AUSTIN (KXAN) — If you’ve been thinking about buying a new or used car anytime soon, you may need to hit the brakes.
Economic experts say the industry, ravaged by microchip shortages, was seeing prices start to level off between June and August, but now they worry it may spike again thanks to hurricanes Ida and Nicholas.
“Prior to the hurricanes, car production has dropped from about — depending on the car company — from one-third to 60%,” said Edward Anderson, Wright Centennial Professor for Management of Innovative Technology at the University of Texas’ McCombs School of Business.
In the last couple weeks, Toyota announced it would be cutting back more than 400,000 units due to the prolonged chip shortage during September and October, on top of already lowered production previously announced in August.
GM and Ford have also announced another round of cut backs.
Anderson says low inventory had already driven prices up for new cars, in turn pushing prices and demand up for used cars, too.
“We’ve seen pricing up as much as 50% in the past year,” said Grant Feek, CEO of Tred, an online person-to-person marketplace for cars. “So pretty, pretty unprecedented increases in U.S. car pricing right now.”
Killion Auto Sales in Round Rock, Texas used to keep about 40 to 60 cars at a time on its lot.
“We have a saying around 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.
Now, Killion says it fluctuates between just two and 15 cars on his lot. He says there are fewer cars coming into his used lots from new car dealers.
“The Chevy store I go to every day, they usually have zero to three cars, and they used to have 800 new cars there,” Killion said.
Feek worries hurricanes “can mean disaster for the car market.”
“You can get a whole region with their vehicles wiped out,” he said. “It’s going to be very challenging, given the shortage that already exists, to get replacement vehicles.”
Anderson says when Hurricane Harvey hit, about 500,000 drivers needed new cars.
“Hurricane Harvey… drove up car prices nationwide by 3%,” said Anderson, a supply chain expert. “We’ve never had a car shortage, in terms of production, like we do right now.”
“It’s just one of those deals where you don’t even really know how to plan for it, you just go day by day and do what you can,” said Killion.
He says they are still seeing product come in daily, it just might not be the car you’re looking for.
Anderson also warns flood-damaged cars may hit the used-car market.
“We have seen in prior hurricanes people trying to do this, where they have sold cars that were actually damaged by floods and just tried to cover it up,” he said.
So how can you tell if a car you’re looking to buy has been involved with any kind of flooding? Joshua Zuber with AAA Texas says the first thing you’ll want to do is look for any obvious signs of damage.
“You’re looking at the upholstery, the carpeting, you’re looking at the various metal components of the vehicle, you know making sure there is no rust or corrosion,” he explained.
He also says it’s a good idea to do a vehicle report, title check and a pre-purchase inspection before buying a vehicle.