Hurricane Helene Floods Dealerships with Risks, Opportunities

Hurricane Helene’s path of destruction through the southeast from Florida to North Carolina, Tennessee and beyond has crippled retail auto business in those areas.

Although total dollars amounts are not yet known, expect the impact to be catastrophic. Consider that just one dealership, Ken Ganley Kia, New Port Richey, Florida, lost an estimated 672 vehicles valued at between $28 million and $30 million. And multiple articles and viral videos show other Helene-induced calamities including fires sparked when flood waters swamp battery-electric vehicles.

But that’s just the beginning. For dealers in Helene’s path the storm’s impact will likely include a flood of demand for new and used cars and service.  

“You are talking hundreds and hundreds of miles of destruction. People will need to replace their cars,” Todd Caputo, president of Todd Caputo Consulting, tells WardsAuto.

Though dealers may face an initial shortage of new inventory, manufacturers will rush to replace lost inventory at their dealerships. Kia, for example, has reportedly already sent some replacement inventory to Ganley Kia.

On the used side, demand will also surge, Caputo predicts. That will occur in an environment where dealers are already having trouble acquiring enough used inventory, especially in the lower price range that will likely be in demand.

“A lot of the places where there was a lot of destruction, it is people that are lower income,” he says. “They are not going to be buying or replacing their cars with a late model used car or brand-new car. They are going to be looking for cars under $10,000 or even $5,000.”

Those will be hard to find, and the increased demand for used inventory will push up prices that are just starting to drift downward after surging during the new-car shortage of the last few years, Skyler Chadwick, director of product consulting, Cox Automotive, tells WardsAuto.

“This will jack up used car prices when everybody is already paying overprice,” he says.

And, of course, dealers throughout the U.S. will need to conduct extra due diligence to ensure they don’t inadvertently offer flood-damaged cars.

Caputo expects wholesale prices to climb quickly as demand for used inventory surges. He advises dealers to “get creative” with used inventory sourcing strategies or risk getting caught “flat-footed.”

That may include looking farther afield than usual to purchase used cars, he says.

Dealerships Due Diligence

Before Hurricane Helene, CarFax estimates there were some 89,000 water-damaged cars added to the used car fleet this year alone, spokesperson Em Nyugen tells WardsAuto.

It doesn’t yet have an up-to-date count that includes recent damage, but “if you just take a look at the expansive, destructive nature of Hurricane Helene, we do expect tens of thousands more vehicles are at risk from this latest storm,” she says.

The top three states in terms of number of water-damaged cars before Helene were Texas with 64,000, Florida with 62,700 and Kentucky with 30,200, according to CarFax.

California, the largest retail car market in the U.S., ranked fifth with 20,200.

Based in Sacramento, California, The Niello Company dealership group has 12 rooftops covering nine mostly luxury nameplates and takes extra steps to ensure the cars they offer are not flood damaged.

The dealership group buys 400 to 500 used vehicles monthly, Tully Williams, fixed operations director at The Niello Company, tells WardsAuto. “We have to; otherwise, we will run out.”

His technicians are trained to recognize signs of water damage in used vehicles coming in as a trade-in or from an auction, he says, and have already been put on “high alert” for water-damage.

Being on the opposite coastline from the hurricane does not protect The Niello Company from potentially acquiring damaged vehicles, Williams says. Car wholesalers “are going to put the flooded cars on (trucks) and ship them out west.”

His team first looks for sediment inside the car, under the floormats and dashboard, he says. “Plus, if they stink.”

If something is wrong with the electronics an error light will come on and they can run a diagnostic, he says. Also, the team checks to make sure the battery hasn’t been unplugged, which could mask problems.

“If someone unplugged the battery and plugged it back in, someone is hiding something,” Williams says.

The Niello Company also encourages its customers to bring a used vehicle they plan to or have purchased elsewhere in for an inspection by its factory-trained technicians. “Only dealers can say their techs are factory trained,” he says.

Fixed Ops Opportunity

A disaster for some can represent an opportunity for others. Dealerships’ fixed ops departments will likely gain business from the hurricane damage, Don Monda, senior fixed operations director at The Proctor Dealerships in Tallahassee, FL., tells WardsAuto.

“I hate to beat the drum, but it is a revenue source when stuff like this happens,” he says.

When a customer brings a water-damaged car in for evaluation,  technicians give them “an honest opinion,” Monda says. He urges customers to get their insurance company involved. The insurance company will decide if the car should be totaled, Monda says.

“A lot of time cars can be dried out and they are fixable,” he says. Still, “a lot of these cars will end up at auction. The crazy thing is dealers will send them to auctions out of state so they don’t have to worry about the car coming back to their stores.”

During inspection, water-damaged cars “tell a story,” Monda says. That could be dirt and grass in the undercarriage or inside the car. The computer system also carries signs if a car has been flooded, he says.

Sometimes, the person who brings the car in will inadvertently let you know there is a possibility of water damage, Monda says. “Customers tell you more than they should.”