The insight: Auto tariffs could create an opportunity for used car dealers like Carvana and CarMax, as rising prices for new vehicles send shoppers in search of better deals.

The current situation: So far this year, used car companies have benefited from the same tailwinds as the broader auto industry, as consumers pulled forward purchases to get ahead of tariffs.

• Carvana said it was aided by a “small pull forward of demand” when tariffs were first announced, while CarMax noted that sales began strengthening at the end of March and accelerated into April.
• That jump in demand is reflected in pricing: Cox Automotive’s Manheim Used Vehicle Value Index, which measures prices paid at wholesale auctions, rose 4.9% YoY in April to its highest level since October 2023.

Looking ahead: Both Carvana and CarMax are confident that the tariffs will make used cars appear to be a good deal compared with new vehicles. But that assumes automakers will pass most of the added costs on to the end consumer, which seems unlikely as companies take stock of the macroeconomic environment.

While some—particularly foreign companies with few alternatives—might choose to take pricing immediately, others are holding back out of fear that increases will dampen already uncertain demand.

• According to Cox Automotive’s chief economist Jonathan Smoke, “none of [the automakers] are expecting to push the full cost of tariffs along to consumers,” he told CNN.
• That sentiment was made clear by General Motors CEO Mary Barra, who told CNN that the automaker expects pricing “to stay at about the same level as it is”—but will also “respond to the market” should its competitors adjust their strategies.

Our take: While tariffs could make used cars seem like better deals than new vehicles, the former is not immune to price pressures, especially now that imported parts are also subject to 25% duties. But the larger issue—for used car dealers as well as the industry writ large—is that tariffs and resulting economic uncertainty are severely curbing demand for big-ticket purchases like autos.

• Just 10.5% of Americans plan to buy a vehicle in the next six months, according to the Conference Board’s April survey. That’s down from 13.1% in December.
• While the vast majority of those consumers plan to purchase used cars, price increases could cause them to reconsider.

Go further: Check out our tariff coverage, including our Live FAQ: The Impact of Trump’s Tariffs on Consumers, Businesses, and Trade, as well as our report on The Impact of Tariffs on US Businesses.