Trump continues to push auto finance tax deduction as campaign issue

Presidential candidate Donald Trump continues to pump a proposed auto loan tax deduction as a key campaign issue just days before the national election. The most recent mention of the idea of a tax break, on Oct. 23 at a rally in Duluth, Ga., had the former president comparing the idea as being as revolutionary as the paperclip. “And everybody said [of the paperclip] ‘Why the hell didn't I think of that?’ Well, this is the same thing. Tax deduction on interest payments on a car. How about that? How about that? Nobody ever thought of that. And then, they came up with a little wrinkle: but only if the car is built in the USA. Is that a good idea? [Audience responds affirmatively] Right?” he said according to a transcript provided by Roll Call . Trump first proposed the change earlier this month during an address at the Detroit Economic Club , prompting questions about how such a plan might impact the auto industry. The tax deduction is one of several ways Trump has said he wants to shake up the automotive industry, including adding restrictions on Chinese autonomous vehicles and higher tariffs. Both presidential candidates have touted tax reform in some capacity but have taken different approaches. Trump opponent Vice President Kamala Harris has not proposed a change to auto loan interest tax but supports investments in EV and battery supply chain manufacturing in the U.S., as well as job growth in the U.S. automotive market, according to a May 6 release from the White House. President Joe Biden in May unveiled plans to hike tariffs on Chinese EVs . Evaluating the proposal Despite it being just a campaign pledge, some analysts have evaluated Trump’s proposed tax incentive. An auto loan tax deduction potentially could benefit a large portion of the population, given that industrywide auto outstandings totaled $1.6 trillion as of the second quarter, according to the Federal Reserve Bank of St. Louis . The ability to deduct car loan tax could entice more consumers to finance their vehicle purchases as it would lower their cost , Mike Brisson , auto economist with Moody’s Analytics , told Auto Finance News . “Making car loan interest tax deductible essentially serves as a subsidy for the auto industry and its consumers,” Brisson said. “The value of this subsidy would be equivalent to the product of a consumer's annual interest payment and their marginal tax rate.” While details on Trump’s plan are scant, consumer benefits would largely depend on whether the auto loan interest rate deduction would be an above-the-line deduction subtracted from the consumer’s gross income or an itemized deduction taken from taxable income for consumers with eligible expenses that exceed the standard deduction, according to a research note published Oct. 11 by the Budget Lab at Yale , a non-partisan policy research center. An itemized deduction would benefit a smaller, wealthier portion of the population, according to the note. The Budget Lab projects car loan interest payments will total about $85 billion in 2024 and $93 billion in 2026. The deduction could increase demand for vehicles and finance, and potentially could entice car manufacturers and dealers to bundle additional services into the purchase price of the vehicle if the tax subsidy makes services cheaper, according to the lab. Incentive changes The tax deduction could also prompt OEMs to alter their incentive programs, Moody’s’ Brisson said. “Usually, many such incentives involve low or zero-percent financing deals, which may no longer be as appealing if financing can be deducted from taxes,” he said. “This could lead to an increase in the types of incentives that directly reduce vehicle prices off the MSRP.” The exact effects of making car loan interest tax deductible would not be known until policy specifics are established, according to the Yale Budget Lab. The proposed tax break could “boost unit sales — and subsequently profits — while also reducing individual tax burdens for consumers with auto loans,” but is unlikely to gain traction “given current political and fiscal climates,” Brisson said. Other tax proposals Many reforms under the 2017 Tax Cuts and Jobs Act are set to expire next year, but Trump aims to make those cuts permanent and add to them, Ira Kalish , chief global economist at Deloitte , said during an Oct. 7 economic presentation at Auto Finance Summit 2024 in Las Vegas. “Kamala Harris wants to make some of those tax cuts permanent but raise some taxes [and] at the same time create some new tax incentives for things like child care, education and homeownership,” Kalish said. “Both candidates are proposing tax and fiscal policies that will boost the budget deficit from where it would otherwise be. That has a stimulative effect on the economy, but also has an inflationary effect. “Most estimates suggest that Trump's policies would boost the deficit more than Harris',” he said. “There's a trade-off there; that means more stimulus to the economy, but more risk of inflation. The reality is that Congress might still be divided, in which case neither candidate would likely get what they want in terms of tax policy.” The presidential election takes place Tuesday, Nov. 5.

Trump continues to push auto finance tax deduction as campaign issue

Former president promoting as hot-button issue days before the election

Retail boat registrations down 9% year over year

Capital One auto originations jump 23% year over year

Related Posts

Flagship Credit sold to investment firm InterVest

10 auto finance executives to watch in 2026

RV dealers say rate cuts needed as cash flow tightens

Capital One auto originations jump 23% year over year

Stay Informed with Our Newsletters

The Roadmap Podcast

SPONSORED

Driving Innovation in Automotive Refunds: How Onbe and Allied Solutions Are Modernizing the Payment Experience

Navigating the Margin Squeeze: EVs, Tariffs & Pricing — A Q&A with Earnix

Enhancing credit approaches to boost conversion and dealer loyalty

Welcome Back!

Retrieve your password