Here’s The Secret Way Automakers Are Making You Pay For Tariffs

Analysts, economists, and customers have been waiting for the moment when cars suddenly get more expensive in the face of tariffs. That hasn’t really happened yet, for various reasons, but it’s probably coming. Don’t worry! In the interim, automakers have found a new and exciting way to pass the increased costs onto you, the consumer.

The Morning Dump is going to be about tariffs, and what is and is not actually happening. Right now, the prices for cars in 2026 are probably going up, but the average MSRP has stayed relatively stable for the past few months. Automakers are starting to crack, and Volkswagen is the biggest so far.

That doesn’t mean automakers aren’t trying to recoup money where they can. There’s a new, not-so-obvious way that the buck is being passed to you (or, rather, from you to automakers). I’ll get into that, and then welcome our new NHTSA overlord.

Where Are The Tariff Price Increases?

I mentioned earlier this week that tariff price increases are likely coming, but haven’t fully hit yet. Tariffs are definitely real, yet automakers seem willing to swallow billions of dollars in increased costs in a way they haven’t in the past.

And it’s not just foreign-made cars that are being impacted. Even the most red-blooded, made-in-America truck is subject to tariffs on parts and materials (especially copper, steel, and aluminum). What’s so different now?

Some of this is related to the simple fact that automakers, like any retailer, are sensitive to the appearance of dramatically raising prices. Even during the pandemic, the average car price didn’t increase all that much, but the average transaction price did. Automakers simply stopped discounting and pulled back from advertising, while keeping MSRPs mostly stable.

As S&P Global Mobility points out, these levers still exist, and will start to be pulled once everyone else does it:

Pricing decisions are not made in a competitive vacuum. Any pricing set by an automaker, along with the levers which they use to support the price via incentives, advertising and inventory management, can impact the competitive landscape.

Competitive pressures can also impact the feasibility of passing the cost through. These aren’t consistent costs from one brand or model to another; if an automaker applies too large of a price increase, then price-sensitive consumers will simply not purchase the vehicle.

Still, a sale which has less margin than planned, or possibly at some level of loss, may be better than no sale.

There are still a lot of pre-tariff cars on the market, but even those numbers are starting to dwindle (my guess is about 25% of total dealer inventory are pre-tariff cars based on June’s inventory numbers). Something has to give, but that doesn’t really answer the question of why automakers are holding back.

Excluding specific cases where an automaker wants to make up market share (specifically Ford, which thinks tariffs will cost more than $1 billion this year, but keeps discounting to move cars), most automakers seem hesitant to raise prices in any obvious way. I think there are two specific factors that go beyond just not wanting to raise prices, and your weighting of these two factors probably relates to your perception of the current political moment.

The first is the economy. Automakers don’t want to raise prices too high if they think people feel bad about spending money and are worried about the future. Consumer sentiment, as measured by the University of Michigan, shows that Americans are starting to feel worse and worse about the economy. It is, sadly, political now to even suggest that the economy isn’t this perfectly-tuned, high-performance machine, but as Cox Automotive points out:

August brought a fresh wave of economic signals that suggest inflation is accelerating, driven in part by tariff-related pressures. New and used vehicle prices edged higher, while wholesale values held steady. Auto credit access tightened in August, even as approval rates improved. Loan performance was mixed last month with delinquencies increasing but defaults declining.

September has seen a slight setback in consumer sentiment so far, just as was seen in August. Both the University of Michigan and Morning Consult indices point to declining confidence, especially in current conditions. Inflation expectations remain elevated.

The other factor is harder to measure. There is likely some desire on the part of automakers not to be the first and most obvious manufacturer to raise prices, because doing so would make the President mad and, as we’ve learned recently, the President is willing to use his levers of power to avoid being critiqued or challenged.

It’s also worth remembering that earlier this year, the President, as reported by the Wall Street Journal, warned automakers not to raise prices in a call, and that those automakers were “rattled and worried they would face punishment if they increased prices.” Again, the politics you bring to this will probably guide how much credence you give to that threat, or how bad you think the threat of this is (or how reasonable you think the Emergency Price Control Act of 1942 was).

My gut tells me that automakers are legitimately fearful of the President, based on the way they seem more hesitant to be critical of his policies, and that does play a role in this. Will this last forever? Probably not. At some point, shareholders are scarier than The White House, and I think this mostly means that no one wants to be the first one to be called out. Once someone gets away with it, they’ll all likely follow suit.

Volkswagen Is Moving Quicker To Raise Prices

Wow, there’s a lot of Volkswagen news lately. The automaker doesn’t sell quite as many cars in the United States as it used to, and its emphasis on foreign production is likely to result in that trend continuing. With the exception of Porsche/Lamborghini/Bentley, it’s not like the problem with Volkswagen and Audi was that the cars weren’t expensive enough.

Brian wrote earlier about how the Volkswagen Golf R got more expensive, which makes sense because it’s a niche product with a built-in cap on demand. If you want a Golf R, you can’t really buy anything else other than maybe a Corolla GR.

It’s more widespread than that, however, with even the basest base trim Jetta S seeing a $1,050 (or 4.3%) increase. That’s a lot considering that most of the models seeing price increases haven’t been notably improved for the next Model Year, but that’s just part of the boil-the-frog strategy, as Automotive News reports:

Volkswagen Group CEO Oliver Blume, speaking during a media roundtable at the IAA Mobility show in Munich on Sept. 8, said VW Group is being strategic in adjusting U.S. prices in response to the tariffs.

“We have to do it carefully,” he said. “We can’t push all that we are losing onto our customers and in one segment.”

This sort of bursts the illusion that only certain cars would be impacted. It’s clearly much easier to spread the costs around until production can be better aligned with tariffs. MSRP is one way to do it, but it’s tricky. What’s an easier way?

The Destination Charge Is Essentially A Bogus Fee, And It’s How OEMs Are Passing Costs Along

For most of automotive history, when you bought a car, the destination fee was a logical construct built on the price associated with actually delivering the car to your dealer. If you lived near the factory, the cost would be lower. If you were further away, the cost would be higher.

That went out the window sometime in the ’80s, and automakers started determining an average and applying it to all the cars, no matter your proximity to the factory. This is weird. If you walk into an Apple Store and buy an iPad, you’re likely to pay the same price for it anywhere in America. And if you order it online, the cost of shipping will vary based on how far away from a distribution center you are.

It’s extra annoying because these are, for many automakers, a below-the-line charge. This is to say that the price of the car is listed, and then the destination is buried lower on the window sticker. Many automakers also advertise the MSRP without the destination charge (GM is an exception here, because it does advertise pricing with the MSRP included, which is great).

You’ll likely not be shocked to find out that, in fact, these mandatory prices are increasing. A lot. Sam Abuelsamid looked at what’s been happening for Telemetry, and it’s worse than I realized:

At the beginning of 2025, the destination charge on an F-Series, Expedition, or Lincoln Navigator was $1,995. At some point in the spring of 2025, that fee climbed to $2,195 and within the last two months, it jumped again to $2,595. That’s a 30% increase in the delivery charge since the beginning of the year. Not all of that cost increase is directly attributable to tariffs, as there have been other factors, such as driver shortages, wages going up, and general inflation.

Ford is not alone in this trend. Stellantis was the first to start increasing destination charges several years ago, including raising the charge for full-size trucks to $1,995 and, more recently, $2,195. As of writing this article, Stellantis still hasn’t lifted its fee to the same level as Ford and GM, but that will likely happen soon. GM has also increased its destination fee on its largest vehicles to $2,595, but since those are included in the advertised price, at least consumers know what to expect.

As Sam points out, there are definitely increased costs with shipping things, so some of this was likely inevitable. But 30% since the beginning of the year? That seems extreme to me.

While MSRPs might not skyrocket, expect the industry to continue to boil the frog by increasing fees and decreasing discounts.

NHTSA Has A New Boss

The United States Senate pushed through a bunch of President Trump’s appointees, including Jonathan Morrison, to the position of Administrator of the National Highway Traffic Safety Administration. This is the first permanent leader the agency has had in three years.

Who is this guy? From Reuters:

Morrison, a former lawyer at Apple and chief counsel at the NHTSA during President Donald Trump’s first term, will oversee a series of safety probes at the NHTSA, including an investigation opened this week into about 174,000 Tesla Model Y cars from the 2021 model year on reports that electronic door handles can become inoperative and potentially trap children inside.

“NHTSA cannot sit back and wait for problems to arise with such developing technologies, but must demonstrate strong leadership,” Morrison said.

He was approved in a party-line vote.

What I’m Listening To While Writing TMD

On the recommendation of Thomas, here’s “Boiled Frogs” by Alexisonfire. Definitely a calm way to roll into the weekend.

The Big Question

Do you have a favorite fall drive? A place to go when the leaves change, if the leaves do change where you live?

Top photo: DepositPhotos.com