Flood-damaged cars to drive up new and used car prices

More than 22,500 cars have been damaged by floodwater and that’s bad news for the cost of new and used cars. Here’s why.

Flood-damaged vehicles are set to wreak havoc on Australian car sales, driving up prices and wait times for new and used cars.

The loss of 22,500 cars to flood damage “will further increase pressure on the used car supply situation”, according to Industry analyst Ross Booth, general manager of vehicle valuation service Redbook.

“We already have an increase in demand because people want their own space instead of using public transport, and there’s less cars due to supply issues,” Mr Booth said.

Thousands of drivers were caught out by floodwaters in East Coast storms. Picture: Steve Pohlner

“There are so many factors impacting the system at the moment, including fuel prices.

“Those 20,000-plus cars taken out of the ecosystem will need to be replaced.”

Long waiting lists brought on by supply shortages and strong demand for new cars will make it hard for drivers to replace lost vehicles.

Cars were stranded in floodwater in Camden, south of Sydney. Picture: AFP

RACQ claims manager Trent Sayers said the majority of vehicles affected by floods have been written off.

“While it is still too early to quantify the impact of the floods and storms in Queensland and NSW on the automotive industry, there is no doubt it will put further strain on supply,” he said.

The damage bill for flooding in February and March exceeds $2 billion. Picture: AFP

“Not only are there people who have had their vehicles written-off in the floods and are now looking to buy new or used replacement vehicles, but there were also multiple vehicle dealerships flooded.”

New car broker Peter Gee, founder of Motor Scout, said insurance companies are asking his firm to source “whatever they can get today”, rather than providing like-for-like replacements at a much later date.

Customers who don’t want to wait for a popular Toyota might be better off settling for a less popular pick.

Food victims may have to settle for less popular vehicles rather than their first preference.

“People will just take what they can get, thinking ‘I’ve just got to get the kids to school’,” Mr Booth said.

“There could be a worthwhile opportunity for people to look wider than their local area – buy a car in Western Australia, buy a car in South Australia, get it inspected and get it shipped.”

Many policy holders are going to find themselves out of pocket if their car is under insured compared to its real-world replacement value.

“Underinsurance is going to be a massive issue given the 20 to 30 per cent increase in used car prices,” Booth said.

Some flood-damaged cars will be cleaned up and shipped outside of the disaster zone – where people may be suspicious of local cars – to states unaffected by recent floods.

Customers should be wary of great used car deals in the weeks after widespread flooding. Picture: Getty Images

“If something seems too good to be true there’s probably a reason for it,” Mr Booth said.

“It’s very hard to tell – you need to do a vehicle inspection with something like Redbook Inspect or CarFacts.”

Mr Sayers said “we wouldn’t recommend buying a flood-impacted vehicle simply because there is a potential risk of ongoing issues”.

Brisbane was hit particularly hard by this year’s flooding. Picture: Lyndon Mechielsen/The Australian

Data released by the Insurance Council of Australia shows NSW and Queensland motorists have made 22,509 claims relating to floods in the last month.

An ICA spokeswoman said the disaster was “shaping up to be one of the most significant floods this country has experienced”, with almost 145,000 property claims totalling an estimated $2.174 billion.

A handful of car showrooms were inundated by floodwater. Picture: AFP

“Insurers are assisting customers with their claims to help alleviate the stress and uncertainty,” she said.

“We expect to be able to provide a breakdown of claims in the weeks following the disaster clean-up when vehicle-owners can speak with their insurer and assess the damage.”