Post-Storm Car Sales Rev Up, but Some Buyers Are Stalled

Auto Loans
car sales after hurricane

Record-high inventory levels in the months before hurricanes Harvey and Irma hit meant that after the skies cleared, there were plenty of cars for automakers to move into storm-affected areas, auto analysts say.

But despite the flow of vehicles into dealerships in the Southeast and Gulf Coast, in some segments, a good deal will still be tough to find. Shoppers searching for older, budget used cars will face limited inventory, and those looking for trucks and SUVs will find that prices are high.

Automakers, dealers respond to storms

To stock local car lots, manufacturers and large dealership chains, such as AutoNation, moved surplus inventory into the hurricane-damaged regions immediately after the storms, says Michelle Krebs, analyst for Autotrader, an online car marketplace. And to boost inventories of used cars, some rental companies sent their used vehicles to car lots rather than shipping them to be sold at auction.

Krebs estimates that 580,000 cars will have to be replaced after Harvey and an additional 200,000 because of Irma. To help cut costs for storm victims, manufacturers have shifted regional incentives to the affected areas. Some carmakers are offering additional incentives especially for those who bring their insurance claim check into the dealership.

The incentives are a mixture of customer cash back, reducing the sale price of the car; employee pricing, which offers especially low prices on some cars; and deferred payments for current customers, says Ivan Drury, senior manager of analytics for car site Edmunds.com.

Chevrolet, for instance, responded with various forms of assistance using the catchy phrase: “Nobody messes with Texas, not even Harvey.” The manufacturer offered courtesy cars while repairs were made to damaged Chevrolets and new vehicle replacement assistance of $1,000 on certain models.

Meanwhile, Tesla provided help for its customers by unlocking extra electric-powered driving range for some of its owners who were fleeing Irma. This means drivers could travel longer distances before needing to recharge their batteries.

From bust to boom

“With Harvey, everything slowed and then came to a dead stop” at the dealerships in Houston, Krebs says. “But as we saw with [hurricanes] Katrina and Sandy, it immediately picked up, and now it’s booming.”

But busy car lots make for less than ideal conditions for people shopping to replace their car lost in the storm, Drury says. Furthermore, the expense of buying a car, on top of other rebuilding costs, “really dampens the car shopping experience,” he adds. However, he suggests this could be a time for some people to re-evaluate vehicle ownership and shift to a cheaper car or consider buying used.

Off-lease vehicles

Shoppers may have the best luck with nearly new used cars. Because of record-high leasing levels, 2- to 3-year-old used cars have been pouring back into the market at the end of the lease, Krebs says. Leasing accounted for nearly 29% of all new car transactions at the end of 2016, according to Experian data.

Buying one of these off-lease, nearly new cars hits a sweet spot for used car buyers by limiting depreciation and providing affordable, reliable transportation. It could shave more than 20% off the new-model price. Plus, a 2-year-old car will still be under factory warranty.

Budget used-car shoppers

However, used cars from 4 to 8 years old are in short supply, which will hurt the budget used car shopper, Krebs says. If possible, she recommends renting a car and waiting for inventory levels to rise and prices to fall.

Krebs also notes there’s been a recent tightening of credit, causing some shoppers “to be frozen out of the used car market even before the storms.” Recent data show that subprime auto loan delinquencies and losses have risen this year, and lenders, in turn, have pulled back on new auto loans for borrowers with poor credit.

Trucks, SUVs and Texas

Deals for flood victims will likely be found in small and midsize cars because prices for trucks and SUVs have been high most of this year, Krebs says. The average purchase price for large trucks reached around $47,000 in 2017, and used trucks are holding their value, Drury says.

He notes that Texas is where the most trucks are sold. In Houston three weeks after the storm, pickup trucks saw an increase in shopper interest compared with the three weeks before, according to data from marketing company Jumpstart Automotive Media. However, victims of the flood who are back in the market for either new or used trucks may be surprised by the high prices, Drury says.

Advice for storm victim shoppers

Despite the unique conditions of the post-storm market, most of the usual advice for car shoppers still applies to storm victims looking to replace their cars.

Consumers can shop for the best interest rate and get preapproved for an auto loan before going to the lot, even if they plan to eventually accept financing through a dealership. This is especially important for borrowers with less than stellar credit. And rather than face crowds at the dealership, shoppers can do much of their car research online and contact salespeople using the dealer’s internet department.

There are, however, some special circumstances for people replacing their car after a natural disaster. Above all else, do a thorough inspection of any used car, and research financing and incentives carefully to take advantage of special offers before making a decision.

More from NerdWallet

About the author