Trump's auto policies collide with consumer reality
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President Trump's seismic policy changes have, on balance, helped automakers, who say their future looks brighter.
- Whether any of that will help Americans afford to buy a new car remains to be seen, though.
Why it matters: Trump dismisses affordability issues as a "hoax," but is also intent on getting cheaper cars into American driveways.
The big picture: More Americans are late on their car payments than at any point in the last 15 years, according to research by Federal Reserve economists.
- Surging sticker prices coupled with high interest rates mean buyers have been borrowing more and taking out longer loans to finance their car purchases.
- The result is that car payments are eating up a larger share of household budgets, particularly for lower-income families also feeling the squeeze on housing, grocery and utility bills.
By the numbers: At an average price of just under $50,000, a car is typically Americans' second-largest purchase after buying a home.
- The typical monthly payment on a six-year car loan has soared to $766, per Cox Automotive.
- Insurance, fuel and car maintenance add another $965 a month, according to AAA.
Trump's solution is to relieve carmakers from having to build electric vehicles or to equip their vehicles with costly fuel-saving gadgets.
- He's even proposing that carmakers build tiny microcars popular in other parts of the world.
- He's scuttled Biden-era policies that favored higher-priced EVs and scrapped other rules that he says drove up car prices.
Trump's logic: Fewer regulations mean more choices and cheaper cars.
- "Counterproductive and burdensome auto regulations have limited options for American consumers, forcing them to purchase higher-priced models for the features and preferences they're looking for in a new car, truck, or SUV," Kush Desai, a White House spokesman, tells Axios.
- "The Trump administration is committed to slashing regulations that limit choices and raise prices so Americans can choose — and afford — the autos they actually want and need."
- A new tax deduction for interest paid on certain car loans will also help, Trump says, but the number of car buyers who qualify is limited, analysts say.
Yes, but: Like many other parts of the economy, the vehicle market is K-shaped, and that $50,000 average transaction price reflects what consumers choose to buy, not what's available, notes Cox Automotive executive analyst Erin Keating.
- "Many new-car buyers today are in their peak earning years and are less price-sensitive, opting for vehicles at the higher end of the market to get the features and experiences they value most," she said.
Lower-priced cars, meanwhile, are struggling in the U.S. market.
- Cars priced below $30,000 accounted for 7.5% of total sales in November (down from 10.3% a year ago).
- Pickup trucks, with an average selling price of more than $70,000, accounted for more than 14%.
Taken together, Trump's policy actions allow automakers to produce more of the high-margin, gas-powered trucks and SUVs consumers want — offsetting the higher cost of tariffs or moving production back to the U.S.
- "It's hard to even go back 12 months and understand the type of uncertainty and anxiety that was out there," General Motors' CFO Paul Jacobson said during a UBS conference last week.
- Now, GM is forecasting an even stronger 2026.
The bottom line: Car companies are better off under Trump, but as long as inflation continues to stretch household budgets, affording a car is a struggle for many buyers.
