With much of the Eastern Seaboard still digging out and drying out from Superstorm Sandy, estimates now put the damage at anywhere up to $50 billion, perhaps more. But in the weeks to come, even consumers as far away as the West Coast could feel the pinch.
That is likely to be especially true for car buyers. Early estimates suggest that tens, perhaps hundreds of thousands of vehicles were damaged to the point they will need to be replaced. And that is likely to drive up prices for both new and used vehicles in the weeks and months ahead, experts warn.
If there’s a positive side for consumers it could mean better prices for those looking to trade in a car. For the industry, it’s likely to add even more momentum to the U.S. automotive market’s ongoing recovery.
The extent of the damage from the superstorm remains to be seen. But experts are already trying to make some comparisons to the trio of hurricanes that slashed through the Gulf Coast region in 2005, destroying an estimated 640,000 vehicles.
“The damage from this storm was more widespread across a more populous area than was hit by Katrina, so the number of vehicles that will need to be replaced will likely be much bigger,” warns Ricky Beggs, vice president of the Black Book, a major source of pricing information on used, as well as new, vehicles.
In fact, the impact will have a “ripple effect in other parts of the country” as dealers and customers in storm-damaged regions race to find replacement vehicles.
The first measure of the impact, suggests Beggs, will likely become apparent at the 62 wholesale automotive auctions covered by the Black Book each week. He anticipates that dealers on the East Coast will significantly increase their bidding and likely grab vehicles that would have otherwise gone to the Midwest, South or even to the Pacific Coast.
Complicating matters, used vehicles already were in short supply because of declining sales of new vehicles during the Great Recession of the last four years. Prices had already been nudging record levels for much of 2012 and Beggs predicts there will be another “bump” in the months ahead.
“We may be seeing anything from $200 to $600 depending on how much the need is,” he says, adding that there could be especially strong demand for pickups and full-size vans used by contractors and repair crews – not only to replace vehicles damaged by the storm but “because there’ll be demand for services to repair the damages from the storm, so someone who might have had one truck may now need two.”
New car prices may also be heading up, the Black Book editor cautions, especially in markets with high lease penetration, such as the Boston area. Those customers, he anticipates, will be more likely to replace damaged vehicles with new ones. How many other motorists buy new vehicles could depend on whether they’re covered by insurance – and how much they get in a settlement, experts caution.
But automakers could also face demand for more vehicles from new car dealers whose lots were damaged. So, while the storm resulted in a short-term sales dip in much of the Eastern third of the U.S., the mid-term focus is much more upbeat.
And the story isn’t entirely bad for consumers, says Beggs. -“It might be a good time,” he adds, “even this week,” for getting maximum value for a trade-in as dealers scramble to line up used vehicles to replace those destroyed by Superstorm Sandy.