As the nation begins dealing with the aftermath of Hurricane Sandy, disaster relief is currently being distributed to victims of this horrible disaster. Our hearts and prayers go out to the families affected. In different industries, many are turning to what it means for them – damage is being assessed in corporate and political arenas, and companies are scrambling to open their doors. The New York Stock Exchange has reopened today.
In the automotive industry, a storm of this magnitude has far reaching impacts on both the new and used car market. Given widespread wind and flood damage, many vehicles are beyond repair. According to Ricky Beggs, analyst at Black Book, these vehicles will never be circulated into the market again. The modern era, with comprehensive reporting (such as CARFAX) has largely eliminated this risk. These are vehicles that will need to be replaced, and buyers will turn to both the new and used car markets to do so.
Particularly in the light truck segment, Black Book sees a trend of rising prices, which actually began before Sandy hit. Interestingly enough, the recent spike in gas prices hasn’t placed downward pressure on pricing in these segments. That’s because manufacturers have much more closely matched capacity with demand versus the similar spike that happened back in 2008. Buyers looking for trucks and SUVs are the type who need the capability they afford, largely negating any downward pressure on pricing. A slightly improving economy and construction fields has powered recent gains. What Black Book expects to drive prices up further is the need to replace damage vehicles, as well as the large reconstruction efforts that will be going on as disaster relief efforts spool up. This need could require pulling inventory from different parts of the country.
As far as new vehicle sales, they could see a boost thanks to the prevalence of leasing in the New England region. Lease penetration overall is stronger in New England versus the rest of the country, and it got hit the worse. Leased cars are relatively new -1,2 and 3 years old meaning these are buyers will now be in the market once insurance companies begin distributing payments. New car sales have been soft for the past few months, and Hurricane Sandy could boost sales for the month of November and December.
Black Book came into existence in 1955 and primarily works with dealers, financial institutions and insurance companies. It tracks auctions on a daily basis to provide current and accurate used market values to these companies. If something happens in the market today, data becomes available in the morning. Black Book also has consumer information where customers can check in on used car trade in values.