Hundreds of thousands of cars have been damaged or destroyed by Hurricane Harvey and the floods in the Houston area. Some sources estimate 500,000 vehicles have been damaged, while others say closer to 1 million cars have been destroyed as a result of the storms.
With Irma still a few days away from anticipated landfall, many more automobiles are destined for the same fate. Of course, those vehicles will all need to be replaced, which will put a lot more buyers in the market for cars. So, what will that mean for prices?
“It’s supply and demand,” Steven Wolf, chairman of the Houston Automobile Dealers Association, told CNBC. “And obviously there’s going to be a tremendous demand for vehicles. I think that you’re going to see some price pressure on used cars.”
According to Ivan Drury, an analyst at Edmunds.com, however, the dynamics of the U.S. market might actually lead some people to buy new cars, instead of used.
“Buyers looking to replace vehicles destroyed by Harvey are stepping into a tough used car market,” Drury said in a statement to Business Insider. “Prices are at record highs due to high volumes of near-new off-lease vehicles. On the other end of the spectrum, older used cars are holding their values at high rates and are in limited supply. Those who can’t afford to spend a lot are going to get squeezed on pricing, especially as a sudden increase in demand makes finding cheaper used cars even more challenging.”
This comes after Hurricane Harvey actually caused a 1.9 percent drop in auto sales for the month of August. The hurricane hurt sales when some dealerships on the Texas Gulf Coast were brought to a standstill. The region represents about 30 to 40 percent of Texas sales, which is up to 9 percent of sales in the U.S., according to Barclays.
In the aftermath of hurricanes and flooding, we’re also likely to see some cars for sale that were not quite destroyed in the storms, but still damaged. To put it in perspective, CARFAX says there are about 325,000 cars damaged from past storms on the road right now.
CARFAX offers tips on how to avoid purchasing one of these flood-damaged vehicles. They advise checking for things like musty odor, rust around the doors and brittle wires under the dashboard, all of which could indicate a car has been damaged by water. You can also search the VIN number of a car you’re looking to purchase to see if it has damage.