By Ray Birch
PRINCETON, N.J.—Lenders should not be overly concerned about Trump tariffs’ dramatically reducing auto loan portfolio size, says one automotive industry analyst who adds the one thing CUs must watch, however, are loan terms getting even longer.
Kevin Tynan, director of research at The Presidio Group, spoke with CUToday.info about the effects of the tariffs on the auto market. Tynan emphasized that while the number of deals will fall, prices of cars will move higher and help maintain portfolio balances.
Tynan said in some ways the tariffs will return the automotive industry to the pandemic days.
“This situation mirrors the pandemic's supply dynamic—an undersupplied market and steady demand, leading to higher prices and wider margins. Consumers and lenders might face challenges due to fewer transactions and higher transaction values,” Tynan said. “For manufacturers and retailers, a tight supply-demand balance typically drives prices and margins upward.”
Tynan agreed that everyone tied to the automobile market is concerned about the Trump tariffs.
Top Concern
“The top concern for everyone is tariffs and their impact on supply and demand,” Tynan said. “Based on the numbers, approximately five million units are affected. In 2024, sales volume was 16 million units, with 11 million produced in the U.S. That leaves five million units built in Canada, Mexico, or other imported, which are at risk. Some proportion of these vehicles will remain unbuilt or unsent to the U.S.”
Tynan pointed out that during the pandemic, dealers benefited from over-MSRP charges.
“Publicly traded dealer groups saw record profitability in 2022 despite lower sales volumes—13.8 million units compared to 2024's 16 million,” Tynan said. “Inventory levels have returned to about three million units post-pandemic, suggesting that constrained supply—whether due to pandemics or tariffs—supports retailer profitability through tighter balance.”
Regarding sales projections, Tynan reiterated that some portion of the five million at-risk units won't be built or imported to the U.S.
Kevin Tynan
“Prices are expected to stay high, potentially returning to MSRP levels as seen in 2022,” he said. “Lenders should be cautious of inflated values and consider that borrowing amounts may increase with longer terms, mirroring manufacturer and retailer trends towards profitable transactions with fewer sales.”
Tynan said manufacturers have prioritized higher-value trucks and SUVs over low-priced “econoboxes,” adapting to chronic manufacturing inflation.
Focus On Market Stability
“As a result, achieving profitability in lower unit markets is feasible, as demonstrated by the significant average transaction price increase—from $35,000 in 2016 to $48,000 in 2022,” Tynan said. “I anticipate extended borrowing terms due to higher vehicle costs, though current interest rates may deter negative equity rolling over that we saw previously during the time of the pandemic. This could lead to an undersupplied used market, with consumers holding onto vehicles longer.”
For lenders, Tynan said, the focus should be on the stability of the market rather than expecting a rapid increase to 17-18 million units.
“Manufacturers likely recognize the benefits of maintaining a demand-supply balance below 16 million units for better pricing and margins,” he said. “We saw the market drop significantly during the pandemic, and then it built itself back up it always does. But if I were a lender, I would get comfortable with about 16 million units annually, and not expecting sales to grow a lot beyond that, to like 17 or 18 million units annually.”