Car prices expected to soar in Hurricane Ida’s wake, experts say. Here’s why
Hurricane Ida’s destructive flood waters are going to have a long lasting impact on the auto market, experts say.
The hurricane, which pounded Louisiana’s shores on Aug. 29 and caused widespread flooding as it moved to the Northeast, killed dozens of people and caused extensive property damage — including to thousands of vehicles.
Many of those vehicles were on sale lots, which means Ida not only triggered a jump in demand, but also obliterated existing inventory.
“I don’t know where the replacement cars will come from,” Judith Schumacher-Tilton, the president of a company that owns five Chevrolet dealerships in New Jersey, told The Wall Street Journal.
Another tropical storm, Nicholas, could cause even more damageafter drenching the Texas Gulf Coast. Now a tropical depression, Nicholas continues to drop heavy rain as it moves across the South.
Past hurricanes, including Sandy in 2012 and Harvey in 2017, have resulted in increased demand for new and used cars, giving the auto market a temporary boost in sales in the following months, The Wall Street Journal reported. But circumstances are different this time around due to the lack of available cars for sale and supply chain issues that the auto industry has been facing throughout the COVID-19 pandemic, experts say.
Shortage of computer chips
Among those issues is a lack of computer chips, which automakers use in everything from sensors, power steering, brakes, and parking cameras.
At the beginning of the COVID-19 pandemic, car manufacturers canceled chip orders, anticipating a drop in sales as lockdowns began and travel decreased, Consumer Affairs reported.
But there was still overwhelming demand for computer chipsat the start of the pandemic, when consumers bought more electronics like game consoles, laptops and TVs to use while staying and working from home, NBC reported.
Those factors, combined with the long lead-time necessary to produce the chips, converged to create a shortage that the auto industry has been grappling with for months.
The new, hurricane-induced car shortage also coincides with record-high average prices for used cars. The average price for a used car hit $25,463 in April, marking the first time ever that the average price for a used car exceeded $25,000, according to research firm J.D. Power.
Now — even without the circumstances created by natural disasters — the market is even more challenging for prospective buyers who hoped to see car prices plateau.
‘The perfect storm situation’
“Excuse the pun, but it’s the perfect storm situation. There has never been something like this,” David Paris, senior manager of market insights for J.D. Power, told CNN. “We definitely see used vehicle prices pick up for two to three months after a storm. But that’s when there’s a healthy level of inventory. This is uncharted territory.”
Major storms can stymie the car market for months because so many cars are destroyed simultaneously. Cars that have sustained damage from flood water are essentially “rotting from the inside out,” Patrick Olsen, executive editor of CarFax, told CNN.
“Anytime you get mud or silt in the connections it can create a short in the system, which can cause a car to stall while driving,” Olsen said.
CarFax estimates that as many as 212,000 vehicles were damaged by Hurricane Ida, and that there were already as many as 378,000 flood-damaged cars on roads before the storm. Anyone looking to buy a car in the next several months, even in states where flooding isn’t common, should be wary of potential water damage to cars, McClatchy News previously reported.
“Our data suggests that unsuspecting buyers everywhere are at risk of winding up with a previously flooded car,” Chris Basso, a CarFax spokesperson, said in a statement.
Buyers beware: What to look for
Flood-damaged cars may re-enter the market after undergoing repairs and re-inspections. However, that history of flood damage may not be disclosed to buyers because those cars are often “transported well beyond their original region” to locations where customers are less likely to know what to look for, Consumer Reports said.
The Better Business Bureau recommends that shoppers always ask to see the car’s title and pay attention to the details — if it’s stamped “salvage” or shows that the car arrived from a state that recently experienced flooding, the car could have experienced water damage. Buyers can also discover more details by obtaining a vehicle history report from a database service, like the National Insurance Crime Bureau database.
Prospective buyers should also make sure to inspect the car themselves for signs of water damage or ask a mechanic to do so. Some signs of a flood-damaged car, according to CarFax, might include:
A musty order in the interior, indicating mold or mildew
Dampness, mud or silt in upholstery
Loose or mismatched upholstery
Visible rust around doors, under the dashboard, on the pedals, or inside the hood and trunk latches
Brittle wiring under the dashboard
Fogging or moisture beads in the lights or instrument panel
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