MW Used-car sellers should benefit from tariffs - here's why the stocks are down

By Tomi Kilgore

Shares of Hertz and Avis soared when tariffs on cars were announced last week, but they're falling now amid worries about a broader bear market and recession

If a rising tide can lift all boats, as the Wall Street saying goes, then the opposite must also be true.

The stock market's reaction to the sweeping tariffs announced by President Donald Trump late Wednesday is proving that point.

Shares of car-rental companies soared last week after 25% tariffs on new cars were announced, with the tariffs seen as providing a two-pronged benefit. Higher prices on new cars would lift the values of the vehicles the rental companies already owned and would also help them sell off their used-car inventory.

Read: New-car prices could be $15,000 higher under Trump's tariffs - and 'no one' wins, Wall Street analyst says

But the selloff in the stock market on Thursday is broad enough, with 77% of all stocks listed on the New York Stock Exchange and the Nasdaq Exchange losing ground, that even stocks that were supposed to benefit from tariffs are falling. (Follow the market in MarketWatch's "Stock Market Today" live blog.)

Shares of Hertz Global Holdings Inc. $(HTZ)$ dropped 3.6% in morning trading, and the stock of rival car-rental company Avis Budget Group Inc. $(CAR)$ shed 5.7%.

Carvana Co. (CVNA), which bills itself as the leading e-commerce marketplace for used cars, saw its stock dive 9.5% ahead of Thursday's open. The stock had climbed 11% through Wednesday since the tariffs were announced last week.

Shares of CarMax Inc. $(KMX)$, which generated about 79% of its latest quarter's revenue from used-vehicle sales, slid 4.4%. And the stock of AutoNation Inc. $(AN)$, which generated about 29% of its 2024 revenue from selling used cars, dropped 5.1%.

Meanwhile, the S&P 500 fell 3.3%.

The weakness in these stocks isn't only about what the broader market is doing. There's a lot of worry about what the tariffs mean for the U.S. economy, and while a slowing economy may hurt used-car sellers less than new-car sellers, it will still hurt them.

Also read: Tariffs could increase car-insurance prices. Here are 3 moves to cut costs - and one to pump the brakes on.

"If these tariffs stick, the economy is going to slow down," said Mary Ann Bartels, chief investment strategist at Sanctuary Wealth, which manages $48 billion. "Whether it's a recession or not, it's clear that the economy is headed for a slowdown in the U.S. and around the world."

The chart above provides a good example. The general trend of CarMax's stock over the past 10 years has followed that of U.S. consumer confidence. And since consumer spending makes up roughly 70% of the U.S. economy, how consumers are feeling matters.

How this plays out in the longer term is still uncertain. But in the near term, if tariffs worry consumers enough that they pull back on spending, as Wall Street is starting to price in, then even used-car sellers will feel the effects.

-Tomi Kilgore

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April 03, 2025 10:10 ET (14:10 GMT)

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