Car dealers anticipate "modest uptick" as tariffs take effect
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Greater Houston car dealers are expecting a small bump in business as tariffs start driving up costs, but they say demand for vehicles in the region will remain steady.
Why it matters: The reality of President Trump's tariffs on imported vehicles and auto parts is sinking in, with the consensus that vehicle prices will go up and the industry's financial outlook will darken.
Driving the news: A 25% tariff on cars or car parts not manufactured in the U.S. is set to take effect Wednesday.
The big picture: The impending tariffs are giving people a reason to go out and buy a new car now — ahead of the traditional spring selling season — even if they'd been on the sidelines, fearful of a worsening economy.
- "Consumers likely have a narrow window to buy new or used vehicles before prices increase by 10% or more," said Jonathan Smoke, chief economist of Cox Automotive.
What they're saying: "Matching customers with vehicles they can afford has always been a top priority — and a growing challenge," the Houston Auto Dealers Association said in a statement to Axios.
- "The new tariffs set to take effect this week could make that challenge even more difficult."
- "While we don't anticipate a dramatic surge in showroom traffic ahead of implementation, there may be a modest uptick in purchases as price-conscious buyers aim to stay ahead of potential price increases," the association wrote.
Between the lines: With prices expected to rise, the association believes prospective car buyers might keep their current vehicle longer, purchase used vehicles or use "flexible" financing options.
- "Long term, the Houston market is uniquely resilient," the association stated. "Our city's geography and economy create consistent, inelastic demand for personal transportation."
The intrigue: There's been a massive range of estimates, from a variety of sources, about how much car prices could actually rise as carmakers look to pass along their extra costs.
- One reasonable estimate comes from the Yale Budget Lab, which forecasts vehicle prices will rise 13.5% on average, or about $6,400 on the average new car.
Reality check: No one really knows for sure yet.
The bottom line: Cars probably aren't getting any cheaper.