Recent reports are warning car buyers that the entire nation will most likely see a jump in pre-owned prices due to damage to at least 250,000 used vehicles on the East Coast caused by Hurricane Sandy. This estimate was made recently by the National Automobile Dealers Association. How large the rise will be remains to be seen, of course, with numbers varying a bit depending on the source.
Used cars are already in short supply, says analyst Jonathan Banks of the NADA, referring to late model used vehicles in good condition. He says consumers could see an upward trend in prices as early as December to the tune of 0.5% to 1.5%. The difference only means an extra $50 to $175 on average, according to the NADA.
Predictions from Edmunds.com are quite a bit higher. “In the short term,” Edmunds is predicting a rise of $700 to $1000 per vehicle.
Banks said that any rise in price will be felt mostly on the East Coast, which bore most of Sandy’s damage; however, the rest of the nation will likely see the rising prices as well. “We have seen a trend for dealers, regardless of where they are located, buying inventory online and that means that geography is not as important as in past,” Banks said. “It used to be that dealers would buy cars from a physical auction near their dealership.” He says removing that many vehicles from the U.S. fleet will result in financial ripples felt throughout the nation.
In New York and New Jersey, many thousands of new vehicles were destroyed both in storage and on the lots, which adds to the problem. Banks said, “Many dealers lost a significant amount of inventory. One Honda dealer told me he lost 600 new units.”
The problem now is that motorists affected by Sandy cannot wait to replace totaled cars and trucks. They need working transportation quickly. This, Banks believes, will cause severe shortages in inventory and a dramatic rise in vehicle prices.
Dealers will be doing their best to keep up with demand. They expect the buying to begin this month and continue to ramp up in the next few months, allowing for time for insurance companies to compensate hurricane victims for lost vehicles.
Edmunds.com Chief Economist Lacey Plache spoke about positive effects on the economy: “Even if 100,000 damaged vehicles are replaced by the end of the year, it could boost auto sales 3% to 4% for the quarter, and that has a positive effect on the economy overall.”
Edmunds.com predicts that new sales precipitated by the recent storm damage could account for 20% of overall sales in the U.S.