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Foreign Cars vs Domestic Cars: Pros and Cons

Where your car was made used to be a major political and personal sticking point. In the ’80s, when trade wars loomed large, there were limits to the number of foreign vehicles that could come into the country, in an effort to support American companies. Despite these restrictions, consumers bought foreign cars because of their better reliability and quality.

Fast-forward to today, and the chances are that no one will protest the origins of your vehicle. The differences between foreign and domestic cars are less significant than they have been in the past, thanks to a more connected global economy. With that in mind, however, where your car is made can still impact reliability, repair costs and access to parts.

To help you with your buying decision, we’ve looked at the pros and cons of foreign versus domestic cars today. As part of our research, we spoke with experts from both AutoTrader and Consumer Reports.

What’s the difference between a foreign and domestic vehicle?

The line between what constitutes a “domestic” car and a “foreign” car is extremely blurry in today’s global economy. In fact, there is no commercially available vehicle that is completely made in America today, because supply chains go back and forth across national borders. All vehicles on the road will have foreign parts.

A federal law called the American Automobile Labeling Act (AALA) requires automakers to disclose what percentage of parts are American made when a vehicle is first sold. A recent report by the National Highway Traffic and Safety Administration shows that in 2019, there are no 100% American-made vehicles on the market.

Why does this matter? Well, manufacturing plants are a key part of regional economies and create thousands of jobs nationwide. If your vehicle parts are made domestically, they could also be easier and less expensive to replace especially since they will not be affected by tariffs during a trade war or by international supply chain disruptions like war, coup or terrorism. Finally, they have to travel shorter distances than a part made overseas making them more readily available when you need them.

Today, many American companies run portions of their manufacturing overseas while foreign companies have factories in the United States. Does a car from GM still count as domestic even if it was made in Mexico? Does a Toyota count as a domestic vehicle if it was made in Texas?

Even if you look for a vehicle with parts “Made in America,” you still might be buying parts from another country: Canada. The AALA requires that vehicle makers list where a car was made and what percentage of the parts were American. The “made in America” definition also includes vehicle parts made in Canada, according to the North American Free Trade Agreement.

Autotrader executive editor Brian Moody acknowledges the confusion. “Factually, brands like BMW and Volkswagen are based overseas. However many foreign automakers actually build their cars in the U.S. using American workers in purpose-built American facilities.”

Since it’s so hard to clarify what counts as foreign versus domestic, Moody uses another approach. “The real differences between domestic and ‘import’ brands has more to do with the philosophy driving the company, whether they are tech-heavy, performance-oriented, all-electric, or focused on lots of trucks etc.” For example, U.S. manufacturers these days primarily build large SUVs and trucks while Japanese manufacturers, on the whole, produce more cars and crossover vehicles focused on fuel effeciency and reliability.

What are the pros and cons of purchasing a car that is “Made in America?”

Since there’s no such thing anymore as a car that’s completely made in the U.S., it might be difficult to sort out the pros and cons of a foreign versus a domestic vehicle. Every vehicle has at least some parts that are made abroad. You can, however, target cars that are mostly “made in America,” by looking for ones that have these features:

  • The engine and transmission are made in the U.S.
  • The final assembly is in the U.S.
  • The majority of parts are made in the U.S./Canada. Car and Driver used 70% as the minimum percentage when they created a list of the “Most American Cars.”

Beyond that, we’ll define “made in America” cars as those from U.S. companies, since the difference between domestic and foreign vehicles is often a matter of style and design preferences. With that in mind, here are the pros and cons of buying a car that’s made in America:

Pros of purchasing an American-made car

Accessible luxury – While American cars are not the cheapest cars, according to Kelley Blue Book (KBB), they can deliver higher-end value at a lower price. “Accessible luxury is an attribute you see in brands like Buick, Ford, Chevrolet and Chrysler,” said Moody. You can get the features found in more expensive brands like Acura and Infiniti while spending less on an American car.

Better trucks, SUVs –The Big Three U.S. auto companies (GM, Fiat-Chrysler and Ford) recently shifted their focus to produce SUVs and light trucks, shifting away from manufacturing passenger cars. In 2018, nine of the top 11 most popular pickups came from American manufacturers, according to KBB.
Recent tariffs also make it more expensive to buy light trucks and SUVs from European automakers, so the market remains dominated by American and Japanese manufacturers.

Support for American workers – If you want to support the U.S. economy, chances are you could do more by buying American-made goods. While foreign manufacturers have plants in the United States and employ U.S. citizens, domestic companies also have their headquarters, R&D labs and administrative offices located here.

Lower cost for parts – While this is no longer as big of a factor due to globalized supply chains, parts for American cars are still more likely to be made locally and less costly to replace, especially compared with more expensive vehicles from Europe. If your car needs new parts, it may be less of a headache to fix a car that is made in America.

Cons of purchasing an American-made car

U.S.-made vehicles get mediocre rankings – Every year, Consumer Reports publishes an Annual Auto Survey where they analyze and rank vehicles in performance, road tests, owner satisfaction and reliability. “Domestic brands have struggled in the brand rankings, with limited exceptions, notably Lincoln,” said Jeff Bartlett, deputy auto editor for Consumer Reports.

U.S.-made vehicles are less reliable – Historically, American-made cars had a reputation of being less reliable especially compared with those from Japan. While they have bridged some of that gap, “reliability remains the Achilles’ heel for some domestic vehicles,” said Bartlett. A less reliable vehicle means more repairs and the potential to replace your car sooner.

U.S. made vehicles get worse fuel efficiency – American fuel efficiency standards are some of the lowest in the world, so domestic manufacturers can get by selling cars that use more gas. While it is possible to find electric and fuel-efficient American cars, on average, you will find more foreign cars with better gas mileage.

U.S. manufacturers are producing fewer cars and more SUVs – As U.S. manufacturers concentrate on building SUVs and trucks, they are canceling production of sedans. By 2022, as much as 84% of GM’s U.S. sales will be comprised of SUVs and light trucks, while 90% of sales from Ford and 97% from Fiat-Chrysler will also be SUVs and light trucks. If you want to buy an American-made sedan, your options are shrinking.

What are the pros and cons of purchasing a foreign-made vehicle?

While it may seem like there are more reasons to purchase a foreign car, there are a number of pros and cons to consider when looking at buying a car manufactured by an overseas automaker.

Pros of purchasing a foreign-made vehicle

Top-ranked vehicles are foreign – “Import nameplates top the rankings in the latest Consumer Reports Car Brand Report Cards, led by Subaru, Genesis, Porsche, Audi and Lexus,” said Bartlett. These brands received the highest ratings for performance and consumer scores, he said.

Better overall reliability – Japanese cars, in particular, have earned a reputation for reliability, which means you need repairs less often and could earn a higher future resale value. In the KBB rankings for cars with best resale value in 2019, Japanese vehicles took four of the top seven spots.

Asian cars can be less expensive – The average December 2018 transaction price for Asian cars (Honda, Hyundai-Kia, Nissan and Toyota) was roughly $10,000 lower than the average transaction price for American cars, according to KBB data.

Cons of purchasing a foreign-made vehicle

Some foreign cars have poor performance – While foreign cars are at the top of the Consumer Reports rankings, they also make up most of the bottom. Brands like Jaguar, Land Rover and Mitsubishi are often placed here, according to Bartlett.

Potential challenge in replacing parts – If your vehicle parts are made overseas, they can be harder to get and more expensive to replace. This has gotten more important lately as tariffs have gone up due to a global trade war, which could hurt the supply chain for foreign cars.

Less support for American workers – Even though some foreign cars are built in American factories, chances are you’re still supporting American workers more by buying domestic. Foreign companies still maintain their R&D, headquarters and administrative functions abroad.

The bottom line

As a final note, Bartlett points out that you should focus on researching the specific vehicle model itself, rather than the manufacturer if you are interested in learning more about where a specific vehicle is made. That’s a great point for the domestic versus foreign debate because some U.S. models are manufactured abroad while foreign cars are mostly made in America. It depends on the vehicle model, not the company itself.

Choosing between a foreign or domestic vehicle depends on your preferences since both have strengths and weaknesses. By considering all these relevant factors, including where the car was made, you can make the right choice for your upcoming purchase.

 

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