In terms of natural disasters in the United States, 2017 was a hell of a year. All told, the hurricanes, wildfires, hail storms, earthquakes, drought, and other extreme weather events cost the US $306 billion. The second-worst year on record? 2005, when damages from Hurricane Katrina and other disasters totaled $205 billion.
As families and organizations throughout the country are still picking up the pieces, Mark Ornstein—a speaker during our 2018 Predictions for Dealers webinar—told us that the automotive industry faces its own unique, weather-related challenge: disclosures. The following article is adapted from Mark’s presentation:
Most people reading this aren’t going to go out, buy a flood-damaged car, and conceal that fact during a sale to a consumer (although it has happened). Rather, what dealers are concerned about are the sheer number of weather-damaged vehicles that may soon enter the marketplace:
- Hurricane Harvey destroyed an estimated 300,000–500,000 vehicles in Houston and another 500,000–800,000 in the rest of southeast Texas and Louisiana.
- Hurricane Irma destroyed an estimated 200,000–400,000 vehicles.
- And the flooding, fires, and mudslides in California damaged tens of thousands more vehicles.
Statistically, about 50% of those vehicles will wind up in the stream of commerce, which means dealers can expect to see these vehicles, whether they knowingly buy them vehicles or not. Why would a dealership not know if a car had weathered Harvey or Irma? Don’t insurance companies typically total, brand the titles of, and crush these vehicles?
Yes—but not every consumer buys insurance, and many Texas residents neglected to purchase flood protection before last fall. For these individuals, a ruined vehicle is a liability to trade in to their local dealership.
Note that some states eliminate this issue. Louisiana will crush disaster-damaged cars. Other states like Florida and Texas will brand the title. But many states do neither. And this doesn’t necessarily stop an unscrupulous wholesaler from washing the title and selling it out of state or forging vehicle identification numbers.