US tariffs on Mexican imports set to push up European and UK car financing 

The introduction of 25% US tariffs on Mexican imports is expected to drive up vehicle prices, with knock-on effects on car financing costs across Europe and the UK.

As manufacturing expenses rise, banks and leasing firms may reassess lending terms, potentially leading to higher interest rates or stricter credit requirements.

Shares in European carmakers and automotive suppliers fell sharply today, with the STOXX Europe 600 Automobiles and Parts index down 3.8%, as markets reacted to the tariffs, Reuters reported.

Companies including Volkswagen, Stellantis and BMW — key players in European auto financing — were among those affected, given their reliance on production facilities in Mexico to serve North American markets.

According to data from Mexico’s automotive industry association, Stellantis and the Volkswagen Group — whose brands include Audi — are the two largest European exporters of light vehicles to North America from Mexico.

With production costs set to rise, financial institutions may revise depreciation forecasts for key models, ultimately affecting monthly payment rates for UK and European consumers, Bloomberg noted.

German automotive supplier Continental, which revised its outlook for 2025 today, is now analysing the impact of the tariffs on its supply chain before making strategic decisions, Reuters said.

Supply chain disruptions could extend lead times for new models, increasing reliance on financing for used vehicles, where prices are also climbing due to constrained supply.

According to Bloomberg, the tariffs will further strain an auto finance sector already under pressure from high interest rates and rising default risks. In the UK, affordability concerns are growing as consumers face steeper monthly payments. The Bank of England has previously warned that increased borrowing costs and potential defaults in the car finance sector could have broader financial implications.

European policymakers have criticised the tariffs, with Germany’s Economy Minister Robert Habeck warning that the European Union would respond if the US escalates trade restrictions, Reuters reported. Any further deterioration in trade relations could add uncertainty to European and UK auto financing, making it more difficult for consumers to secure affordable loans.

The post US tariffs on Mexican imports set to push up European and UK car financing appeared first on Motor Finance Online.