Storm-driven sales gains disappear
Consumers’ credit ratings could still take a hit Photo credit: BLOOMBERG
It’s time to close the books on hurricanes Harvey and Irma. Storm replacement auto purchases almost disappeared in November after driving substantial gains in U.S. new- and used-vehicle volume in September and October.
And as used-vehicle demand declined in November so did prices, says Jonathan Smoke, chief economist for Cox Automotive. Wholesale used-auto prices fell 1.29 percent in November, the first monthly decline in eight months, with the Manheim Used Vehicle Index falling to 134.5.
Storm-driven replacement demand was almost absent in November new-vehicle sales and contributed only a tiny gain for used, Smoke said.
Ford Motor Co. U.S. sales boss Mark LaNeve said the automaker found no storm replacement gains in its November internal data.
Back to trend
Extra post-storm demand in September and October, especially for less expensive models, inflated used-vehicle prices when they normally would decline seasonally, Smoke said. But that’s over.
“Now we’re correcting on the used side back to old price-decline trends,” he said. “That will continue at least the next three months.”
Smoke said storm victims replacing flooded vehicles bought about 500,000 additional units since September, about 150,000 new and 350,000 used.
“That’s a half million, right in the middle of the 400,000 to 600,000 losses we originally estimated in September,” Smoke said. But used volume came in toward the heavier end of Cox’s original projected range of 270,000 to 400,000 while the new total was toward the light side of the initial range of 130,000 to 200,000.
Moody’s Analytics estimates U.S. vehicles lost to hurricanes Harvey and Irma at 400,000, with no breakout of new and used replacements.
“Most of those losses were to Harvey, which was highly concentrated in Houston and southeastern Texas,” Christian Henkel, a Moody’s senior director, said during a Dec. 13 webinar. “With Irma, many people literally drove their vehicles out of danger.”
After Harvey struck Texas just before Labor Day, Cox Automotive had expected a two-month replacement surge concentrated in coastal Texas.
“But then Irma two weeks later made it possible that some November lift was possible, though still mostly in Texas and not Florida,” Smoke said.
But that anticipated sales lift appears to have been muted because the vast majority of vehicle storm losses were from widespread flooding in Texas during Harvey with limited vehicle write-offs in Florida during Irma, where more damage came from wind.
While many more auto write-offs came from Harvey in southeastern Texas than from Irma in Florida and Georgia, property losses were much greater from Irma, said Amy Crews Cutts, chief economist for Equifax.
“Far more U.S. hurricane losses were in residential housing than in autos,” she said.
Moody’s estimate of hurricane total losses is $73 billion from Harvey and $63 billion from Irma, plus $70 million from Maria, which hit Puerto Rico and other Caribbean islands in September. The $206 billion total could rise as insurance claims continue to be processed.
“This was the most expensive U.S. hurricane season on record,” said Moody’s Henkel.
In addition, the storms’ ensuing economic damage — in terms of lost wages or employment and coping with the costs of replacing possessions, rebuilding or relocating — is just starting to affect victims’ credit ratings, Cutts noted.
Smoke said virtually all Harvey and Irma victims have replaced lost vehicles, but many may have settled for basic transportation instead of what they really wanted.
“I wouldn’t be surprised if there is a slight rise in vehicle purchases over the next 12 to 18 months,” he said, as victims trade for the better vehicles they originally wanted and can again afford.