Hurricane Harvey made landfall near Corpus Christi, TX on Friday, August 25, 2017 with winds reaching Category 4 levels. It may be the most expensive natural disaster in US history, with a price tag as high as $160 billion dollars in property damage. That’s over 3 times higher than Hurricane Katrina in 2005.
Just two weeks later, another Category 4 storm – Hurricane Irma – struck Florida with damage estimates as high as $100 Billion.
The two category 4 hurricanes have destroyed an estimated 1 million cars. Hurricane Harvey destroyed nearly half a million vehicles in the Houston area alone. Compare that to the mere 200,000 vehicles destroyed by Katrina in 2005 and 250,000 by Sandy in 2012.
Why were so many more cars destroyed? Houston is the 5th largest city in the US, and it has a higher percentage of car ownership than New Orleans or New York. They do everything bigger in Texas!
What does that mean for the Car Market???
Three main things are going to happen:
- Used car prices will increase slightly over the next several months, especially in Texas and Florida. It’s simple supply and demand. Not only has the supply of cars been suddenly reduced, but thousands of people will need to replace the vehicles they lost, creating a sudden spike in demand. Used car prices may also increase in other areas of the country, as Texas and Florida car dealers travel to dealer auctions in other geographies to replace their lost inventory.
- Expect insurance rates to increase slightly over the next year, as insurance companies try to recoup the costs of replacing all of those totaled vehicles. A cost that could top $5 Billion.
- Finally, the used car market will be flooded with… flood vehicles. While many of the vehicles damaged by Harvey and Irma will either be sent to the scrap yard or exported overseas to South America and West Africa, past research indicates that as many as half a million of these flood cars could end up back in the US market place – cleaned up and resold to unsuspecting car buyers.
What protections exits for consumers?
After Hurricane Sandy in 2012, the federal government updated the National Motor Vehicle Title Information System in an effort to protect consumers from fraud and unsafe vehicles. That database serves as a repository of information on salvage vehicles, including vehicles deemed to be a “total loss” in a flood. But this system isn’t fool-proof, and differences in disclosure regulations across states often leave gaping holes through which unscrupulous dealers can “wash” titles and sneak flood vehicles back on the market, often hundreds or thousands of miles away from the flood zones without so much as a warning.
How do you avoid buying a flood vehicle?
- Run the VIN number through the National Insurance Crime Bureau and the National Motor Vehicle Title Information System databases to see if the vehicle has been identified as a total loss or stolen vehicle.
- Get a Carfax report, which you should do any time you buy a used car! A Carfax report may show a salvage or rebuilt title for the vehicle. A Carfax report will also show where a vehicle has lived and been titled. Look at the dates and locations on the report to see if the vehicle resided in an area affected by a hurricane. If the vehicle was housed in say Houston or Miami in August or September 2017… that might be a flood vehicle!
- Get a pre-purchase inspection by an ASE master certified technician before you purchase any used vehicle. A trained technician can look for signs of past water damage, such as mineral deposits, faint stains under the floor mats and on door panels, mildew spots, the smell of mold, or the overwhelming scent of shampoo and other chemicals used to try to hide the smell of mold.
While you should always do your diligence when shopping for a used car, you will need to be extra careful over the next several years, as thousands of Harvey and Irma flood cars permeate the used car market. You want to buy a used car, not a used submarine.
I hope this information about the impact of Hurricanes Harvey and Irma on the car market has been helpful. If you are still worried about ending up with a flood vehicle, or if you are one of the many victims of the recent hurricanes and need help replacing your vehicle, then I invite you to visit my website to learn more about how my unique car buying service can take all of the hassle and worry out of buying a new or used car.
Until next time, drive safely everyone!