Sandy Cripples The East Coast

11.13.12

Sandy Destroys Cars, Spurs Used- and New-Car Market

With an estimated 250,000 vehicles destroyed in the storm, car dealers, manufacturers, and buyers are negotiating a landscape littered with obstacles.

When the water came up on the evening of Oct. 29th and flooded much of the tristate area, it didn’t just ruin homes and businesses. Hurricane Sandy has also taken a serious toll on the auto industry—on the East Coast and beyond.

An estimated 250,000 cars were totaled during Sandy, and images of hundreds of parked cars floating have become among the most iconic images of the devastating storm.

Two weeks after Sandy made landfall, the auto industry is preparing for what John Sinclair, Jr. of New York’s AAA calls a possible “boon for the industry”—even as it tries to weigh the needs of consumers forced to buy new cars.

With so much supply destroyed, used-car prices have already risen as much as $700 to $1,000 per vehicle, says Ivan Drury, a senior analyst at Edmunds.com, an automobile-research firm. “The market has been kicked into high gear,” he told The Daily Beast. Prices on new cars are also expected to rise, says Drury, although less dramatically than those for used cars.

Drury says he expects the aftermath of Sandy to affect the national auto industry. “Some people will be too afraid to buy cars on the East Coast, and they’ll have them shipped from the Midwest or West Coast. There will be fluctuations in the market,” he said.

While manufacturers and car dealers are already reporting an uptick in business, they are cautious to maintain the tricky balance between their gain and their customers’ loss. “We’re looking out for our friends in the community,” says John Bruno Jr., the general sales manager at Potamkin New York. Bruno says General Motors and other manufacturers are offering discounts of at least $500 on new cars for customers whose cars were totaled during Sandy.

“Moving forward, it looks like a majority of our business will be replacing flooded cars,” he said. “Today, a school principal in Breezy Point came in to replace the second of his two cars lost in the storm. Beyond anything, we want to help these people.’

And while local dealerships are doing good business, the news isn’t all positive. “We lost a significant amount of our inventory in our storage lot in Brooklyn,” said Bruno. “We had no phone service to our dealership until this past Saturday,” weeks after the storm.

Fisker Automotive, which manufactures luxury electric cars, lost over 300 cars—totaling over $30 million—during the storm.

Consumers will have to worry about more than spiking prices when buying their replacement cars: much like after Hurricane Katrina, there’s worry throughout the industry that, as Sinclair put it, “unscrupulous dealers will take vehicles that have been flooded, wash the titles, and ship them elsewhere to be sold.”

“That’s always a concern,” says Larry Dixon, a senior automotive analyst at the National Automotive Dealers Association (NADA). “It happens after every flood,” he says, adding that NADA tries to keep a record of totaled vehicles in a national database, but it remains inevitable that some ruined cars will end up back in the used-car market.

With so much supply destroyed, used-car prices have already risen as much as $700 to $1,000 per vehicle, says Ivan Drury, a senior analyst at Edmunds.com.

“Issues of supply and demand are short-term,” after so much inventory was damaged on the East Coast, he added. “But the washed titles problem is a long- term issue both for safety and economic reasons.”

Sinclair says that flooded vehicles sold at “bargain-basement prices” may run for a short while, but that “salt water can short out the electronics, saturate the carpet and create mold conditions, and fracture the engine.” 

“Consumers have to be especially aware and vigilant,” Drury said. “Look at the mileage and check out the vehicle—if it looks too good to be true, it probably is.”

Still, there’s no for consumers reason to panic—at least not yet. “After Katrina, there was a lot of talk about how flood-damaged vehicles would enter the market,” he said. “But it didn’t affect the industry nearly as much as people expected.”

“Consumers have been holding onto vehicles longer than they would normally because of the economy,” said Larry Dixon of NADA. “But after Sandy, manufacturers and car dealers are offering deferred-payment plans and giving consumers an extra few months to pay.”

And even though consumers forced to buy a new car may not be thrilled, “as bad as it sounds to buy a brand-new car,” says Drury,” a lot of people who haven’t been in a new car in a long time will be shocked at new features. They will end up getting some things they never thought they would.”