Houston hits gas on used vehicles
Used-car sales shot up 16.1 percent in July as the rising cost of new vehicles has some buyers feeling sticker shock.
Buyers in the Houston area purchased 70,914 used vehicles in July, up by 9,800 vehicles from the prior month, according to the TexAuto Facts report from Sugar Land-based InfoNation.
About two-thirds of used cars sold in July were from the 2015 to 2018 model years. The most popular used-car brands in Houston are Ford, Chevy, Toyota, Nissan and Honda, according to the most recent monthly report.
Houstonians are flocking to used-car lots as the prices of new vehicles have climbed in recent years with the addition of safety and technology features. The average retail price of a new car sold in Houston was $36,294 in July; the median price was $33,000.
“Prices of new cars and trucks are higher than they have ever been,” said Tony Gullo, who owns sevearal Montgomery County dealerships. “Every new model that comes along, they put in a little more trinkets as standard equipment. I think people are looking for that year or 2-year-old automobile to save a little money.”
Used cars have become more popular among cost-conscious consumers as the quality of modern vehicles and the rise of longer-term financing allow Houstonians to drive their cars longer.
The average age of a car in the Houston area last year was 9 years, up from 7.3 years in 2000, according to TexAuto Facts. On average, Americans drive their cars for 11 years.
“It used to be several years ago, if you had a vehicle over 100,000 miles, they wouldn’t want to touch it,” Gullo said. “But these days, people are not afraid of vehicles with 150,000 miles on them if the car has been well-maintained and has only had a couple of owners.”
Used vehicles represent major
cost savings as well, said Gullo, who has chaired the Houston Auto Show for 35 years. A used pickup truck that is several years old can easily be half the price of a brand new one, he said.
New-car sales are still up in the area but are rising at a slower pace. Local dealerships sold 24,200 new vehicles in July, up 5.1 percent from June and up 2.7 percent from a year ago.
Houstonians have purchased 170,797 new vehicles so far this year, up 5.4 percent year to date from last year.
Auto industry analysts are predicting slower newcar sales for the remainder of the year amid the growing popularity of used cars and the rising cost of manufacturing due to tariffs on imported steel and aluminum. A proposed tariff on foreign cars continues to be a concern to the auto industry, Info Nation said in its report.
Dealerships are adapting to changing consumer tastes in cars.
Houston-based Group 1 Automotive, the nation’s third-largest dealership group, earlier this year invested $3 million to launch Val-U-Line, a branded line of older, high-mileage trade-in vehicles that in the past were sent to auction but are now reconditioned and sold in dealerships.
The emphasis on used vehicle sales paid off in July, when Group 1 posted a record profit amid an 11 percent uptick in used car sales in the U.S. Used cars now represent 10 percent of the company’s business, up from 4 percent historically.
Group 1 sold 28,484 used vehicles in the U.S. during the second quarter at an average retail price of $20,784. Revenue from used-vehicle sales globally was up nearly 20 percent compared with the same period last year.
The shift in consumer preferences toward used cars can benefit dealerships, which can achieve higher profit margins on used cars compared to new cars, Gullo said.
“It’s a good thing for dealerships,” Gullo said. “If you’re not selling used cars, you’re missing the boat.”