Ben Bartosch Discusses Impact of Natural Disasters on Vehicle Pricing for Dealers and Consumers; J.D. Power Used Vehicle Price Index
"These types of events are unpredictable and the impact they can have on used vehicle pricing is difficult to forecast. Having sound, robust data can be very beneficial to J.D. Power clients in mitigating any loss." -- Ben Bartosch, J.D. Power
Hurricanes and other natural disasters invariably cause price increases in the automobile market across the affected area, with a ripple effect that extends beyond the direct points of impact. The exact effect of each event, however, differs, so it is important to have historical data as a benchmark to help predict the pricing impact, says Ben Bartosch, Manager of Forecast Analytics at J.D. Power, in a new audio interview for journalists.
It is a problem that is actually more acute for businesses than it is for consumers. When a natural disaster occurs, consumers tend to vacate the affected area with their vehicles, which in many instances will enable them to prevent loss.
It's much more complicated for dealers and wholesalers. They will attempt to move their inventory to areas where they can minimize the loss, but that's not always possible to do, so they plan for a loss.
"We use the major events -- like Hurricane Harvey in Texas, Superstorm Sandy in the Northeast and Katrina in New Orleans -- as gauges to forecast the impact of natural disasters on vehicle pricing after a major storm or other severe event," Bartosch says.
While the primary effect is on pricing of used vehicles in the area directly touched by such events, the impact manifests itself across a much wider radius as dealers or auction houses work rapidly to replenish their inventories from other areas.
Prices increase for a couple of reasons, Bartosch says:
There is a lack of supply due to losses experienced by auction houses and dealers.
There is a short-term boost in demand due to losses suffered by consumers.
Depending on the size of the storm and the amount of the actual damage, the price increase -- or the relationship between supply and demand -- varies.
Other variables that can affect the prices of vehicles immediately following a natural disaster include: the severity of the event; the time of year when the storm occurs; and the amount of time it takes for the region to recover from an infrastructure and communications perspective.
"We see the most significant increase in prices potentially related to a storm occur one-to-three months following the natural disaster," Bartosch says.
J.D Power collects vehicle price data on daily, weekly and monthly bases, analyzing the details and summarizing them in various ways. For business customers, our monthly Used Vehicle Price Index report is available free of charge for historical information and they can also purchase the historical data combined with price forecast analysis. Go to www.nada.com/priceindex for more information or to subscribe.
Armed with this data dealers, auction houses and others in the industry can better assess risk and plan their portfolios -- or books-of-business -- accordingly.
"These types of events are unpredictable and the impact they can have on used vehicle pricing is difficult to forecast," Bartosch says. "Sound, robust data is essential to planning and minimizing loss in the aftermath of natural disasters and major storms."
To listen to the entire podcast interview with J.D. Power's Ben Bartosch, visit: