A damaged car sits beside floodwaters in the aftermath of Hurricane Ida in Jean Lafitte, La.

Ida brought on widespread flooding from Louisiana, the place it got here ashore as a hurricane on August 29, to the closely populated Northeast, the place its remnants hit laborious a number of days later. It killed a minimum of 86 folks and its flood waters destroyed a whole bunch of hundreds of vehicles, together with many that have been on automobile supplier tons.
Ida’s wrath has concurrently created a sudden demand for automobile purchases whereas additional destroying already tight inventories. Hurricane Nicholas, which hit the Texas Gulf Coast early Tuesday, may add to the issues, particularly if it causes flooding as soon as once more in Houston, one of many largest markets for automobile possession within the nation.

The storms couldn’t have hit at a worse time. “Any new problem with car inventory is one problem too many,” mentioned Kayla Reynolds, supervisor of financial and Industry insights for Cox Automotive.

That’s means large issues for the hundreds of people that misplaced their automobiles as Hurricane Ida battered the Gulf Coast earlier than storming up to the Northeast.

Retired faculty academics Ira and Ruth Steinberg have been completely proud of their 2020 Honda Accord. Then the stays of Hurricane Ida hit their suburban hamlet of Hartsdale, about an hour north of New York City.

A damaged car sits beside floodwaters in the aftermath of Hurricane Ida in Jean Lafitte, La. A damaged car sits beside floodwaters in the aftermath of Hurricane Ida in Jean Lafitte, La.

A flash flood burst via the condominium’s storage doorways and flooded it. No one was injured, however all 130 vehicles parked there have been misplaced.

The Steinbergs referred to as the Honda supplier at which they’d purchased their earlier automobile. “He said he didn’t have a lot of cars to begin, and he had lost 85% of his cars in the storm,” mentioned Ruth Steinberg.

Fortunately the Steinbergs’ loss can be coated by their insurance coverage, which has a provision to lease a automobile after a loss, however they cannot discover one. They’re 2 hundredth on the record for rental from Enterprise.

The couple is counting on their grownup son, who lives close by, to get round. They do not know what they will give you the chance to afford as soon as they get a settlement on their automobile, or after they’ll give you the chance to purchase it. But they’re making an attempt to preserve a very good angle.

“We’ve gone through much worse things,” mentioned Ruth Steinberg. “I’m extra upset about the Yankees.”

Historical excessive automobile prices

Car prices — new and used — soared within the face of sturdy demand and tight inventories this summer season, attributable to a dearth of computer chips and different spare elements, which restricted manufacturing.
The scarcity was additional exacerbated by rental automobile corporations selling off about a third of their fleets throughout the early months of the pandemic when journey floor to a close to halt. Those corporations usually are a significant supply of used automobile provide.
Soaring automobile prices have been a significant factor behind the general rise in the price of dwelling, as measured by the consumer price index, the nation’s key inflation gauge.
Car prices may have peaked — Tuesday’s August CPI report confirmed used automobile prices retreating 1.5% from July, though nonetheless up 32% from a yr earlier — whereas new automobile prices elevated just one.2%, the bottom tempo of improve since April. Other measures of automobile prices had additionally confirmed prices topping out in late summer season.

But that pattern will not possible proceed in Ida’s aftermath.

“Excuse the pun, but it’s the perfect storm situation. There has never been something like this before,” mentioned David Paris, senior supervisor of market insights for JD Power. “We definitely see used vehicle prices pick up for two to three months after a storm. But that’s when there’s a healthy level of inventory. This is uncharted territory.”

Why floods destroy vehicles

Major storms can have an effect on automobile prices nationwide for a lot of months, as a result of so many vehicles are misplaced concurrently.

“A car that has been through a flood is basically rotting from the inside out,” mentioned Patrick Olsen, government editor of CarFax, which tracks injury to vehicles. “Anytime you get mud or silt in the connections it can create a short in system, which can cause a car to stall while driving.”

Hurricane Harvey, which hit the Houston space in late August 2017, is believed to have been essentially the most damaging when it comes to automobiles severely broken or destroy. Cox Automotive estimates that up to 500,000 automobiles in Texas have been misplaced from that storm, in contrast to 250,000 for Superstorm Sandy in 2012 and 200,000 for Hurricane Katrina in 2005.

Hurricane Harvey pushed used automobile wholesale prices nationwide up about 3% within the month after the hurricane, and prices remained elevated via November. Experts worry it will likely be worse this time, even when fewer vehicles are affected.

“This is an historically tight market, so it’s going to be much more inflated impact we saw in previous storms like Harvey,” mentioned Cox Automotive’s Reynolds.

US inflation eased in August. But America's not out of the woods yetUS inflation eased in August. But America's not out of the woods yet

CarFax estimates that a minimum of 212,000 automobiles have been misplaced within the storm. And AIR Worldwide, which estimates insurance coverage business losses from pure disasters, believes that insurers will cowl losses of greater than 250,000 automobiles from Ida. And solely about 78% of the automobiles can be insured for this type of loss, in accordance to the Insurance Information Institute, which signifies that the variety of automobiles misplaced can be even larger than the insured losses.

Anyone wanting to purchase vehicles within the subsequent a number of months, even these removed from this yr’s hurricane paths, ought to beware: CarFax estimates that there are are 370,000 storm broken vehicles on the street immediately, typically sold to unsuspecting buyers. Some of of these vehicles have been broken broken by earlier storms, together with Hurricane Katrina 16 years in the past.

“if you see a price that is too good to be true, it’s probably too good to be true for a reason,” mentioned JD Power’s Paris.

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