Price of new and used cars expected to surge as hundreds are written off in floods

Wednesday, 1 February 2023

Cars were submerged in flooding in Auckland, including this one in the suburb of Epsom.

Thousands of Aucklanders’ cars are being written off after being submerged in flooding.

AA Insurance had had 1200 vehicle claims, and had so far written off 300 cars, acting chief executive Simon Hobbs said.

But many of the other claims would lead to cars being written off too.

“If the water has got into the car, it’s a simple write-off,” Hobbs said.

* More than 13,600 flood claims now lodged with insurers

David Meagher, owner of Sal Rose Italian Restaurant assesses flood damage.

* The red severe weather warning explained

That was because water wrecked cars’ electronics.

“Once it gets wet, it might work for a while, but you don’t know when it will stop working,” Hobbs said.

“The last thing you need is for your safety features not to work when they are needed, or your car simply to stop working when you are halfway down the motorway.”

AA Insurance was going as fast as it could assessing cars because it was trying to get money to policyholders as quickly as possible, in anticipation of a surge in demand for new and used vehicles, which could result in prices rising.

“One of the important things at the moment is to process as many of these claims as quickly as we can because we know there’s a limit of new and secondhand vehicles in New Zealand,” he said.

“Supply chain stuff is going to be real challenge in the next six months, to get a stock of vehicles into New Zealand to replace all these that are being written off.”

Over past 12 months, secondhand vehicles prices had been rising as demand had outstripped supply, he said.

When a car is written off by an insurer, it is deregistered and logged as written of on the Motor Vehicle Register.

The register shows dozens of vehicles, including a Harley Davidson motorbike and several Ford Rangers, were written off for flood damage on February 1.

Over 100 cars were completely flooded in the carpark of a Ronayne St apartment block in Parnell.

Hobbs said once cars are deregistered, they were sent to be sold at damaged vehicle auctions held by the two large rival car auction companies Turners and Manheim.

AA Insurance paid for them to be removed to Turners and Manheim’s yards, but such was the scale of the claims, both Turners and Manheim had secured new temporary storage sites to handle such a large number of vehicles.

Greg Hedgepeth, chief executive of Turners, said: “There have been hundreds coming in over the last couple of days.”

The company expected to handle as many as 2000 written off cars in the coming days.

“This will be one of the biggest, if not the biggest weather event we have dealt with,” he said.

Like Hobbs, Hedgepeth expected a spike in demand for used cars as people whose cars were written off in the flood get their insurance money, and try to replace them.

“There is potential for some upwards price pressure. The industry has been a little bit light on stock in terms of used vehicles for a while now,” he said.

Turners currently had around 2600 cars up for sale, he said.

“We’re ready for that demand.

At auction, written-off cars are sold to dismantlers, and scrap metal merchants, Hobbs said.

Useful parts are stripped from vehicles, and scrap metal, and some components are exported. Other parts are used to repair vehicles in this country.

Hedgepeth said there had been a shortage of imported parts thanks to Covid disruption, and the parts stripped from written off cars would welcome to help keep other vehicles on the road.

Manheim had also set up a temporary storage location in south Auckland with the capacity to hold 400 to 500 vehicles with additional sites on standby depending on demand Andy Cox, Manheim’s NZ sales manager for salvage told the Autotalk news service.

Turners had opened a temporary site in Onehunga to handle the volume of written-off cars, Hobbs said.

The end of life car industry is large, already handling about 150,000 vehicles a year.

Once a car has been written off, it could still be repaired, and returned to the roads, but Hobbs said the process was “stringent”.

Cars written off by insurers overseas, including some in floods, had been repaired, and then imported to be sold in New Zealand, Hobbs said.

Car dealers must disclose when this has happened, with one Auckland car dealership ordered to pay more than $7000 after not telling a customer the vehicle they were buying had been written off in an accident.