News Column

Demand for Used Vehicles Rises in Wake of Superstorm Sandy

Nov. 12, 2012

Staff -- HispanicBusiness.com

used car

A rise in prices for used cars and trucks is expected in the aftermath of Superstorm Sandy, which destroyed thousands of vehicles in the northeast last week.

The National Automobile Dealers Association is predicting prices for used vehicles up to 8 years old will be between 0.5 percent to 1.5 percent higher in December because of Sandy.

"The loss of used-vehicle supply and the increase in replacement demand after Hurricane Sandy will have the greatest impact on used-vehicle prices in December," said Jonathan Banks, executive automotive analyst with the NADA Used Car Guide.

Without drawing exact parallels, because no two storms are alike, NADA points out that the destruction of vehicles by Hurricane Katrina in 2005 and the subsequent increase in demand boosted used-vehicle prices by as much as 3 percent over the four months following the storm's landfall.

"Although Sandy's reach encompassed an area with a greater population density than Katrina, the number of vehicles damaged by flooding doesn't appear to be as high as the number lost to Katrina," Banks said

Initial damage estimates for Sandy place insured losses for the storm between $10 billion and $20 billion, according to EQECAT Inc., a catastrophe risk analytics company based in Oakland, Calif. The total loss is projected to be $30 billion to $50 billion, according to EQECAT.

By comparison, the insured-loss cost of Hurricane Katrina was $46.5 billion, and the total cost was $145 billion (both in 2011 dollars), according to AIR Worldwide and the National Oceanic and Atmospheric Administration.

"Current estimates for insured and total losses place Hurricane Sandy on average at about one-third of the cost of Hurricane Katrina," Banks added. "The destruction wrought by Hurricane Sandy was most severe in New York and New Jersey, and supply-and-demand disruptions will be especially severe in these states."

New York and New Jersey rank in the top 15 U.S. states in terms of overall vehicles in operation and new-vehicle dealerships. In addition, both states have large populations and high population-density ratios.

"Regionally, the concentrated damage that occurred in New Jersey and New York means that used-vehicle prices, particularly for import and luxury cars, will most likely increase beyond NADA's national level expectations," Banks said.

Banks added that prices for large pickup trucks should also increase toward the high end of NADA's predicted range as contractors and other service-related professionals seek to replace the vehicles they need to make a living. Supply for the segment is already constrained in the northeast, where drivers tend to favor automobiles over light trucks.

NADA has pledged $1 million to jump start a national fundraising campaign for the Emergency Relief Fund of the National Automobile Dealers Charitable Foundation.

"This is the time for dealers across the country to step up and help those in the northeast most affected by Hurricane Sandy," said Bill Underriner, NADA chairman and a dealer from Montana.

The fund provides financial assistance to dealership employees affected by natural disasters.


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