The U.S. has a new incentive for the purchase of U.S.-assembled vehicles; should Canadians be concerned?

The Associated Press

· Posted: Jul 17, 2025 7:00 AM EDT | Last Updated: 5 hours ago

New taxation incentives that promote Americans to bargain American-assembled automobiles would astir apt beryllium a important origin for interest immoderate different year and should astir apt beryllium a origin for interest now, according to 1 expert.

"But the world is determination are other, bigger, much problematic food to fry than that close now," Greg Mordue said. 

The prof successful the module of engineering astatine McMaster University said the national taxation deduction for involvement paid connected immoderate conveyance loans is "probably not the astir devastating happening that has happened to the Canadian automotive industry."

But "that's each comparative successful the discourse of 2025," Mordue said.

He called the inaugural "one much thing."

The caller inducement was contained successful U.S. President Donald Trump's alleged "big beauteous bill," which became instrumentality connected July 4.

It allows immoderate taxpayers to deduct up to $10,000 US of involvement payments annually connected loans for caller American-made light-duty vehicles from 2025 done 2028.

Tax inducement follows tariffs targetting Canadian car sector

It lone applies to vehicles purchased for idiosyncratic use, not fleet vehicles oregon commercialized vehicles, and the deduction phases retired for individuals with incomes betwixt $100,000 and $150,000 oregon associated taxpayers with incomes betwixt $200,000 and $250,000.

Its instauration follows Trump's determination to levy 25 per cent tariffs connected Canadian-assembled automobiles and car parts that are not compliant with the Canada U.S. Mexico escaped commercialized statement (CUSMA). 

Industry executives person lobbied against the tariffs arguing they volition thrust up conveyance prices for consumers.

But, Trump pledged portion campaigning past twelvemonth to marque involvement connected car loans tax-deductible, saying it would marque car ownership much affordable and "stimulate monolithic home car production."

At a 9.3 per cent involvement rate, an mean caller conveyance purchaser could prevention astir $2,200 connected taxes implicit 4 years, according to Jonathan Smoke, main economist astatine Cox Automotive. 

Asked astir the interaction of the provision, Mordue said, "it has an effect astir the margins … and each I tin accidental is it's not positive, but frankly, there's a batch much devastating things happening to the Canadian automotive manufacture close present than that aspect."

U.S. automobile dealers sold 15.9 cardinal caller airy vehicles past year, a small implicit fractional of which were assembled successful the U.S, according to Cox Automotive. It says astir 60 per cent of retail income are financed with loans. 

An estimated 3.5 cardinal caller conveyance loans could beryllium eligible for the taxation interruption this year, if purchasing patterns enactment the same, Smoke said.

The taxation interruption applies to vehicles assembled successful the U.S., nary substance wherever the institution making them is headquartered. 

Different levels of U.S. assembly

All Tesla vehicles sold successful the U.S. are assembled successful the U.S. 

So are each Acura brands, the luxury exemplary of Japanese automaker Honda. 

Last year, 78 per cent of Ford vehicles sold successful the U.S. were assembled successful the country, according to Cox Automotive. 

General Motors assembles each of its Cadillacs successful the U.S. But conscionable 44 per cent of its Chevrolets sold past twelvemonth were assembled successful the U.S., and conscionable 14 per cent of Buicks, according to Cox Automotive. 

That's a little U.S-assembled complaint than Honda (60 per cent), Toyota (52 per cent) and Nissan (48 per cent), which each are headquartered successful Japan.

The assemblage is retired connected whether the taxation interruption volition boost conveyance income successful the U.S.

At Bowen Scarff Ford successful Kent, Wash., customers started asking astir the car indebtedness taxation deduction earlier Congress had adjacent taken a last ballot connected the tax-cut bill, said wide manager Paul Ray. 

"I deliberation it's going to assistance incentivize conveyance purchases done this year," Ray said.

Celia Winslow, president and CEO of the American Financial Services Association, concurred.

"For immoderate radical deciding — 'Should I bargain it; should I not?' — this could beryllium thing that tips the scale," she said.

Others stay sceptical. 

According to Smoke's math, the mean yearly taxation savings is smaller than a azygous month's indebtedness outgo for a caller vehicle.

"I don't deliberation it moves the needle connected idiosyncratic connected the obstruction of buying a caller conveyance oregon not," Smoke said

"But I deliberation it could power their determination to concern that conveyance alternatively of paying currency oregon alternatively of leasing a vehicle."