Experts say that the surge in demand to replace flood-damaged cars in Hurricane Florence's wake will likely push up the prices for used vehicles, especially on the East Coast.
The National Weather Service in Raleigh tweeted in September that the deadly storm may have dumped about 8 trillion gallons of rain on North Carolina.
Florence’s heavy rainfall and subsequent flooding throughout the Carolinas could have potentially damaged between 20,000 and 40,000 vehicles, according to estimates from Cox Automotive.
However, the overall number of Florence-related vehicle losses is projected to be far lower when compared to other recent hurricanes, said David Paris Sr., an automotive analyst with J.D. Power’s Valuation Services Division.
During 2017’s Harvey, more than half a million cars were estimated to have been flooded.
“Using Katrina as an example, 200,000 units were totaled, and used-vehicle prices increased by as much as 3 percent, or $309, over the four-month period following the storm's landfall,” Paris said. “Prices initially rise but then fall to parity. In the case of Florence, it’s possible that replacement demand could drive used prices up [by] 0.5 percent to 1 percent in the short term above current levels before returning to normal.”
The vehicle damage that occurs following significant flooding events like this are twofold, as both the car owners and used car dealerships in the affected area can suffer losses, according to Michael Newcomer, principal founder of Florida-based Novel Insurance, a property and casualty insurance brokerage firm.
After natural disasters that result in many auto losses, the used car market generally experiences a higher swell in demand than the new car market, according to Newcomer.
“Beyond the cost of a used car rising when it needs to be transported because of used car inventories decimated locally, the general law of supply and demand applies here as much as anywhere,” he said. “Where more people are in the market for a used car and inventory is lower, prices shoot up.”
While some people might be able to wait out the initial surge in pricing, many people will likely want to buy a replacement vehicle as soon as possible in order to work and live, Newcomer said, noting that newer technologies in the car-buying process are beneficial in these cases.