HEMPSTEAD, N.Y. - Customers who walk into the Millennium Honda showroom these days take a number, just like shopping in a bakery. Contrary to the typical scenario in which a salesman meets someone as soon as they step on the lot, the wait for service can sometimes be hours for a sales consultant.
"It's unbelievable the influx of customers we are seeing," said the dealership's GM, Ravel Mejia. "Today it's Tuesday and we should sell 60 cars. Usually the second day of the work week we sell maybe 10. Last Saturday we sold 71 cars, and we usually sell 20 to 21 on a typical Saturday. We are keeping our lending partners busy, and they are having a tough time keeping up."
Hurricane Sandy is sending consumers in the Northeast, insurance check in hand, to dealerships for cars and to FIs for loans. The wave began the week before Thanksgiving, sources indicated. Reports of the total number of cars damaged by Sandy have been mixed, some predicting the damage will be greater, some less, than when Hurricane Katrina hit the Gulf Coast in 2005. Between damaged and totaled vehicles, Katrina impacted 600,000 automobiles.
GrooveCar President David Jacobson said the latest number for Sandy was 250,000 totaled cars, with many more to come.
"Dealerships are running out of inventory, that's the greatest problem. Most dealers keep 60 to 90 days of vehicle inventory in stock, but that is drying up already. They are having to pull inventory from other states," added the lifelong Long Island, N.Y., native who has been in the automotive industry for more than 30 years. "The last time I saw any kind of rush to buy cars like this was around 1987, I think, late in the year, when the state announced it was taking away the ability for people to write off their interest on a car loan established after that year. Everyone and their mother bought a car that December."
Leasing Activity Also Spikes
The aftermath of Hurricane Sandy will affect more than car sales and the loan balance sheets of banks and credit unions in the Northeast. Prices of new and used cars, likely from the middle of the U.S. and eastward, will increase, sources said. Jacobson, reported, too, that leasing activity is up 200%.
Sandy should prolong the inflated value of used cars already brought on by tight supply due to consumers hanging onto their cars longer than at any point in recent history (Credit Union Journal, Jan. 12), sources said. Ricky Beggs thinks Sandy's impact will affect used prices for four to six months.
"Too, just like when Katrina hit, these new car buyers won't be bringing in trades," said the VP and managing editor of Black Book, Gainesville, Ga., during Thanksgiving week. "Used values will increase. I thought it would take a couple weeks after Sandy to see effects in the wholesale market, but we just got a report from one remarketing arm indicating used cars are being sold at a little bit better value and on a little wider geographic area than they had anticipated."
What's causing the rise in used prices to extend well beyond the Northeast, Beggs noted, are online sales of new and used cars as dealers reach into a wider area to find replacement vehicles. "I talked to a dealer in Texas who knew of a dealer in his area already loading up a couple truckloads of cars and shipping them to the Northeast."
Jacobson believes new car prices in the Northeast will tick up due in part to the fact the great deals on last year's models won't be around much next year. "The 2012 leftovers will be gone a lot sooner now. Inventory will be smaller, so you could see some higher prices on new cars at the start of next year."
Certain Cars, Trucks In Great Demand
Not only could inventory affect new car prices, but demand for certain types of cars, asserted Beggs. He predicts trucks and cargo vans will be in demand as construction companies and contractors need to add vehicles to keep up with the work to rebuild in Sandy's wake. "The storm, because of where it hit, also damaged a lot of luxury vehicles," said Beggs.
While estimates on damaged cars, in the near term, will continue to change, as well as will the predictions on how long consumers will keep flocking to auto dealer showrooms, Beggs thinks the impact of Sandy on auto lending and auto sales will be great. "It will be quite a while before we know the total number of damaged and totaled cars from this storm. Katrina's impact was big. I think Sandy's will be bigger."
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