Tariffs on Canada and Mexico could increase car insurance rates 60% faster, a new report by Insurify says. 

Full-coverage car insurance is projected to increase by 8% by the end of 2025, from $2,313 to $2,502 on average, the report found. It says without tariffs car insurance is projected to increase by 5% year-over-year. 

New York could see the highest increase with the annual cost of car insurance increasing by $489 by the end of 2025, the report says. It says about $110 of the increase could be attributable to tariffs. 

Insurify previously projected that insurance rates would stay the same or remain flat in five states: Vermont, New Hampshire, Hawaii, New Mexico, and Idaho. With tariffs, however, rates would increase in every state. 

“It will take some time for that cost to work through the system,” Andrew Whitman, professor of finance at the University of Minnesota, told Insurify. “Insurance companies have to file for rate increases, and those rate increases have to be based on increased claim costs.”

The additional 3% increase is due to the increased cost of vehicles and auto parts from the 25% tariff on imports, the study says. It says the average purchase price of a new car could increase by $3,000 on an average model cost of $51,641. 

Twelve popular car brands assemble models in Mexico, including Audi, Ford, Mazda, and Nissan, the study says. It says each has multiple models with more than 50% of the vehicle’s parts coming from Mexico. 

It says a proposed tariff on steel and aluminum could further increase the prices for cars and auto parts, with Mexico and Canada accounting for about 35% of U.S. steel imports in 2024 and about 50% of U.S. aluminum imports from Canada. 

“One-fifth of the cars and light trucks sold in the U.S. come from Canada and Mexico,” Insurify says. “Additionally, the U.S. imports roughly 32% of its total auto parts supply from Canada and Mexico, including certain components for which there’s no manufacturing in the U.S.”

Mexico also provided 43% of U.S. auto parts imports between January and November 2024, Insurify says. 

Insurify found that parts account for about 60% of a repair bill and that the cost of covering vehicle damages makes up about 60% of the price of full-coverage car insurance. 

“As the price of replacement parts increases, premiums will have to increase accordingly,” said Daniel Lucas, Insurify carrier relations manager, in an Insurify article.

Lucas said it would take time for manufacturing to move toward the U.S. Manufacturers also may hesitate to move operations across the borders when tariffs may not last. 

“For certain auto parts, no manufacturing capacity currently exists in the States,” the Insurify report says. “Wire harnesses, seat trims, and armrests used by American drivers are entirely made abroad, as they’re too expensive to make in the U.S., according to Wolfe Research, a New York-based financial research firm.”

Abey K. Abraham, Ducker Carlisle principal, previously told Repairer Driven News that the automotive industry is unable to easily switch to domestic manufacturing. He said it usually takes three years of planning before production starts on a vehicle model.

Automakers are currently designing vehicles that will be released in 2028, he said. Vehicles are then typically produced for five to eight years after design and engineering. 

Currently, the U.S. doesn’t have the capacity to supply the industry’s needs for aluminum that is poured and cast domestically. 

“It will take a long time and a lot of investment if we want to bring that up to speed,” Abraham said. 

The automotive industry will have to import the material at the higher tariffs until then, he said.

The U.S. auto industry relies on imported steel less than it does aluminum, Abraham said. However, he said about a quarter of steel is still imported before it is transformed into a finished part. 

Automakers use specific alloys for parts, and it could be difficult for the U.S. industry to meet those demands immediately, he said.

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