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Experts say that the surge in demand to replace flood-damaged cars in Hurricane Florence's wake will likely push up the prices for used vehicles, especially on the East Coast.
The National Weather Service in Raleigh tweeted in September that the deadly storm may have dumped about 8 trillion gallons of rain on North Carolina.
Florence’s heavy rainfall and subsequent flooding throughout the Carolinas could have potentially damaged between 20,000 and 40,000 vehicles, according to estimates from Cox Automotive.
However, the overall number of Florence-related vehicle losses is projected to be far lower when compared to other recent hurricanes, said David Paris Sr., an automotive analyst with J.D. Power’s Valuation Services Division.
During 2017’s Harvey, more than half a million cars were estimated to have been flooded.
“Using Katrina as an example, 200,000 units were totaled, and used-vehicle prices increased by as much as 3 percent, or $309, over the four-month period following the storm's landfall,” Paris said.
“Prices initially rise but then fall to parity,” he said. “In the case of Florence, it’s possible that replacement demand could drive used prices up [by] 0.5 percent to 1 percent in the short term above current levels before returning to normal.”
The vehicle damage that occurs following significant flooding events like this are twofold, as both the car owners and used car dealerships in the affected area can suffer losses, according to Michael Newcomer, principal founder of Florida-based Novel Insurance, a property and casualty insurance brokerage firm.
After natural disasters that result in many auto losses, the used car market generally experiences a higher swell in demand than the new car market, according to Newcomer.
“Beyond the cost of a used car rising when it needs to be transported because of used car inventories decimated locally, the general law of supply and demand applies here as much as anywhere,” he said. “Where more people are in the market for a used car and inventory is lower, prices shoot up.”
While some people might be able to wait out the initial surge in pricing, many people will likely want to buy a replacement vehicle as soon as possible in order to work and live, Newcomer said, noting that newer technologies in the car-buying process are beneficial in these cases.
“Dealerships, such as Carvana, will transport used cars from across the country at very low rates,” he said. “The farther away from the disaster area that you are shopping, the lower the impact of the storm will have on prices.”
Many rental agencies, including Hertz and Enterprise, also sell their old rental inventories at much lower prices than the general markets and oftentimes will transport them for low rates, he added.
Be wary of buying flood-damaged cars, experts say
In addition to the rise in used car prices for people in need of a replacement ride in Florence-affected areas, buyers will have to be cautious about purchasing previously flood-damaged vehicles that may be sold likely between four and eight months after Florence.
Some can be repaired and resold in other parts of the country without the buyer having any knowledge of the vehicle’s flood history, according to experts with Consumer Reports.
Flood-damaged vehicles are considered highly unreliable to drive, because while much of the cosmetic flood damage can be camouflaged, it’s tough to completely repair an engine that has been impacted by floodwaters, according to DMV.org.
Rusting could be happening inside the vehicle, endangering the lives of passengers and potentially triggering costly repairs for the owner.
“Flood-damaged cars are seldom branded, so consumers rarely have fair warning even if they purchase a public records report, such as CarFax,” said Florida-based consumer protection lawyer Donald E. Petersen.
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This problem arises because many flood car claims are settled below state law reporting thresholds or utilize other loopholes to escape reporting, according to Petersen.
He recommends that car buyers order a title history on the vehicle. The public records will indicate where the car was titled and approximate area where its owner lived.
“Check out the car yourself before taking it to a certified mechanic,” Petersen said. “Flood cars often have telltale signs if you know what to look for.”
Experts advise looking for clues including a musty smell, rusted metal parts and residue from a high-water mark left under the hood.
“Flood cars will have a variety of mechanical and, more commonly, electrical problems, and they’ll never run normally again,” Petersen said. “The water, especially salty or briny water, destroys the electrical components and wiring. It often takes a while to manifest itself, but it will.”
Used car buyers should also consider looking for the following signs of flood damage:
For more safety and preparedness tips, visit AccuWeather.com/Ready.
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