Automakers are running out of ways to rationalize price increases. They’ve done just about everything to excuse themselves as the average transaction price for a new vehicle in the U.S. reached a record high of $50,080 last month. But all they really have left is covertly boosting destination fees or blaming tariffs. Unfortunately, the limit for the former looks to have been reached. Attaching price hikes to tariffs has been something the industry has attempted to avoid. However, it looks like the last excuse they’ll be able to make.
The average transaction price has crept up for all sorts of reasons. Among the biggest were automakers collectively deciding to cull small, affordable models from their lineup. This started about fifteen years ago and has left dealerships with a glut of large vehicles carrying bloated MSRPs. Smaller, more economical models are now either absent or have seen so few updates that they’re typically some of the oldest models in the lineup.
Noticing that new vehicle sales started slowing down after about 2006, automakers have gradually pivoted toward chasing higher margins on every vehicle sold while introducing novel subscription fees. Smaller vehicles have never been as profitable and, based on the wonky way the United States has structured its emissions regulations in the last few decades, they’re also harder to make compliant without incurring fines — ironically enough.
So we’ve been left with a slew of oversized models priced into the stratosphere and companies gradually trying to lock equipment that’s already been installed into the vehicle behind digitized paywalls. We’ve also seen increased destination fees and whatever dealers are willing to tack onto to help pad the final price.
But things haven’t stopped there. While generalized price increases aren’t uncommon, they’re very obviously increasing at accelerated rates and not in a way that’s keeping pace with incomes. This has been something the industry has attempted to downplay in an effort not to look greedy. Extended financing contracts have helped mask those price increases by allowing people to pay even higher rates over a longer time span, netting even juicier profits in the end. That remains true despite there being a record number of drivers who are underwater on their current auto loan.
However, tariffs are starting to force the issue of rising MSRPs and likewise make a convenient excuse. The industry probably always wanted to raise prices further, they just weren’t sure what the public would tolerate. The tariffs being implemented by the Trump administration not only add legitimate pressure to overhead, it also makes a nice scapegoat.
Notice how you’ve previously seen loads of automakers making declarative statements about how tariffs aren’t changing the final price of their vehicles this year? Well, that’s likewise starting to change … among other things.
According to Automotive News, destination fees have continued going up as a way to covertly raise vehicle pricing without having to attach it to the MSRP. But there’s only so far companies can realistically go before customers begin to catch on and get upset. After another bump in 2025, domestic automakers have destination fees for their larger pickups already set between $2,000 and $2,600.
Now, we’re seeing promises of generalized price increases. Ford has increased prices of numerous models along with destination fees, suggesting tariffs were indeed a contributing factor. It was a similar story for General Motors, which announced in spring that it was concerned about tariffs impacting its bottom line by up to $5 billion this year.
For GM, products coming in from China are creating the biggest issue. That’s less of a problem for Ford. But, like most brands doing business in North America, they both have a sizable number of vehicles that see final assembly in Mexico.
Stellantis, which is estimated to already have raised destination fees by over 30 percent since 2021, has likewise seen some lofty pricing increases in general for select brands. This is most evident with Jeep vehicles. But you can also see it with Dodge, which has gradually abandoned its volume leaders for more-expensive alternatives.
Toyota brands have seen more modest pricing increases, similar to what you’d expect to see between years. But, if you examine how it prices trims and options on its latest models, it’s hard to suggest you’re really getting a steal of a deal. Its destination fees have similarly risen more than a lot of its mainstream rivals.
Mazda has raised the prices of its models incrementally over the last several years. But has likewise said tariffs have forced it to boost destination charges. It said it may have to raise the MSRP of several popular vehicles for the 2026 model year, too.
Honda is doing the same. But it has done a fairly good job at tying those price increases to packaging changes. Still, there are a few popular models (e.g. Civic, CR-V, Odyssey) that are just going to cost several hundred dollars more than they did last year.
Meanwhile, Volkswagen Group has allegedly seen some of the biggest increases in vehicle pricing between model years of any automaker. You might not have noticed this from the VW brand. But it becomes a lot more obvious when you incorporate Audi, Porsche, and Lamborghini.
Speaking of the high-end nameplates, Ferrari said it would be raising prices by as much as 10 percent to account for tariffs.
Volvo has also been raising prices. While the jump is comparatively modest on its cheaper products, some of its fancier automobiles went up by over $3,000 this year. The company is also moving further away from cars to prioritize the sale of SUVs and crossovers boasting higher price tags.
While we could continue providing examples, it just needs to be said auto pricing continues to be an issue for consumers in general. A decade ago, it was fairly common to see most cars see a price jump of about 0.5 to 1.5 percent between model years. But it’s now closer to 4 percent and has been for several years.
That’s in addition to the sizable increase in destination fees we’ve seen implemented by brands over the last five years. Some brands (e.g. Volkswagen, Honda) only increased destinations by 10 percent. But others (e.g. Porsche) went up by an estimated 50 percent in total.
As previously stated, pricing shenanigans were formerly a combination of raising MSRPs and manufacturers pulling models from the bottom end of the pool. However, with fewer affordable vehicles to cut from the lineup, it’s getting harder for the industry to hide generalized price increases. Tariffs are really the only thing the industry can still point to without simply confessing that leadership just wants perpetually higher profit margins.
Obviously inflation has played a factor in all of the above. While it was supposed to have stabilized over the last three years, customers really aren’t seeing that on the ground. Even though the valuation of some consumer goods have remained stable, most living expenses (e.g. food, housing, energy, and transportation) have not. It also needs to be said that the automotive industry has broadly (albeit not universally) enjoyed record-setting profits over the last several years.
Pursuing volume is clearly much less fashionable than chasing margins these days. But one wonders how realistic that strategy is on an indefinite timeline. How accommodating can consumers really be as vehicle pricing continues to climb?
[Images: Keegan Divant/Shutterstock; Noel V. Baebler/Shutterstock; somkanae sawatdinak/Shutterstock; Zamrznuti tonovi/Shutterstock]
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