American automakers got a shot in the arm Thursday as shares of Ford Motor Company and General Motors surged to fresh 52-week highs following a major announcement from Treasury Secretary Scott Bessent regarding a new tax benefit for car buyers.

Ford shares climbed 5% while GM gained 3% after Bessent confirmed that the Treasury Department is implementing President Donald Trump's "No Tax on American Car Loan Interest" policy, a provision from the administration's landmark tax legislation that allows eligible taxpayers to deduct up to $10,000 annually in car loan interest.

How the Deduction Works

The new tax benefit, enacted as part of the "One, Big, Beautiful Bill," represents one of the most significant changes to automotive tax policy in decades. Here's what consumers need to know:

  • Maximum deduction: Up to $10,000 per year in car loan interest
  • Eligible vehicles: New vehicles assembled in the United States
  • Effective dates: Applies to vehicles purchased between 2025 and 2028
  • Income limits: Phase-out begins at $100,000 MAGI for single filers and $200,000 for married couples filing jointly

"The tax cut also supports American workers by applying solely to U.S.-assembled vehicles, strengthening domestic manufacturing."

— Treasury Secretary Scott Bessent

A Boost for Detroit's Big Three

The policy is particularly beneficial for traditional American automakers whose manufacturing footprint remains heavily concentrated in the United States. Both Ford and GM have extensive domestic production capabilities, positioning them to capture increased demand from consumers seeking to maximize the new tax benefit.

In 2025, GM sold 2.83 million vehicles, up 5.1% year-over-year, capturing 17.3% of the U.S. market. Ford moved 2.18 million units, representing a 5.6% increase and 13.4% market share. The new tax incentive could accelerate these growth trends.

Claiming the Deduction

The IRS has issued preliminary guidance outlining the requirements for claiming the deduction:

  • Documentation: Taxpayers must include the vehicle's VIN on their tax return
  • Assembly requirement: The vehicle must be assembled in the United States
  • New vehicles only: Used cars do not qualify
  • Loan requirement: Interest must be paid on a qualified auto loan

The Treasury Department has scheduled a public hearing for February 24, 2026, to address questions about the regulations, with written comments due by February 2, 2026.

Market Implications

The announcement comes at a pivotal time for the auto industry, which has been navigating a challenging landscape of elevated interest rates and shifting consumer preferences. By reducing the after-tax cost of financing, the new deduction could stimulate demand at a time when many buyers have been priced out of the new car market.

For a consumer financing a $40,000 vehicle at current rates, the tax deduction could translate to savings of several thousand dollars over the life of the loan, depending on their tax bracket and the loan terms.

What Investors Should Watch

While the immediate market reaction has been positive, several factors will determine the long-term impact:

  • Consumer awareness: The benefit only helps if buyers know about it and factor it into their purchase decisions
  • Inventory levels: Automakers must have sufficient U.S.-assembled vehicles available to meet potential demand
  • Interest rates: The deduction's value increases as interest rates rise
  • 2028 sunset: The temporary nature of the provision may create a pull-forward effect in demand

For Ford and GM shareholders, Thursday's rally suggests the market is pricing in meaningful incremental demand. Whether that optimism proves justified will depend on how aggressively consumers pursue the new tax benefit in the months ahead.