Experts are using words such as “noise” and “chaos” when describing developments coming out of Washington and what consumers are currently thinking as they try to explain what might unfold next in the car business and the general economy.

Bottom line: dealerships and finance companies ought to prepare for turbulent conditions for the rest of March and likely into much of the year.

“The daily chaos from Washington has been negatively impacting consumer sentiment and likely contributing to lackluster consumer spending in February,” Cox Automotive chief economist Jonathan Smoke said on Tuesday in his weekly industry analysis.

“The biggest worry I have for the spring continues to be the trend we’ve being seeing with high interest rates, which moved higher in February when bond yields have been falling,” Smoke continued. “March should see lower rates and, if so, should help accelerate used-vehicle demand to reach peak seasonal highs, especially now that we all face the reality of vehicles getting more expensive rather quickly.”

That reality is tariffs are being implemented by the United States, Canada and China, among other places.

“For economists like myself, the unthinkable is coming true, with tariffs being applied to our free trade partners across North America,” Smoke said in another analysis. “We have no history to study for this, but there will be implications. It is not even clear if the U.S. government has a way to efficiently track the movement of goods and impose duties, but set that aside: Production will be disrupted, supply will be restricted, and prices will go up.

“This is happening at a moment when supply is tight already, and just as tax refund season approaches critical mass in dollars being distributed to consumers. Consumers with potential buying plans are very likely to act swiftly, so the short term is likely positive for sale volume. But once prices shift higher, demand will decline. Depending on how long this tariff stance lasts, it will also jeopardize the trajectory of the overall economy, further weakening growth potential later in the year,” he went on to say.

And to boost sales volume, consumers likely will need financing. As Smoke referenced, the movement involving interest rates came after they improved a bit during the fourth quarter.

Experian reported on Thursday that the average interest rate for used-car financing that originated in Q4 declined from 11.97% to 11.62% year-over-year. Within new-car financing, those average rates stood at 6.35%, down from 7.16% a year ago, according to Experian’s State of the Automotive Finance Market Report: Q4 2024.

“With manufacturer incentives, the continued resurgence of leasing and lower interest rates, we’re seeing consumers across the board shift back into the new market,” said Melinda Zabritski, Experian’s head of automotive financial insights.

What might happen with interest rates could take another turn next week when the Federal Reserve has its next scheduled meeting and opportunity to make an adjustment.

While the Trump administration is trying to make all sorts of cuts to federal programs and entities, Comerica Bank chief economist Bill Adams and senior economist Waran Bhahirethan gave their updated Fed projections on Wednesday.

“The Fed held rates steady at their January decision and signaled they are in ‘no hurry’ to make further interest rate cuts near-term,” Adams and Bhahirethan wrote. “Since their decision, financial markets have become unsettled by the January macro slowdown, DOGE, and tariff noise, and have started to price in the possibility of the Fed pivoting to substantial rate cuts by the end of 2025.

“However, Comerica continues to forecast for the Fed to cut the federal funds target by only a quarter of a percent by year-end, since inflation will remain a source of frustration for them. In addition, Washington will likely start discussions soon on plans to repurpose DOGE’s spending cuts and tax revenues from tariffs to pay for tax cuts in 2026, which the Fed would see as a reason to look past a near-term slowdown,” they went on to say.

What does the combination of all these factors mean for turning your inventory and building your portfolio? Edmunds head of insights Jessica Caldwell tried to sum up the situation this way.

“Being stuck in this limbo presents challenges for the industry and could have ripple effects on consumer confidence. Affordability is already a major concern for American car shoppers amid elevated prices and interest rates, and continued uncertainty only adds to the pressure,” Caldwell said.

“President Trump mentioned that the auto industry will ‘boom’ in his remarks to Congress (Tuesday) night, but how that vision aligns with the proposed tariffs in their current state remains unclear,” she added.