Storm-driven demand begins to peter out

October 30,2017

Used-vehicle buyers replacing rides lost in hurricanes Harvey and Irma are boosting prices and trimming inventories, but the end of the storm surge is in sight.

October has been a big month for used-vehicle sales, but industry watchers expect the post-disaster replacement surge to play out by the end of November. Virtually all of the lift has come from Harvey and Irma, with hardly a ripple caused by Hurricane Nate and California wildfires.

Still, it has been strong enough to temporarily lift used-vehicle prices by reducing abundant stocks.

"Used-vehicle prices are reflecting a surge in demand and a tightening of supply," Cox Automotive Chief Economist Jonathan Smoke said. "It's continuing in October but starting to slow down."

In September, Cox's Manheim Index of used-vehicle prices rose 6.3 percent and retail used-vehicle prices measured by Dealertrack, another Cox company, also rose 6 percent, Smoke noted.

Through the first half of October, Manheim tracked higher prices and 1.4 percent more used-vehicle sales volume, but "half of what we saw in September," he said.

Wholesale used-vehicle prices rose 2.9 percent in September to an average of $11,046, ADESA Analytical Services said. ADESA Chief Economist Tom Kontos noted prices were "bolstered by dealer demand in the hurricane-stricken regions" of Texas and Florida, comparable to the 2012 aftermath of Hurricane Sandy in northeastern Atlantic states.

"This impact may be waning and prices are likely to resume the softening pattern seen prior to these catastrophic events," Kontos said.

September prices rose for both used cars and light trucks, unlike previous months when car prices fell while trucks gained, which he said may be evidence of more balanced supplies.

Cox's Smoke said demand driven by Texas and Florida storm replacement has lifted wholesale used-vehicle prices across the entire country.

"We don't see evidence of it being concentrated in just the impacted areas," he said. "Inventory can move easily to where it's most needed and online activity has also opened up buyers to units from across the country."

CEO Mark Maida of AutoBuy, a Florida company that buys used vehicles from consumers and resells them to dealers nationwide, said used-vehicle demand didn't pick up much until October, but now it is strong. He expects AutoBuy's shipments to dealers in Texas and Florida to peak in late October.

"Pickups and SUVs are the hottest segments," Maida said.

Source - Automotive News