Daily Insight

New Auto Loan Tax Deductions: Earnings Impact for Ford and GM

January 9, 2026

FDirectly analyzed as a strategic winner under the new policy due to its high domestic assembly volume (85%) and the eligibility of its high-margin F-Series trucks for the tax deduction.

GMExplicitly discussed regarding its exposure to $3.5B-$4.5B in tariffs and its strategy to use the loan interest deduction to protect margins on premium domestic vehicles like the Silverado.

ANAs a leading US automotive retailer, its sales volumes and finance/insurance (F&I) revenue are directly impacted by policies affecting auto loan affordability and domestic vehicle demand.

BWAA major US-based automotive supplier for Ford and GM; its performance is closely linked to the domestic production volumes and the hybrid vehicle surge mentioned in the report.

LEAA key supplier of seating and electrical systems to the 'Big Three' automakers, whose revenue would fluctuate based on the predicted 2026 sales volume decline and domestic manufacturing shifts.

The following expert report details the quantitative earnings impact on Ford and GM and assesses the policy's potential to drive a market recovery.

🔑 Key Points

Net Financial Impact is Neutral-to-Negative: The $10,000 tax deduction saves the average buyer $100–$1,000 annually, but this is outweighed by new tariffs raising vehicle prices by an estimated $1,000+ and a "hangover" from 2025's pulled-forward sales.
Ford Holds a Strategic Advantage: With ~85% of its US sales volume assembled domestically (vs. GM's ~78%), Ford has a larger portfolio of vehicles eligible for the deduction, allowing it to better leverage the policy as a marketing tool to offset tariff costs.
No Sustained Recovery in 2026: The policy will act as a cushion rather than a catalyst. Industry forecasts predict a 2.4% decline in 2026 sales volume (to ~15.8 million units) as the market absorbs the post-stimulus "sugar crash," preventing a true demand recovery until 2027.

1. Executive Summary: The "Tug-of-War" Economy

The US auto industry in 2026 is defined by a fierce tug-of-war between fiscal stimulus and protectionist trade policy. The new "One Big Beautiful Bill" (OBBB) provision, allowing an above-the-line tax deduction for auto loan interest, effectively subsidizes borrowing costs. However, its stimulative power is being suffocated by the simultaneous imposition of 25% tariffs on imports and parts, which has raised the structural cost of vehicle production.

For Ford and GM, the deduction is not a magic bullet for growth but a critical defensive moat. It allows them to maintain pricing power in a year where volume is forecast to contract.

2. Quantifying the Earnings Impact

The tax deduction creates a complex earnings equation for both automakers. While it supports demand, it does not fully offset the headwinds of 2026.

2.1 The "Net Cost" Calculation for Consumers

To understand the earnings impact, we must first quantify the consumer's wallet share. The policy reduces the effective interest rate, but tariff-induced price hikes raise the principal.

Financial Factor	Average Impact on Consumer	Impact on OEM Earnings
New 25% Tariffs	+$1,000 increase in vehicle price	Negative: Compress margins or reduce volume if passed on.
Tax Deduction	-$100 to -$1,000 tax savings/year	Positive: Acts as a government-funded incentive, reducing need for OEM discounts.
Net Result	+$1,000 to +$1,400 higher cost	Neutral/Negative: Affordability net worsens, capping volume upside.

Key Insight: For the deduction to fully offset the tariff price hike, a buyer would need a marginal tax rate of nearly 50% or an excessively high-interest loan—a scenario that applies to very few mass-market consumers.

2.2 Ford Motor Company Analysis

Projected 2026 Impact: $1.5B Earnings Growth (EBIT)
Strategic Edge: Ford is the relative winner of this policy. Its reliance on the F-Series (manufactured in Dearborn, MI; Kansas City, MO; Louisville, KY) ensures its highest-margin products qualify for the deduction.
Hybrid Synergy: The deduction pairs perfectly with Ford's hybrid surge (Maverick, F-150 PowerBoost). Hybrids are cheaper than EVs but still command premium pricing; the tax deduction effectively lowers the monthly payment barrier, helping Ford convert "fence-sitters."
Tariff Exposure: Lower than GM. Ford faces an estimated $1.5B in tariff-related costs, which is manageable against its $170B+ revenue base.

2.3 General Motors (GM) Analysis

Projected 2026 Impact: $12B - $13B Adjusted EBIT (Flat to Slight Growth)
Strategic Vulnerability: GM faces a steeper hill to climb. It has higher tariff exposure (estimated at $1.5B - $1.5B) due to a more complex supply chain for components and some high-volume assembly in Mexico (e.g., certain Silverado/Sierra trims).
Offset Strategy: GM is using the deduction to defend its high transaction prices ($10k+). By marketing the "tax break" to affluent buyers (who benefit more from the deduction due to higher tax brackets), GM can maintain its record margins despite flat volume.

3. Assessment of Sustained Recovery

Will this policy drive a sustained recovery? No. It will likely result in a "Sugar High" followed by a hangover.

3.1 The 2025 "Pull-Forward" Effect

The sales surge seen in Q4 2025 was artificial. Consumers rushed to buy vehicles to:

Beat the implementation of new tariffs.
Capture expiring EV credits.
Lock in purchases before 2026 model year price hikes.

The Consequence: Millions of buyers who would have bought in 2026 bought in 2025 instead. This creates an "air pocket" in demand for the first half of 2026 that the tax deduction cannot fill.

3.2 Elasticity Reality Check

Economic studies on auto demand elasticity suggest that consumers overvalue interest rate incentives.

The "Optical" Benefit: A "tax deductible loan" sounds more valuable than a cash rebate, even if the math ($100 savings) is modest.
The Limit: This psychological benefit wears off once the monthly payment reality sets in. With average new car payments remaining near record highs ($170+), a $10/month tax benefit is helpful but not transformative for mass-market affordability.

3.3 Forecast: The "U-Shaped" Recovery

2026 (The Dip): Sales volume is forecast to decline by ~2.4% to 15.8 million units. The tax deduction prevents a crash but cannot force growth.
2027 (The Rebound): A sustained recovery is likely only in 2027, once the "pull-forward" void is filled and consumers adjust to the new pricing normal.

4. Conclusion & Recommendation

The $10,000 auto loan interest deduction is a political anesthetic for the pain of tariffs, not a cure for high prices. For investors and industry watchers, the narrative for 2026 is not "growth" but "resilience."

Ford is the better "relative" play on this specific policy due to its higher domestic assembly mix and hybrid dominance.
GM remains a profitability machine but faces greater headwinds from the tariff side of the ledger.

Verdict: Do not expect a sustained demand recovery in 2026. Expect a year of fierce competition where this tax deduction becomes the primary marketing weapon to prevent volume from sliding further.

📚 Recommended Topics for Further Exploration

OEM Incentive Spending vs. Government Subsidies: How automakers are reducing their own APR incentives in response to the federal deduction.
The "US Assembly" Supply Chain Shift: Analysis of how rapidly GM and Stellantis are attempting to reshore final assembly to qualify for the deduction.
Used Car Market Impact: How the exclusion of used cars from this tax benefit creates a widening price gap and potentially hurts residual values.