Used car prices expected to rise because of Sandy's destruction
Expect used car prices to rise nationally because of Hurricane Sandy.
The storm destroyed about 250,000 used vehicles on the East Coast, and maybe more, according to estimates by the National Automobile Dealers Association.
That puts pressure on what is a tight supply of good-condition, late-model used cars and could push prices for such vehicles up by 0.5 percent to 1.5 percent in December, said Jonathan Banks, an analyst with NADA.
The dealer group said that amounts to a little more than $50 to $175 for the average used vehicle.
Auto information company Edmunds.com projects a higher estimate, saying that used car prices will climb $700 to $1,000 “in the short term.”
While this will be felt most keenly on the East Coast, the rest of the nation is not immune, Banks said.
“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 the past,” he said. “It used to be that dealers would buy cars from a physical auction near their dealership.”
Pulling such a huge number of vehicles out of the U.S. fleet will have an impact at the national level, Banks said.
The problem is compounded by at least tens of thousands of new cars that were destroyed at dealerships and in storage yards in the New York and New Jersey areas hit hardest by the storm.
“Many dealers lost a significant amount of inventory. One Honda dealer told me he lost 600 new units,” Banks said.
Fisker Automotive, the Anaheim, Calif., maker of $100,000 plug-in hybrid sports cars, said it lost 30 vehicles with a retail value of $30 million in a port storage facility in New Jersey. A spokesman said the cars were insured and the company won't suffer a financial loss.
Toyota has said it might have lost as many as 4,500 new Toyota, Scion and Lexus vehicles to flooding and storm damage.
All of this is going to create problems for consumers in the region who need to replace their rides quickly.
“Prices could really shoot up for consumers buying cars right away, because they will run into a severe inventory shortage,” Banks said.
The dealers group believes that some replacement buying will start this month but will pick up in December and run through February.
It takes time for people to collect payments from insurance companies and go shopping for a replacement car.
The buying, however, should provide a boost for the economy, said Edmunds.com chief economist Lacey Plache.
“Even if 100,000 damaged vehicles are replaced by the end of the year, it could boost auto sales 3 percent to 4 percent for the quarter, and that has a positive effect on the economy overall,” Plache said.
Edmunds.com estimates that 20 percent of new car sales in the United States come from the Mid-Atlantic and Northeast region that was affected by the storm.