Up, down or flat?
As Canada enters its second year scrambling to deal with U.S. tariffs on steel, aluminum and auto parts, auto industry experts are divided on the outlook for car prices in 2026.
With Trump’s tariffs sticking around, automakers are expected to continue to be squeezed by rising manufacturing costs. But how much of that pressure will be passed on to consumers, amid ongoing concerns about affordability, remains up for debate.
Two experts told the Star they expect average new car prices to climb about four per cent in 2026. Two others said the outlook is uncertain, though they do not foresee a major drop, while another expects prices to remain steady, with automakers charting their own paths through tariff pressures.
“In 2025, manufacturers have found and tried to establish ways to shelter the consumer side from tariffs,” said Charles Bernard, lead economist at the Canadian Automobile Dealers Association. “But as we’re moving to 2026, those cost pressures are still there and are increasing.”
Bernard said that if manufacturers can no longer absorb tariff costs or adjust production to mitigate the impact, car prices could rise. Conversely, if demand for new cars — which slowed in the last few months of 2025 — continues to weaken, it could put downward pressure on prices.
Many Canadians can recall the doom-and-gloom predictions of car price hikes in the thousands of dollars in early 2025, when U.S. President Donald Trump imposed a 25 per cent tariff on cars and trucks not built in the U.S. and raised steel and aluminum tariffs to 50 per cent.
In response, Ottawa applied a 25 per cent tariff on steel, aluminum and auto imports originating from the U.S. in September.
Those predicted price spikes did not materialize, with prices increasing only slightly or even declining, depending on which data you examine.
Statistics Canada shows that the average purchase price of new passenger vehicles in 2025 was about four per cent higher year-over-year, while Autotrader, an online automotive marketplace, reports that the average price of a new vehicle had fallen to $63,264 in September 2025 — more than $1,000 less than the same period in 2024.
(Statistics Canada said it is unfamiliar with Autotrader’s methodology and calculates the new-vehicle price index using manufacturer’s suggested retail prices with rebates, weighted by model share and adjusted for quality. Autotrader said it analyzes listing prices only, excluding incentives and subsidies, reflecting the closest price to the real-time market prices.)
Erik Johnson, a senior economist specializing in the auto industry at BMO, who trusts the accuracy of StatCan data, said car prices rose less than predicted due to automakers shouldering some tariff costs, the slow rollout of tariffs, and manufacturers building up pretariff stockpiles.
Johnson said he predicts car prices will rise between 3.5 and four per cent in 2026, as automakers may no longer be able to rely on those strategies.
“We are going to be seeing vehicle inflation of a similar magnitude that we saw this year again, partly because companies still have to bear the cost of these tariffs,” Johnson said.
Robert Karwel, director of customer success at J.D. Power Canada, an automotive data analytics firm, said he expects car prices in Canada to rise in 2026, but by less than four per cent, with no sudden jumps for consumers.
“The effects will be slight,” Karwel said, “because manufacturers will spread the pricing impact across a variety of cars and segments that they compete in.”
Baris Akyurek, vice-president of insights and intelligence at Autotrader.ca, said his firm’s data shows that new cars in 2025 were cheaper than the year before, as automakers held high inventory and many consumers, concerned about tariffs, turned to used cars — pushing up their prices by 3.2 per cent year-over-year by September.
He said that with uncertainty surrounding between U.S. and Canada trade negotiations, he couldn’t speculate on the outlook for car prices in 2026.
“What I’m sure about is that we’re not going back to pre-COVID levels,” he said. “If tariffs continue, if there’s no USMCA deal, I think it’s inevitable that we would see some sort of an increase.”
Akyurek said he foresees used car prices remaining high in 2026, as strong demand and constrained supply persist due to a market gap caused by 1.5 million fewer new cars sold between 2021 and 2023.
Daniel Ross, senior manager at Canadian Black Book, a vehicle valuation and data company, said his firm has also observed a slight decrease in car prices — around $1,000 — in 2025 compared with a year ago.
Ross said he expects car prices to stay flat in 2026, as demand for new vehicles has softened following a rush of purchases in early 2025 before tariffs took effect. He added that consumers remain cautious about a full year of tariffs amid rising living costs.
“I think that demand is going to keep declining, and this is the part where it’s uncertain, is how much more money the manufacturers have to provide to the consumer to get them in the door,” he said.
