Strategies to Navigate Tariffs on Canadian Dealerships’ New and Used Inventory

Canada-US auto tariffs on imports and parts are the silent force that’s reshaping the way Canadian dealerships are managing new and used inventory in 2025. From rising import costs to shifting consumer demand, tariffs are forcing dealers to reconsider sourcing, pricing, and movement of their inventory.

In 2025’s tight-margin market, what does the impact of tariffs mean for your dealership’s inventory, and what are some strategies you can implement against uncertainty?

Tariffs Driving Up New Vehicle Costs and Inventory Cycle Bottlenecks

On April 9th, 2025, Canada applied a 25% counter tariff on American imports which increases the overall wholesale prices of vehicles originating from the US. According to The Canadian Auto Dealer, Canadian vehicles and parts faced more than US $380 million (CA $525.02 million)  in levies in July 2025 alone. 

A few key points to note:

• Automobiles imported from the US and those not compliant with the CUSMA (Canada-U.S.-Mexico Agreement) are subject to a 25% tariff, making them instantly lose competitiveness

• Cars compliant with CUSMA must have at least 75% of non-US value in their make to avoid tariffs that would otherwise apply

• Alongside added costs, logistics challenges come into play with regards to longer lead times and production bottlenecks that can slow inventory cycles.

  
  

Recommendations for your inventory:

• Audit your supply chain to identify models and parts subject to tariffs, and rearrange your inventory to prioritize North American-assembled parts to maintain predictable margins.

• Develop a proactive rather than reactive inventory strategy to order stock early before you’re hit with unforeseen delays.

Shifting the Focus to Used Vehicle Inventory As A Buffer

A good balance can help your dealership reduce unnecessary capital investment while still staying competitive to customer demand. Some dealerships are opting to fill their lots with a mix of new, used, and certified pre-owned (CPO) vehicles to maximize customer base while reducing investments on any one type of car.

For your dealership, consider a greater focus on used cars as they are still a key profit driver despite rising vehicle costs for both new and used cars.

Some best practices for managing pre-owned inventory:

• Increase trade-in incentives: Investing a little more into trade-ins can sustain a flow of high quality used vehicles while boosting the sale of new vehicles.

• Develop a vehicle sourcing strategy: Whether it is utilizing buy-backs or streamlining your used car acquisition process, consider methods that will save you both time and money. When dealerships use AI tools like Kaihive Co-Pilot, they can spend less time sifting through endless listings and more time connecting with serious buyers. Real-time filtering helps surface only high-quality pre-owned vehicles, making the sourcing process faster and more focused.

  
  

Managing Slow-Moving Stock Amid Uncertainty

When tariffs drive up prices, certain vehicle models can quickly shift from in-demand to difficult to move, forcing dealerships to rethink what’s actually worth keeping on the lot. Lotlinx found that slow-moving vehicles are a drain on capital and space especially when they sit on the lot for more than 90 days.

As a dealer, you should:

• Identify vehicles at risk of stagnation using historic inventory turnover data wherever possible

• Strengthen your digital marketing efforts by boosting online listing descriptions, offering virtual inspections, and utilizing targeted promotions to move inventory more quickly

• Use demand forecasting tools to determine which vehicles are worth keeping in stock and which should be discounted

Conclusion

Tariff-related disruptions are becoming an everyday reality for the Canadian auto landscape, but with the right strategy, they don’t have to derail profitability. By prioritizing domestic and CUSMA-compliant vehicles, diversifying into used and CPO stock, and leveraging AI-driven sourcing tools, dealerships can stay agile and maintain healthy turnover even in an uncertain trade environment.

Interested in Kaihive’s used vehicle acquisition tool? Book a demo with us here today!

Strategies to Navigate Tariffs on Canadian Dealerships’ New and Used Inventory