The used-vehicle industry appears to be in better position to welcome extra demand stemming from destroyed units strewn within the path of Hurricane Harvey.
But can individuals who lost so much in Houston and elsewhere in the Gulf region handle the potential extra cost of securing new transportation? That’s what experts are now considering.
During a conference call with the media on Friday, Autotrader executive analyst Michelle Krebs said, “Affordability is going to be an issue. These poor people are going to be challenged financially if they’ve lost homes and don’t have insurance and they’ve also lost their car. That’s something we’ll have to watch carefully.”
Krebs mentioned that while there are plenty of off-lease units in the wholesale space — nearly new units less than 4 years old — she pointed out that vehicles that are 4 to 8 years old and are “much affordable are in much tighter supply.”
Cox Automotive chief economist Jonathan Smoke quantified Krebs’ point with some specific figures, stating during the same call that there are roughly 20 million less units that are between 4 and 8 years old than those nearly new, off-lease vehicles.
Still Smoke noted that at least there are used vehicles available in the auction lanes. After Superstorm Sandy in October 2012, that was not necessarily the case.
“When you think about when Sandy impacted New York, more of that (demand) ended up into new-vehicle sales because at that time there weren’t very many used or relatively new vehicles because we were coming out of the Great Recession and the lowest vehicle production period, from 2009 through 2011. That pushed people a bit more toward new,” Smoke said.
Whether they’re buying used or new vehicles, Kelley Blue Book senior analyst Alec Gutierrez acknowledged vehicle shoppers and owners in the Houston market gravitate toward SUVs and trucks. Affordability and the dire situation might lead to some changes as Gutierrez mentioned that midsize and compact car inventories on the new-car side are each at or near 100 days’ supply.
“These are folks who are looking to get back on the road as quickly as possible so they can put their lives back together and get to their work if it wasn’t impacted,” Gutierrez said. “(Midsize and compact sedans) are affordable basic transportation. You might see some folks switch their preferences to find an affordable unit.”