulting firm AlixPartners estimates. Car companies will not absorb the hit for the good of the American consumer. Rather, AlixPartners expects them to pass on about 80% of those increased costs to buyers, with the ultimate price hike depending on where in the world a vehicle is made.
Vehicles produced outside of North America will be hit the hardest; prices for those cars will increase by approximately $4,400. AlixPartners expects the average vehicle sold in the U.S. to get $1,760 pricier. Repair bills will go up too, as the cost of car components increases.
At Trump’s direction, federal agencies are preparing to relax the standards that were pushing automakers to boost fuel economy and cut tailpipe emissions over time. The heads of the Environmental Protection Agency and Department of Transportation have cheered these rollbacks as a win for consumers, who will see vehicle prices drop as automakers are freed from onerous regulations.
Likewise, Senate Republicans have proposed dropping the fines for noncompliance with Corporate Average Fuel Economy (CAFE) rules to zero. They say their measure “Brings down automobile prices modestly by eliminating CAFE penalties on automakers that design cars to conform to the wishes of DC bureaucrats rather than consumers.”
2026 Toyota RAV4 GR Sport Hybrid
Photo by: Toyota
The reality is that more fuel-efficient cars—the EVs and hybrids that these rules push automakers to produce—save people tons of money on gas over time. That’s part of why Americans have been flocking to hybrid cars in unprecedented numbers in the last few years.
“There’s almost a 0% chance—as close to a 0% chance as you can have—that eliminating these standards will reduce the cost of vehicles to consumers,” Harto said. “What it is going to do is drive up the fuel cost for consumers.”
If left to run their course, the Biden-era vehicle rules would deliver $6,000 in lifetime fuel savings for buyers of new vehicles, according to a Consumer Reports analysis.
Meanwhile, repealing tax credits for Americans who buy plug-in hybrids and EVs will inflate the upfront cost to get into some of the country’s cleanest vehicles.The Republicans’ sweeping budget reconciliation package is still making its way through Congress. But the death of EV tax credits seems to be a question of “when,” not “if.” The latest proposal from the Senate Finance Committee would eliminate the $4,000 rebate for buyers of used EVs within 90 days and end the $7,500 program for new EVs after 180 days.
Moreover, the one-two punch of tariffs and ending the EV tax credits threatens a new crop of more affordable electric cars coming soon—not all of which automakers planned to build in America. That leaves people stuck buying more expensive gas-guzzling options when they could have had cheaper alternatives.
Policy changes such as these that derail EV adoption will also increase demand for gasoline, inflating prices at the pump for all Americans. The Rhodium Group, a research firm, projects that gas prices will go up by between 25 and 37 cents per gallon by 2035 as a result of the House’s sweeping domestic policy bill, passed last month.
It may get more expensive to charge up your EV, too. Congress is on track to prematurely torpedo tax credits in the 2022 Inflation Reduction Act that subsidize the production of clean energy, as well as investments in new clean energy projects. And removing a tax credit is effectively a tax hike. The reversal could add up to $400 to some Americans’ annual electricity bills by 2035, one analysis found.
Photo by: InsideEVs
There are more direct cost increases on the table, too. The House’s One Big Beautiful Bill Act includes a $250 annual tax on owners of EVs and $100 fee for hybrids. The ostensible goal is to raise money for highway improvements by targeting people who pay less in federal gas taxes. But the fee is out of whack with what most Americans pay in gas taxes; Consumer Reports found that the average driver of a gas-guzzling V8 pickup truck only pays around $100 per year in gas taxes, while many other drivers pay far less.
To be sure, Trump also promised on the campaign trail to allow Americans to deduct car-loan interest from their taxable income. That could save some car buyers a few hundred dollars per year.
But, given the mountain of forces acting to drive costs up, that may be cold comfort for America’s drivers.
Contact the author: tim.levin@insideevs.com
