Tariffs And Car Buying in Canada: What You Need to Know
Posted on August 12, 2025
If you’ve been following the headlines, you’ve probably heard the word “tariffs” thrown around, especially when it comes to cars. But what exactly are tariffs, and why should the average car buyer in Canada care?
Whether you're looking to buy a new vehicle or just trying to understand why prices seem to be going up, you need to know how tariffs can affect your purchase.
In this blog, we’ll break down what tariffs are, how they impact car pricing in Canada, and what you need to watch for before signing on the dotted line.
What is Car Tariffs Canada?
A tariff is essentially a tax that the government places on goods brought into the country from abroad. In the automotive world, this means that cars and auto parts imported from other countries can come with an added cost.
So, if a vehicle is manufactured outside of Canada, whether it's from the U.S., Europe, or Asia, it could face a tariff that raises its overall price.
This extra tax doesn’t just affect fully built vehicles. It can also apply to individual car parts used in assembly or repairs. That means even if a car is assembled in Canada, it could still be more expensive if it includes parts from overseas.
For Canadian car buyers, tariffs can quietly influence what you pay at the dealership, even when the sticker price hasn’t changed for other reasons.
How Do Tariffs Affect Car Buyers?
When tariffs are applied to vehicles or auto parts, the extra costs usually don’t stay behind the scenes. Automakers and dealerships often pass those added expenses directly to the consumer, meaning you might end up paying more for the same car than you would have before the tariff was introduced.
Here’s how that plays out in real life:
- Higher prices on imported vehicles: Cars made outside of Canada can carry steeper price tags due to added taxes.
- Reduced availability of certain models: Some brands might limit or stop bringing in specific models if tariffs make them too costly.
- Potential delays in delivery: Supply chain issues caused by tariffs can slow down shipments and lead to longer wait times.
At the end of the day, tariffs can make the car-buying experience a bit more frustrating, and definitely more expensive.
Tariffs Effect on New Car Prices in Canada
If tariffs are introduced or ramped up, especially by major trade partners like the U.S. Canada may respond with its own tariffs on auto parts.
While a 25% tariff on a smaller part like a $500 alternator might not make a big dent in the price of a $70,000 truck, a similar tariff on something like a $10,000 transmission could have a noticeable impact.
Add broken supply chains into the mix, and things could get even more messy. Industry leaders, including Flavio Volpe of Canada’s Automotive Parts Manufacturers Association, have warned that automotive production in North America could come to a standstill within days if tariffs disrupt the flow of parts.
In the short term, you might not see price hikes at the dealership right away, but that buffer won’t last long. Once inventories shrink and supply chains tighten, prices on new cars are expected to rise.
While Canada might not see the same level of increase as the U.S., where some forecasts suggest a $3,000 to $7,500 jump, Canadian buyers should still prepare for a ripple effect. Pricing strategies will likely vary depending on how automakers handle tariffs and how long competitors can hold off on raising prices.
Don’t be surprised if dealerships start promoting “tariff-free deals” while inventory lasts.
Impact of Tariffs on the Canadian Automotive Industry
Canada’s automotive industry is deeply tied to a global supply chain, especially with the U.S. Any major tariff changes, particularly on imported parts can create a ripple effect that shakes the entire system. Without government intervention or financial support, the industry could face serious disruptions.
Automakers rely on a steady flow of parts and components from around the world, and even a small blockage can throw off production schedules and delivery timelines.
If tariffs are introduced without a plan to support manufacturers, the system risks grinding to a halt. Jobs could be lost, production could slow down, and investment in Canadian plants may shrink.
It's not just about higher costs; it’s about the long-term health of one of Canada’s biggest industries. A well-functioning automotive sector needs stability, and tariffs threaten to throw that balance off completely.
Why Canadian-Made Vehicles Are a Smart Choice
Good news for car shoppers: vehicles built in Canada are not affected by many of the tariffs that apply to imports, thanks to trade agreements like the U.S.-Mexico-Canada Agreement (USMCA). This means more stable prices, fewer unexpected costs, and often faster delivery compared to cars made overseas.
Buying a Canadian-made vehicle can also help avoid delays caused by international shipping or supply chain issues. Just keep in mind that some vehicles may still include parts from other countries, which could be affected by tariffs.
Still, choosing a car assembled in Canada is a smart way to lower the risk of price hikes and keep things simple.
Buying New: The Tariff Impact and Benefits
According to Colin Mang, an economics professor at McMaster University, both U.S. tariffs and Canada's likely response could push car prices up by anywhere from $1,000 to $8,000 CAD.
He explained that “prices will start to increase in the United States,” and Canada will feel the ripple effect as prices here tend to follow suit.
Still, buying new has its advantages. Despite the potential for higher sticker prices, new cars come with benefits that might make the extra cost worth it. Here’s a simple look at the pros and cons:
Pros
- Full warranty and the latest tech and safety features
- Lower repair and maintenance costs in the first few years
- Access to financing deals, cashback offers, or special incentives from automakers and dealers
Cons
- Higher upfront cost due to tariffs and rising demand
- Faster depreciation compared to used vehicles
If you’re set on buying new, it’s smart to explore Canadian-made models or take advantage of current dealer incentives that may help offset the impact of tariffs on new car.
Buying Used: The Tariff-Free Option, But with Challenges
Used cars are often a smart way to sidestep tariff-related price hikes. Since tariffs usually apply to new vehicles and imported parts, pre-owned vehicles on the lot are mostly unaffected.
This can make buying used a more affordable option up front, especially if you’re looking to save on your next car.
But there are a few things to watch out for. With more people turning to the used market, demand has gone up and so have prices. Plus, finding a reliable used vehicle with a clean history can take some extra time and research.
Pros
- Lower initial cost and better value for your money
- Avoids tariff-related price increases
- Slower depreciation compared to new vehicles
Cons
- High demand can lead to higher prices
- Limited or no warranty, especially on older models
- May come with higher maintenance or repair costs depending on the vehicle’s condition
If you're patient and do your homework, buying a used car can still be a great way to get a quality vehicle without the added cost of tariffs.
Explore Our Wide Selection of Tariff-Free Vehicles Today
Tariffs may seem like a behind-the-scenes issue, but they can have a real impact on what you pay at the dealership and which vehicles are available. Whether you’re buying new or used car in Canada, you need to stay informed so you can make the best choice for your budget and needs.
Looking for a car without stress? Visit CarHub.ca to explore a wide selection of new and used vehicles, including Canadian-made models that help you steer clear of tariff price hikes.