Tariffs and Opportunities

For more than half a decade, the automotive industry has been dealing with one of the most tumultuous and uncertain periods in history. First came the COVID-19 pandemic and the lockdowns that restricted the movement of goods and people. Then came the surge in vehicle demand, which coupled with reduced inventory put huge pressure on pricing for used vehicles. While we’ve seen both the new and used vehicle markets stabilize in recent years, 2025 has seen the emergency of tariffs and an international trade war—the ripple effect of which is clearly being felt in the automotive sector—one that in North America is highly integrated between Canada, the U.S. and Mexico.

Tough environment
The uncertainty around tariffs and declarations by the U.S. administration on new levies, as well as a lack of clarity on implementation and duration, means that it’s currently a very tough environment to do business.

Brent Ravelle, President of the Ravelle Group of Companies (which owns multiple rooftop retail locations) and President of the Motor Vehicle Retailers of Ontario, says that a huge concern right now is making sure that consumers are educated when it comes to automotive retailing. “Everybody is telling everybody else that we have these 25% tariffs here and there,” he says, but in reality; Ravelle acknowledges that what’s going on behind the scenes is very different to the hysteria that consumers are seeing in the headlines.

“I’ve seen deals that attorneys are putting together,” he explains, and says that with his business being conducted on both sides of the border, in the U.S., there is a growing realization of the true cost of implementing these tariffs. He says for dealers, the best approach right now is to properly educate their customers and structure vehicle deals and protection products to create outcomes that benefit customers and as a result, the dealers themselves.

Critical lever
Jake Stacey, Executive Vice President of Sales and OEM Performance at LGM Financial Services, concurs. She notes that if and when tariffs do have a significant impact on vehicle pricing in Canada, which could lead to lower demand, F&I then becomes a critical lever to help dealers preserve profitability as well as customer retention. “While volume may shrink [due to higher prices and lower demand] opportunity per deal should not,” she explains.

Stacey says that in these kinds of economic conditions, dealers need to focus on deal quality and product attachment, i.e., product and profit per each vehicle. She notes that the F&I office can play a key role in offsetting lower vehicle sales volumes by increasing the value of each transaction. Some examples include loan protection, pre-paid maintenance and bundled protection packages.

“These aren’t just add-ons,” Stacey explains, “they’re strategic tools that help customers protect their investment in a more volatile market.”

Not negotiable
She notes that in the current climate of economic uncertainty, program integrity, transparency and trust are critical and simply, not-negotiable. Stacey says that while consumers today are tending to be more cautious with their money, they’re also looking for smart ways in which to protect it. “Dealers that align themselves with partners offering clear, well-positioned F&I programs—especially those backed by OEMs—will have a competitive advantage,” explains Stacey.

She notes that there’s been a strong push from both dealers and OEMs for greater transparency, more insightful reporting, and tighter alignment between sales and service which is creating new and solid opportunities for dealers and their F&I partners. A good example is LGM’s Exclusive Certified Pre-Owned (CPO) Used Car Program that’s implemented directly with franchise dealers and includes a 30-90-day powertrain protection program to provide peace of mind for consumers. “She notes that programs like this and the alignment between sales and service that dealers are increasingly emphasizing “isn’t just good operations, it’s what drives real customer retention.”

Used market considerations
Dan Park, CEO of Clutch, an online buy and sell used vehicle marketplace that’s designed to provide a seamless experience for consumers in Canada, notes that market dynamics continue to shift, making for a challenging operating environment. Clutch’s recent June 2025 used car report noted that used car prices in Canada have been climbing for seven straight months with a 6.3% increase year-over-year in June, resulting in an average price of $33,868. This has effectively erased any market correction we saw in 2024 and is the result of several factors.

A key one has been the suspension and restart of the Roulez Vert green vehicle incentive in Quebec, which has increased buyer hesitancy, resulting in stagnant sales volumes but rising prices. This combined with a used vehicle market where lease returns and trade-ins are still low, is making it difficult for dealers to replenish inventory (a knock-on effect from the COVID-19 era declines in new vehicle manufacturing due to lockdowns). Other conspiring factors that are driving up used prices include a surge in demand (and pricing) for hybrids as more consumers dip their toes in electrification, plus higher costs for vehicles in western Canada, which have pushed up the average price nationwide, facilitated by sluggish demand in Quebec.

Park notes that while this might not be the “ideal” environment to purchase a car, it is not a particularly bad one either, providing the deal is structured properly. He also notes that the trend of growing negative equity among consumers provides an opportunity for services like Clutch and for dealers to work with their customers to create a win-win scenario—one where the client has piece-of-mind and the right protection, and the retailer can enhance their profitability and service reputation.