Expect Used-Car Prices to Skyrocket in the Southeast Post-Hurricane

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Remember the 2009 Cash for Clunkers program? Some hated it. Others invested in this new form of government cheese. After eight weeks, the entire USA had spent nearly $3 billion in taxpayer money to supplement the purchase of almost 690,000 vehicles. It was a big deal, but not nearly as big as what’s happening right now in the Southeast thanks to hurricanes Harvey and Irma.

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Roughly a million vehicles have been totaled from Texas to the southern tip of Florida. When Superstorm Sandy hit the New York tri-state area in 2012, auto sales in metropolitan New York City skyrocketed 49 percent in a single month. Yet, as far as vehicle population is concerned, the aftermath of that storm represents a fraction of the damage Harvey and Irma have left from Houston to Miami. Industry trade paper Automotive News reported estimates that retail sales in Houston were up 40 to 50 percent over year-ago levels in the immediate aftermath of the storm, even as inventories were depleted by flood damage.

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When extreme disasters strike, local car dealers at ground zero will fan out into surrounding wholesale dealer auctions to buy whatever they can to fulfill the surge in demand. Within a week of Harvey’s landfall, there were dealers throughout southeast Texas visiting mega auctions in Atlanta, Tampa, and Tulsa. These folks were loading up cars and trucks on transport vehicles that were headed out to places including Houston and Corpus Christi.

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Bradley Williams has been a large-scale buyer for franchise and independent dealers, and he’s seen this invasion of demand at regional auctions before. “Everyone from Texas is up in Tennessee now, and it’s going to be like this for the next two to three months now that Florida got hit, too,” Williams said. “I have to go buy cars in Ohio for a Tennessee store at this point.” The spike in demand hits every level of the used-car market, from late-model cars and trucks with fewer than 50,000 miles on their odometers to runaround beaters that have been to the moon and back.

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A spokesman for the Insurance Council of Texas told Car and Driver earlier this month that about 15 percent of Texans generally drive without insurance. Of the Texan motorists that are insured, about 75 percent have comprehensive coverage, which would cover flood damage. I would venture to estimate that a substantial number of those who did keep comprehensive insurance coverage have older vehicles that aren’t worth very much. This level of loss on the low side of the market means that cheap cars will soon be in incredibly short supply for the next several months. Even up in the Northeast.

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If there is one saving grace for the Southeast in terms of shopping for a vehicle, it is the timing of these natural disasters. Most major hurricanes take place during the late summer to early fall, a time when the used-car market is usually soft. Still, values have already been going up. “I watched an ’09 Focus with 115K [miles] do $4400 today at auction,” said Kristen Mauro, owner of Image Auto Sales in Bensalem, Pennsylvania, noting that the retail value is $4800. That suggests the wholesale price allows only a slim profit margin or that the buyer plans to sell the car at an inflated price. “I seriously don’t understand where people are going with these vehicles.”

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• Scammers Take Advantage after Cars Get Flooded in Texas Hurricane
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• Things to Keep in Mind When You’re Hunting for a Reliable Used Car
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• Great Used-Car Bargains Hide among the New-Car Losers
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The double wallop that hit the Southeast is going to have an impact on used-car prices for a long time. A natural disaster can bring out the price gougers and opportunists like little else. So if you live in one of the hurricane-impacted areas and already enjoy what you drive, keep it if you can. Deals won’t be happening any time soon.

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Steve Lang has been an auto auctioneer, car dealer, and part owner of an auto auction for nearly two decades.

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