Buying a car in Canada: How to save despite rising prices and tariffs

If you’ve been thinking about buying a new or used car in Canada, you may have noticed a new challenge on the horizon: tariffs. Recent trade tensions between Canada and the United States have led to significant tariffs on vehicles, metals, and other goods. These costs are expected to eventually trickle down to Canadian consumers.

Understanding how these tariffs impact car prices and how you can potentially avoid paying more is important for making a smart purchase decision. Tariffs can also have ripple effects on your auto insurance premiums, which is another factor to keep in mind when planning your next vehicle purchase.

In this article, we’ll explain how tariffs are affecting car prices in Canada, what you can do to minimize the impact, and how these changes may influence your auto insurance rates.

How tariffs affect car prices in Canada

A tariff is essentially a tax on imported goods. While the intent is to protect domestic industries, tariffs almost always increase the cost of the affected products.

In April 2025, Canada imposed a 25% tariff on vehicles that do not meet the Canada–United States–Mexico Agreement (CUSMA) rules, along with tariffs on U.S. sourced portions of compliant vehicles. These tariffs apply to fully assembled vehicles, not auto parts. However, that doesn’t mean that parts prices are unaffected.

Steel and aluminum, two of the main materials used in vehicle manufacturing, are also subject to increased tariffs, doubling from 25% to 50% in some cases. Because most car parts contain these metals, their prices are likely to rise.

Experts estimate that the purchase price of a new vehicle could increase anywhere from $3,000 to $12,000 as a result. Even if you’re not buying an American made vehicle, the global supply chain for cars is so interconnected, these higher costs are likely to spill over into the Canadian market.

Impact on new and used cars

Both new and used vehicle markets are likely to feel the pinch:

• New cars: Manufacturers may initially absorb some of the increased costs, but this won’t last forever. Once existing inventory sells through, price increases are expected to reach consumers. Dealers may also reduce purchase incentives and financing offers.
• Used cars: With the continuous increase in new car prices, a growing number of buyers are expected to shift their focus towards purchasing used vehicles. This surge in demand for used cars is anticipated to significantly increase prices by the year 2026. 

Canadian-assembled vehicles can help avoid tariffs

With rising tariffs on U.S. assembled vehicles, buying cars manufactured in Canada is a smart way to sidestep price hikes and support local production. Several major automakers operate manufacturing plants across Ontario, producing vehicles that are typically exempt from import tariffs due to domestic assembly.

Here are some popular models built in Canada:

• Honda Civic and CR-V – Manufactured in Alliston, Ontario, these models are among Canada’s top-selling compact sedan and SUV options.
• Toyota RAV4, Lexus RX, and Lexus NX – Assembled in Cambridge and Woodstock, Ontario, these vehicles offer reliable performance and luxury features without the added tariff costs.
• Chevrolet Silverado and BrightDrop Van – Produced in Oshawa and Ingersoll, Ontario, these GM models are ideal for both personal and commercial use.
• Chrysler Pacifica and Dodge Charger – Built in Windsor and Brampton, Ontario, these vehicles continue Canada’s legacy of domestic auto manufacturing.
• Ford Super Duty (Coming in 2026) – Ford’s Oakville plant is being retooled to produce these heavy-duty trucks, which will be tariff-free once production begins.

Choosing a Canadian-assembled vehicle not only helps you avoid the 25% tariff on American built cars but also ensures better availability and potentially lower maintenance costs due to local parts sourcing.

The link between tariffs and auto insurance

Higher car prices don’t just affect your purchase decision. They can also raise your auto insurance premiums. Here’s why:

• When vehicles become more expensive to buy, repair, or replace, insurers’ claim settlement costs increase. Since auto insurance is designed to cover those costs, premiums typically rise in response.
• Tariffs on steel, aluminum, and other metals make collision repairs more expensive. 
• If replacement parts are delayed due to supply chain disruptions, repair timelines stretch, and costs can add up for insurers, especially when rental vehicles are required.

Industry experts anticipate car insurance could be the hardest-hit line of personal insurance by these tariffs. While you might not see an immediate increase, premiums could rise at your next policy renewal as insurers adjust to higher claims costs.

How to avoid tariff-driven price increases

While you can’t control trade policy, there are steps you can take to reduce the impact of vehicle tariffs on your next car purchase:

1. Buy from non-U.S. sources
Vehicles built outside the U.S. may not be subject to the same tariffs. Japanese, Korean, and some European models assembled outside of North America could avoid the extra 25% tariff.

2. Act before inventories change
Some manufacturers have stockpiled vehicles and parts in anticipation of the tariff increase. If you’re ready to buy, act before this inventory sells out and prices adjust upward.

3. Consider Canadian-assembled vehicles
Cars assembled in Canada may be less affected by tariffs, especially if their parts are sourced from non-tariffed suppliers.

4. Look for end-of-model-year deals
Dealers often discount last year’s models to make room for new inventory. These vehicles could offer savings opportunities before the next shipment reflects increased costs.

5. Explore certified pre-owned
With used car prices expected to rise, purchasing a certified pre-owned vehicle sooner rather than later could result in a better deal.

How to manage auto insurance costs during tariff increases

Even if tariffs drive premiums higher, there are ways to keep your auto insurance affordable:

• Increase your deductible: Increasing your deductible can lower your insurance premiums. However, it's important to note that while this will reduce your monthly payments, you will need to pay more out of pocket if you need to file a claim. This means  that in the event of an accident or damage to your vehicle, the initial costs you will have to cover yourself will be higher.
• Bundle your policies: Combining your auto insurance with home or other types of coverage through the same provider can often lead to significant discounts. This bundling approach not only simplifies your insurance management by having all your policies under one roof, but it also makes you eligible for multi-policy discounts. These discounts can result in substantial savings on your overall insurance costs, making it a financially savvy move for many policyholders.
• Review your coverage: Ensure you’re not paying for coverage you don’t need or for limits that exceed your vehicle’s current value. This means reviewing your policy to make sure it aligns with your actual needs and the current market value of your car. Over-insuring can lead to unnecessary expenses, while under-insuring can leave you vulnerable in case of an accident or damage.
• Ask about discounts: Low-mileage driving, safety features, and loyalty programs can all reduce your rate. If you drive fewer miles, insurers see you as less of a risk, which can lower your premiums. Equipping your vehicle with advanced safety features can also lead to discounts, as these features reduce the likelihood of accidents and claims. Additionally, staying loyal to your insurance provider over time can make you eligible for loyalty discounts, rewarding you for your continued business.

The bottom line

Tariffs are changing the landscape for buying a car in Canada, impacting everything from dealership pricing to your insurance bill. By being strategic, choosing the right vehicle source, buying at the right time, and reviewing your coverage, you can soften the financial impact.

At Orbit Insurance Services, we help Canadian drivers protect what matters most while keeping costs manageable, even in changing markets. Our brokers can walk you through your options, find the right coverage for your needs, and help you save wherever possible.

Get ahead of the changes. Request your free, personalized auto insurance quote from Orbit today.

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