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Hurricanes Full Impact Will Emerge Over Next Few Months

Hurricanes Full Impact Will Emerge Over Next Few Months Featured

The recent hurricanes will definitely impact the used-car market by putting thousands of shoppers into the market while eliminating massive amount of inventory.

However, exactly how much impact remains to be seen.

Initial estimates had as many as half a million cars destroyed in Houston alone. Tom Kontos, chief economist for KAR Auction Services Inc., said those estimates were probably on the high side.

However, there is no doubt the unfortunate events happened at a time when the wholesale market experience an abundance of supply, Kontos said.

“People need cars and at least the cars are available,” he said.

Getting those cars to the consumers in Texas and Florida should prove a more efficiently process than even after Hurricane Sandy, which hit the East Coast in 2012.

Today dealers can restock their lots online and have the cars shipped to them from anywhere in the U.S.

This is already driving up prices as far away as northern Michigan.

“Supply will be pulled from other regions, so the impact to the wholesale market will be widespread,” said Jonathan Smoke, chief economist for Cox Automotove.

However, Kontos said these price increases tend to have short durations.

There were some concerns the large amount of cars being scrapped would overwhelm the salvage market. Kontos said the “numbers thus far seem very manageable.”

The overall impact remains unknown, with several factors potentially affecting the wholesale market in the next few months.

One is that rental cars are likely to stay in use longer as many drivers in Houston and Florida await their insurance payments before they can buy replacement vehicles.

The other key factor is the truck market.

Fourteen percent of all pickup truck sales occur in Texas and Houston in particular has some of the largest new-truck dealerships in the country.

In addition, the construction business drives truck demand and there will be plenty of rebuilding taking place in the next few months.

Kontos said the good news here is more trucks were due to come into the wholesale market already, so this should keep prices from going too high.

Meanwhile, hurricane season remains in full effect until November.


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