The new car market remains in a highly unusual state. Prices remain high as demand rocketed followinglockdowns in 2020, which closed many dealerships and idled factories. Factor in a shortage of new car inventory thanks to and too few semiconductor chips and you get average transaction for the first time in history. Now, cars may become even more expensive, thanks to hurricane season.
CNN Business reported Wednesday that Hurricane Ida destroyed “hundreds of thousands” of cars, many brand-new without a single owner. That’s critical inventory amid the new car supply crunch for automakers, now lost to Mother Nature. Add on flooding from Hurricane Nicholas battering Texas, and it’s a recipe for even fewer new cars with far too much demand.
Not only do automakers simply not have enough cars in general for today’s market conditions, but demand increases almost cyclically following hurricane season. As residents return to find cars flooded and destroyed, they need to replace them, and quick. Not only could it push new car prices into even more expensive territory, it could hit the used car market just as prices began to plateau and even decline at wholesale auctions. Used car prices are 32% more expensive year-over-year, though they showed signs of stabilizing, with prices dropping by 1.5% in August, according to data from the Consumer Price Index.
The report cited data showing Hurricane Harvey in 2017 pushed used car prices up by 3% in the months after it destroyed some 500,000 cars. That was a 3% increase with a bountiful supply of new and used cars, keep in mind. For the first time in history this past June, theas inventories remain incredibly tight across the board. An influx of more demand and even tighter supplies may push prices higher than the 3% Harvey induced.