As Hurricane Florence hits the Carolinas and surrounding areas, the flooding could damage 20,000 to 40,000 vehicles, according to forecasts from Black Book and Cox Automotive.
“The losses are set to cause demand for cars to push higher as consumers rush to replace damaged vehicles,” Anil Goyal, executive vice president of operations for Black Book, told Auto Finance News.
Demand for cars especially this summer had been causing prices to rise slightly even before Florence, so any rush to replace damaged vehicles could force prices higher in the near term, Goyal added.
It is too early to predict how high prices could rise, but many are looking to last year’s Hurricanes Harvey and Irma in Texas and Florida as a benchmark. Black Book estimates approximately 700,000 cars and trucks were either damaged or destroyed during Hurricanes Harvey and Irma.
However, the market today is very different from how it was in August 2017. Today, there is concern that demand is outpacing supply. “Last week, we had started to see more stabilization after values rose for the last three months, reaching an all-time record in August,” Jonathan Smoke, the chief economist for Cox Automotive, noted in an insights blog post.
Even though the replacement need will be smaller in this case, values might increase temporarily especially in the region due to limited supply.
Florence also won’t have as big an impact on the broader U.S. vehicle market given that Texas and Florida serve as larger hubs for retail sales and vehicle storage than South Carolina.
Though Hurricane Florence’s vehicle damage will be far less than what the industry witnessed last year, lenders should still leverage hindsight to “ensure that they are putting the right value on vehicles,” Goyal said.