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AUSTIN (KXAN) – If you’re thinking about buying a new or used car anytime soon, you might want to put on the brakes.
Economists say the microchip-stricken industry saw prices flatten out between June and August, but now they fear it could rise again thanks to Hurricanes Ida and Nicholas.
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“Before the hurricanes, auto production fell from about a third to 60 percent, depending on the automaker,” said Edward Anderson, Wright Centennial Professor of Management of Innovative Technology at the University of Texas’ McCombs School of Business.
In recent weeks, Toyota announced that it would cut more than 400,000 units in September and October due to the ongoing chip shortage, in addition to the reduced production announced in August.
According to CNBC, GM and Ford have also announced another round of cuts.
Anderson says that low inventory levels already drove up new car prices, which in turn drove up used car prices and demand.
“Over the past year we’ve seen price increases of up to 50%,” said Grant Feek, CEO of Tred, an online human-to-human car marketplace. “Such nice, pretty unprecedented increases in US car prices right now.”
Killion Auto Sales in Round Rock used to have around 40 to 60 cars in its parking lot at a time.
“We have the saying here that we’re not a museum, so we don’t have to collect a lot of cars,” said Michael Killion, partner at Killion Auto Sales in Round Rock.
Now partner Killion says it fluctuates between just two and 15 cars on their property. He says there are fewer cars in his used lots than his from new car dealers.
“The Chevy store I go to every day usually has zero to three cars, and it used to have 800 new cars,” Killion said.
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Feek fears that hurricanes “could be a catastrophe for the auto market”.
“They can wipe out an entire region with their vehicles,” he said. “It will be very difficult to get replacement vehicles given the current shortage.”
Anderson says when Hurricane Harvey hit, about 500,000 drivers needed new cars.
“When that happened, when Hurricane Harvey hit Houston, it drove car prices up 3% nationwide,” said Anderson, a supply chain expert.
This time around, in the midst of an unprecedented market, he estimates that could mean a 10-20% increase for Austin.
“We’ve never had a car shortage like this in terms of production,” said Anderson.
“It’s just one of those deals that you don’t even really know how to plan. You just go day after day and do what you can, ”said Killion.
He says there are still products out there every day, it just might not be the car you’re looking for.
Buyers: keep an eye out for cars with flood damage
Anderson also warns that flood-damaged cars could hit the used car market.
“We have seen people try this in previous hurricanes, where they were selling cars that were actually damaged by flooding and just trying to cover it up,” he said.
So how can you tell if a car you’re about to buy has been involved in some type of flood? AAA Texas’ Joshua Zuber says the first thing you should check for any obvious signs of damage.
“You look at the upholstery, the carpeting, you look at the various metal parts of the vehicle, you know that there is no rust or corrosion,” he explained.
He also says it’s a good idea to get a vehicle report, title check, and pre-purchase inspection before buying a vehicle.
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