President Trump’s tariffs could push car insurance costs higher—here’s why

Car insurance is already getting more expensive, but President Trump’s tariffs on steel, aluminum, and imported vehicles / auto parts could drive premiums up even further.

For context: Auto insurance rates have been rising for over a year, jumping 11.8% in January compared to a year earlier, according to the Consumer Price Index.

The reason? Vehicle values are a key factor in calculating insurance costs and car prices have been historically elevated for years. 

• If new car prices get pushed even higher, used car values will likely follow—forcing insurers to pay out more in claims. 

• That increased financial risk gets passed down to drivers in the form of higher premiums.

Why it matters: Underinsurance is already an issue in many states, and higher premiums could further tighten household budgets, push more drivers into risky bare-minimum policies, and prevent consumers from buying a car altogether.

On top of that—the other side of the insurance equation is repair costs.

• Hamrick warns that supply chain disruptions could leave drivers waiting longer for parts, increasing rental car costs and driving up insurer payouts.

• On top of that—more vehicles being totaled. If the cost to repair a car exceeds its actual cash value (ACV), insurers declare it a total loss and pay out the ACV instead of fixing it. 

• When repair costs rise, more cars cross that threshold—reducing the (already tight) supply of affordable used vehicles. That further inflates used car prices and continues the cycle of rising insurance costs.

What we’re watching: Higher insurance rates don’t just hit policyholders—they impact auto loan affordability.

• When car prices rise, lenders typically extend larger loans. This could increase loan-to-value (LTV) ratios—the percentage of a car’s price that is financed compared to the vehicle’s appraised value.

• However, to prevent LTVs from further exposure—lenders may require larger down payments, shorten loan terms, or tighten credit standards to offset risk.

• If insurance becomes too expensive—some consumers may opt for less coverage or drop comprehensive and collision insurance entirely. That creates additional risk for lenders, who may take more drastic measures to ensure their collateral (the car) is properly insured.

Big picture: For now—insurers, lenders, consumers and automakers are bracing for change—but the real question is how much financial burden consumers will actually be able to absorb.

Become an automotive insider in just 5 minutes.

Get the weekly email that delivers transparent insights into the car market.

Join 90,000+ others now, it's free:

In today's automotive landscape, car buyers invest more time than ever in researching, considering, and comparing options. But for dealers, the challenge lies in pinpointing the audience ready to make a purchase.

Enter Premier by Edmunds.

Premier offers dealers a groundbreaking way to connect with in-market car shoppers precisely when, where, and how they prefer. With over 20 million monthly visits, Edmunds.com is the go-to destination for buyers seeking market insights, expert advice, and budget tools to make informed decisions.

Through Edmunds Premier, dealers gain access to this highly coveted audience. Simply list your new and used inventory on Edmunds, and watch as qualified, in-market traffic flows directly to your vehicle detail pages on your website.

Don't miss out on this opportunity to elevate your dealership's visibility and sales performance. You can sign up for Premier today at Edmunds.com/CDG.