The storm could not have come at a worse time. “Any new issue with car inventory is a problem,” said Kayla Reynolds, manager of economic and industry insights for Cox Automotive.
This meant major problems for thousands of people who lost their vehicles as Hurricane Ida battered the Gulf Coast before storming to the northeast.
Retired school teachers Ira and Ruth Steinberg were absolutely delighted with their 2020 Honda Accord. Then the remnants of Hurricane Ida hit the suburban village of Hartsdale, about an hour north of New York City.
There was a sudden flood from the garage doors of the condo and it was flooded. No one was injured, but all 130 cars parked there were lost.
Steinberg called the Honda dealer at which he had bought his previous car. “They said they didn’t have a lot of cars to start with, and they lost 85% of their cars in the storm,” Ruth Steinberg said.
Luckily Steinberg’s loss will be covered by his insurance, which has a provision to rent a car after the loss, but he can’t find one. They are ranked 200th on the list of rentals from Enterprise.
The couple are counting on their adult son, who lives nearby, to be around. They don’t know what they will be able to spend once they have settled on their car, or when they can afford it. But they are trying to have a good attitude.
Historic High Car Prices
But this trend is unlikely to continue after Ida.
“Sorry, but this is a perfect storm. It’s never happened before,” said David Paris, senior manager of market insights at JD Power. “We certainly see prices for used vehicles go up for two to three months after a hurricane. But that only happens when there is a healthy level of inventory. This is uncharted territory.”
Why do floods destroy cars
Large storms can affect car prices across the country for several months, as so many cars are lost at once.
“A car that has gone through a flood is basically rotting inside, which damages the cars,” said Patrick Olsson, Carfax’s executive editor. “Whenever you get mud or silt in the connection, it can create a short in the system, which can cause the car to stall while driving.”
Hurricane Harvey, which hit the Houston area in late August 2017, is considered the most devastating in terms of vehicles seriously damaged or destroyed. Cox Automotive estimates that 500,000 vehicles in Texas were lost to that storm, compared to 250,000 for Superstorm Sandy in 2012 and 200,000 for Hurricane Katrina in 2005.
Hurricane Harvey raised the wholesale prices of used cars nationwide by nearly 3% In the month after the storm, and prices continued to rise until November. Experts fear it will be worse this time around, even if fewer cars are affected.
“It’s a historically tight market, so it will have a much more inflated effect than we saw in past storms like Harvey,” said Reynolds of Cox Automotive.
CarFax estimates that at least 212,000 vehicles were lost in the storm. And AIR Worldwide, which estimates the insurance industry’s losses from natural disasters, believes insurers will cover damages to more than 250,000 vehicles from Ida. And according to the Insurance Information Institute, only 78% of vehicles will be insured for such damage, meaning the number of vehicles lost will exceed the insured loss.
“If you look at a price that’s too good to be true, it’s probably too good to be true for some reason,” said J.D. Power’s Paris.