The devastating floods of Hurricane Ida will have a lasting impact on the car market, experts say.
The hurricane that hit the coasts of Louisiana on August 29, causing widespread flooding on its way to the northeast, killed dozens of people and caused extensive property damage – including thousands of vehicles.
Many of these vehicles were on sales floors, which means that Ida not only sparked a surge in demand, but also destroyed existing stocks.
“I don’t know where the replacement cars will come from,” Judith Schumacher-Tilton, president of a company that owns five Chevrolet dealerships in New Jersey, told the Wall Street Journal.
Another tropical storm, Nicholas, could wreak even more damage after soaking the Texas Gulf Coast. Nicholas is now a tropical depression and continues to drop heavy rain as it moves through the south.
Past hurricanes, including Sandy in 2012 and Harvey in 2017, have spurred increased demand for new and used cars, giving the auto market a temporary boost in sales in the months that followed, the Wall Street Journal reported. But circumstances are different this time around due to the lack of cars available for sale and the supply chain issues the auto industry faced during the COVID-19 pandemic, experts say.
Lack of computer chips
These problems include the lack of computer chips that automakers use in everything from sensors, power steering, brakes to parking cameras.
As the COVID-19 pandemic began, automakers canceled chip orders and expected sales to decline as lockdowns began and travel decreased, Consumer Affairs reported.
However, at the start of the pandemic, there was still an overwhelming demand for computer chips as consumers bought more electronics like game consoles, laptops and televisions to use while staying and working from home, NBC reported.
These factors, combined with the long lead time to manufacture the chips, created a shortage that the auto industry has been grappling with for months.
The new car shortage caused by the hurricane also coincides with record high average prices for used cars. The average price for a used car reached $ 25,463 in April, marking the first time the average price for a used car exceeded $ 25,000, according to research firm JD Power.
Now, even without the circumstances caused by natural disasters, the market is even tougher for potential buyers hoping for car prices to plateau.
“The perfect storm situation”
âSorry for the pun, but it’s the perfect storm situation. There has never been anything like it, âDavid Paris, JD Power’s senior manager of market insights, told CNN. âWe are definitely seeing an increase in used car prices for two to three months after a storm. But that’s when there is healthy inventory. This is new territory. “
Big storms can paralyze the auto market for months because so many cars are destroyed at the same time. Cars damaged by floods essentially rot “inside out,” Patrick Olsen, editor-in-chief of CarFax, told CNN.
âAny time mud or mud gets into the joints, it can short out the system, which can cause a car to come to a standstill while driving,â said Olsen.
CarFax estimates that up to 212,000 vehicles were damaged by Hurricane Ida and that there were already 378,000 flood-damaged cars on the streets before the storm. Anyone looking to buy a car in the next few months should be aware of potential water damage to cars, even in states where flooding is not common, McClatchy News previously reported.
âOur data suggests that unsuspecting buyers everywhere are at risk of ending up with a previously flooded car,â Chris Basso, a CarFax spokesman, said in a statement.
Buyers attention: what to look out for
Cars damaged by floods can come back on the market after repairs and re-inspections. This history of flood damage may not be shared with buyers, however, as these cars are often shipped “well beyond their original region” to locations where customers are less likely to know what to look for, according to Consumer Reports.
The Better Business Bureau recommends that buyers always ask for the title of the car and pay attention to the details – if it is stamped âRescueâ or shows the car may have been in a recent flood state the car sustained water damage. Buyers can also learn more details by obtaining a vehicle history report from a database service such as the National Insurance Crime Bureau database.
Prospective buyers should also examine the car themselves for signs of water damage or ask a mechanic to do so. According to CarFax, some signs of a car damaged by the flood may include:
- A musty order in the interior that indicates mold or mildew.
- Moisture, mud, or mud in upholstery.
- Loose or mismatched padding.
- Visible rust on the doors, under the dashboard, on the pedals or in the locks of the bonnet and trunk.
- Brittle wiring under the dashboard.
- Fogging or beads of moisture in the lights or the instrument panel.