Vehicle Affordability Gets Worse With Hidden Price Increases

By Sam Abuelsamid, VP of Market Research at Telemetry

When new vehicle supplies first became restricted in mid-2020 as a result of production shutdowns due to the COVID-19 pandemic, prices began a steep rise that hasn’t really let up. There are multiple reasons behind the increase, but it seems that as each reason subsided, something else came along to keep prices elevated. Automakers are well aware of the affordability problem and the impact it has had on sales, and they are obviously reluctant to raise manufacturing suggested retail prices (MSRP), so instead, they are resorting to hidden price increases. 

According to Cox Automotive data, the average transaction price (ATP) of new vehicles was about $39,000 at the beginning of 2020, and it had been climbing at a relatively linear rate through much of the 2010s. Those ATPs include the MSRP plus the destination charges (more on that later), options, and any dealer markups. By the end of 2020, prices had spiked to over $47,000 and have remained between $48,000 and $50,000 ever since, an increase of more than 25%. 

Following the initial pandemic price surge, the industry was hit first with semiconductor shortages and then sporadic other supply chain disruptions. With production capacity restricted in many cases, automakers focused on producing higher-priced, higher-margin products. 

As this occurred, incentive spending by manufacturers dropped roughly 10% to just 2% of the ATP as limited supply made it easy to sell everything they could build. Since mid-2022, incentive spend has climbed back up to about 8% of ATP, but ATP hasn’t declined. 

2025 hasn’t seen many major supply chain disruptions, but retail prices have remained high. The big disruptor this year has been the Trump administration's tariff policies. Over one-third of vehicles sold in the U.S. are assembled outside the country, mostly in Mexico and Canada, with the rest primarily coming from Europe, Japan, and Korea. 

Until this year, vehicles produced in Canada and Mexico entered the country largely tariff-free as a result of the trilateral free trade agreements dating back to the North American Free Trade Agreement of the 1980s. Now those vehicles are subject to tariffs of 25%. In addition, many of the components and raw materials, such as steel and aluminum, that go into U.S.-assembled vehicles are also subject to substantial tariffs. 

General Motors has estimated that the current trade policies of the Trump administration will cost it between $4 and $5 billion in 2025, and other automakers are also seeing billions of dollars in additional costs. Despite this, automakers like many other companies are at least publicly trying to hold the line on retail prices as much as possible. Executives are rightfully fearful that if they publicly blame tariffs for price increases, the administration will retaliate. Earlier this year, Amazon indicated that it would list a tariff surcharge cost on its product pages and the White House almost immediately threatened the company not to do so. The new charges never appeared on the pages. 

The Unavoidable Charge

On my podcast, Wheel Bearings, each week my co-hosts and I review the vehicles we’re driving, and then we play a little game where we take a guess at the destination charges listed on the window sticker. We do this as part of an ongoing conversation we’ve had for years about these mandatory charges. Every product we buy, from groceries at the local farmer’s market to vehicles, has some cost associated with transporting it from where it’s produced to where it is ultimately sold. In the vast majority of cases, that cost is simply factored into the price. You don’t pay a separate destination charge on a head of lettuce or a roll of toilet paper you buy at the local store unless you are getting it delivered. 

This is not the case with vehicles. If you look at the window sticker, you will find a line item after the MSRP for a destination or delivery charge. Once upon a time, that charge varied depending on how far your dealer was from the factory. Sometime in the 1980s, automakers started just calculating the average cost for a given model and applying that universally. Thus, it didn’t matter if you lived next door to the factory or across the country; you paid the same destination charge. 

Destination charges are required to be broken out on the sticker, so I don’t have any issue with it being there. What I have an issue with is that all but one major manufacturer selling cars and trucks in the U.S. do not include this charge in the price they advertise. If it were possible to forgo the destination charge by picking up a new vehicle at the factory gate, this wouldn’t be a problem. 

But customers generally can’t do this. One of the few U.S. companies offering a factory delivery option is Tesla, but you still have to pay that fee. I live 25 minutes from Ford’s Rouge Assembly Plant in Dearborn. If I bought an F-150, I would not be able to avoid this charge by taking an over to the plant and driving home in the truck. Thus, it seems unethical for automakers to advertise a price that doesn’t include a mandatory fee that every customer must pay. That one exception I mentioned is General Motors. For several years now, they have advertised prices that include the destination charge, and they should be applauded for that. 

Hiding the Price Increases

This unadvertised mandatory charge has become even more of a problem in the last few years as automakers have used it as a way of hiding price increases. While a number of vehicles have seen increases in their MSRP during the course of 2025, many others have not. For example, Ford raised prices on its popular Maverick compact pickup truck. At the beginning of the 2025 model year, the base MSRP for the front-wheel drive hybrid version was $26,995. As I write this, the same model starts at $28,150. But that’s not the whole story, as Ford has also raised the destination charge from $1,495 to $1,695 for a net increase of $1,350. The Maverick is assembled at Ford’s factory in Hermosillo, Mexico. 

Currently, all of Ford’s full-size F-Series pickups and full-size SUVs are being assembled at factories in the U.S. in Dearborn, Michigan, Kansas City, Missouri, and Louisville, Kentucky. While these trucks haven’t yet seen any notable increase in MSRP, they have gotten more expensive. Despite being assembled at U.S. factories, they use many raw materials such as aluminum and steel that are imported and subject to tariffs, as well as gas and diesel V8 engines built in Canada and Mexico. 

At the beginning of 2025, the destination charge on an F-Series, Expedition, or Lincoln Navigator was $1,995. At some point in the spring of 2025, that fee climbed to $2,195 and within the last two months, it jumped again to $2,595. That’s a 30% increase in the delivery charge since the beginning of the year. Not all of that cost increase is directly attributable to tariffs, as there have been other factors, such as driver shortages, wages going up, and general inflation. 

Ford is not alone in this trend. Stellantis was the first to start increasing destination charges several years ago, including raising the charge for full-size trucks to $1,995 and, more recently, $2,195. As of writing this article, Stellantis still hasn’t lifted its fee to the same level as Ford and GM, but that will likely happen soon. GM has also increased its destination fee on its largest vehicles to $2,595, but since those are included in the advertised price, at least consumers know what to expect. 

Most drivers can’t afford to buy new vehicles anyway, with nearly three times as many used vehicles sold every year. The combination of rising ATP and high interest rates has seen auto loan debt explode in the last decade. According to Lendingtree.com, the amount Americans owe on vehicle loans has gone from about $950 billion in 2025 to $1.64 trillion in Q1 2025, and car loan terms have gotten longer, with 72-, 84-, and even 96-month loans being increasingly common. 

We may not see many cheaper vehicles on the market any time soon, but at least automakers should be more honest with consumers about what they can actually expect to pay right from the beginning of the purchase experience. Include the destination charge in the advertised price so there isn’t a $2,595 surprise when signing the paperwork.