One of the things mega-hurricane Sandy has left in its wake is 200,000 damaged vehicles, some of them owned by manufacturers and dealerships, others by private customers.
An after-effect of this situation is a sudden increase in demand for used vehicles, as damaged cars need to be replaced in order for their owners to have a fresh set of wheels again.
This is the point where the laws of the market come at play. ADESA Analytical Services analyst Tom Kontos has written in a report that, last month, used-vehicle prices “were actually declining during the first half” – but the increased demand “more than made up for lost ground during the second half of the month”.
According to experts, used-vehicle prices will increase by an average of US$1,000 or more in areas hit hard by the storm as the inventory has been depleted and many vehicles will have to be transported from other parts of the country, increasing their cost.
Ricky Beggs, managing editor of Black Book, told Autonews that normally used-vehicle prices are typically at their lowest during this time of year. Sandy has changed that, and after talking to dealers and re-marketers in the Midwest, he expects price increases of US$600-1,000.
“A couple of wholesalers say the market is coming to them and saying ‘We need more cars’”, said Beggs. “They’re seeing demand. The sales conversion rate (that’s the percentage of vehicles offered at auction that are sold) has increased”.
Other analysts, such as Jonathan Banks who works for NADA Used Car Guide, believe that post-Sandy prices will increase in all of the U.S.
“We do think that there’s going to be a ripple effect, that prices will be affected across the country”, he said, adding, “Anything that disrupts the balance is going to have an impact on price. In this case, it’s going to be an increase in demand and a decrease in supply.”
The good news, according to Banks, is that owners of damaged vehicles will get more from their insurance claims.
Edmunds.com analyst Richard Arca pointed out that his data show dealers are preparing for inventory shortages. He also predicted that in “a month or so”, the average price of a 5-year old vehicle in the US$13,000-14,000 price range will increase about US$1,000 or even higher”.
By Andrew Tsaousis
Story References: AutoNews
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