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Border Tax Will Add Thousands of Dollars to New Car Prices

February 24, 2017

All signs point to buying a car as soon as you can if you're looking for a new one. Congress is giving enough attention to a border tax proposal to warrant concern, or excitement, depending on your point of view. It's clear that a border tax would not help new car prices come down. Prices would get higher, rather. How much higher depends on the brand you want.

Baum and Associates estimates Ford may need to increase prices by only $282, since many of its components are manufactured domestically. The hardest hit manufacturer is Jaguar Land Rover, which is a subsidiary of an Indian corporation called Tata Motors. Jaguar and Land Rover vehicles could end up costing $10,000 to $15,000 more if the border tax proposal goes into effect because they are pure imports, made and assembled overseas.

Accordingly, the manufacturers that will have to increase prices most are those that don't source a lot of parts from the US. Therefore, the question is "what will they do?" Simply raising prices isn't a great option. They will be forced to invest in American parts and assembly or exit the US market completely, leaving us with fewer options and higher prices for the remaining choices.

Many auto leaders are pushing back against the proposal, saying auto prices are already high enough and loan delinquency is a significant problem already. Cody Lusk, president of the American International Automobile Dealers Association, said to Automotive News "we already have an affordability issue with the auto industry. We're already pushing it with consumers, with the average payment going up and loan terms being stretched out." Not surprisingly, some of the automakers that don't rely heavily on important parts have shown support for the proposal. It would, after all, be a major disadvantage to some of their competitors.

Here are the estimated price increases the auto brands would need to enact in order to recoup import tax costs. Thanks to Automotive News (via Baum and Associates) for this information.

Tesla: $0 Ford: $282 GM: $995 Honda: $1,312 Fiat Chrysler: $1,672 Nissan: $2,295 Hyundai/Kia: $2,704 Subaru: $3,656 BMW: $3,725 Mercedes: $4,211 Mazda: $5,156 Mitsubishi: $5,938 Volkswagen: $6,779 Volvo (Geely): $7,643 Jaguar Land Rover: $17,204

Donald Trump originally thought the border tax would be too complicated but has since shown interest. If you're in the market for a new car, start shopping! ‚Äč

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