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Thursday, December 5, 2019

Could Auto Prices Be Ready to Jump Up?

Since the Obama administration’s bailout, several years ago, the auto industry has outperformed the expectations of many. Some American auto companies have performed so well, they’ve even begun to focus on international expansion. But what is the incoming presidential administration planning to do to the international supply chain fixtures that have kept auto prices down during the past 6 to 8 years? And what about innovation in the industry?

Factor: NAFTA and Other Trade Agreements

Nobody knows exactly what president-elect Trump plans to do to achieve his goal of bringing jobs back to America. He has taken aim at the trade agreements that sometimes lead to jobs being outsourced, but how can significant auto manufacturing return to the US without causing a spike in prices? If NAFTA, the North American Free Trade Agreement, were scrapped completely, it would be a shock to the regional economy. Nobody’s expecting Trump’s cabinet to recommend such a thing. However, we don’t know what they will do to satisfy Trump’s many working class supporters. Time will tell.

Experts believe that if manufacturing jobs return to the US, they will all be UAW union jobs. That alone could create a sizeable increase in costs and, therefore, prices. But parts and materials will have to be shipped to the US from an endless number of oversea suppliers as well, which would probably account for an even higher jump in costs for the auto makers. The auto workers may gain an advantage but the average consumer would not.

Factor: Fuel

There could be some counteractive forces at play here. On one hand, nobody’s really expecting Trump to extend or tighten the fuel economy standards set by Obama. That may give automakers a bit of a break from research and development costs, which could possibly lead to a slight decrease in pricing.

The advances the EV (electric vehicle) has made since 2008 might be halted for the same reason. Although EVs and hybrids are common today, we’re not sure if they’ve become mainstream enough to survive or break any more ground without continued government subsidies to support them. Since gas is cheap now, this isn’t very important information. It will become important as gas prices rise, however.

Also, fuel might become cheaper if domestic production is boosted again. That would help manufacturers and everyday drivers alike, but it may only be a short-term advantage.

Our Recommendation

If you already know it’s time for a new vehicle, you should probably buy one in the next 12 months or so (probably by mid-2017). You never know when the auto industry will start to actually expect costs to go up and then start setting prices higher. Current model-year vehicles are built using lightweight materials like aluminum, in order to increase their efficiency. We can’t be sure if future models will be the same. It’s a good time to get a hold of a lighter-weight car.

Make sure you get quotes right here before you visit a dealership. It’s easy and it’s free, and you can choose the local dealers you want information from! Best of all, you might find discounts you wouldn’t have access to any other way. Click here for your free, no-obligation quotes.