Beau Boeckmann was outside his Ford dealership in the San Fernando Valley last week, looking at a thick smoke cloud hanging over the sky just 9 miles away. The fierce Palisades wildfire was distant enough for him to feel relatively safe at that moment but too close to ignore the apprehension it created in him.

Boeckmann runs Galpin Ford, one of the largest Ford dealerships in the U.S., selling around 20,000 new and used cars annually. He expressed gratitude that his business and staff are safe, but noted that a customer who lost their home and vehicle in the wildfires has already come to purchase a new car. Boeckmann is unsure how many more customers like this one he will see, but the extensive devastation he witnesses leads him to expect many will be seeking replacements.

“There’s more than one ominous cloud over Los Angeles — a physical one and an emotional one,” Boeckmann mentioned to the Free Press on Monday evening, sharing his shock at the overwhelming destruction.

Experts concurred with him. Despite the human toll, the wildfires have been damaging the nation’s second-largest auto market over the past week, with thousands of vehicles likely totaled. This situation will affect both automakers based in Detroit and consumers, as the rush for replacements is expected to push prices higher, particularly in the already tight used car market.

“Depending on how many vehicles are destroyed, the impact could influence used car prices on a national scale,” stated Jonathan Banks, general manager of vehicle valuations at J.D. Power. “For context, around 250,000 vehicles were lost during Hurricane Sandy in 2012, which we forecast would result in a $300 increase per unit due to that impact.”

While Banks doesn’t remember the exact outcome, he recalls that it ended up surpassing their 2012 predictions.

Thousands of vehicle sales already lost

The exact number of vehicles lost in the fires is still unknown, but images reveal many burnt remnants of cars that once were.

The California Department of Forestry has reported that over 12,300 structures have been destroyed since the fires began shortly after midnight on January 1. This includes vehicles classified as “structures,” as per fire officials. Sadly, at least 25 fatalities have been reported, and the total economic impact is projected to be between $250 billion and $275 billion according to AccuWeather.

Kevin Roberts, director of economic and market intelligence at car-shopping platform CarGurus, informed the Free Press that their analysis showed approximately 25,000 new and used vehicles are listed in areas affected by evacuation orders or warnings in Los Angeles County. This figure represents nearly 6% of listings in California, a region known for having higher vehicle prices. Roberts revealed that the average listing price for cars in the affected areas is $52,000, which is 25% more than the average across the state.

Los Angeles represents the second-largest car market in the U.S., trailing only New York City. The city accounts for about 800,000 new vehicle retail sales annually, making up about 6.1% of the nation’s retail auto sales, according to Tyson Jominy, vice president of data and analytics at J.D. Power. In contrast, Detroit represents 2.3%.

Jominy mentioned that data from J.D. Power indicates that during the first week of the fires, new vehicle sales in Los Angeles dropped by 0.6%, corresponding to roughly 1,000 fewer vehicles sold between December 31 and January 5. While this decline could be attributed to various factors, Jominy noted that “concerns about the fire and vehicle purchases during this time” likely contributed to holding buyers back.

By late Wednesday, the data firm estimated that January sales for new vehicles in Los Angeles could decline by 5,000 to 13,000 vehicles, as individuals either postpone their purchases to regain stability in their lives or opt for used cars instead.

However, those looking for a new vehicle may actually boost sales for Detroit automakers. Given the vast market of Los Angeles, even a fraction of individuals replacing their lost vehicles could lead to a rise in new vehicle sales for the Detroit Three, according to Jominy.

“While we should not overlook the human aspect here, typically, there’s a minor upswing during times like this as individuals replace lost vehicles, adding more buyers to the market,” commented Jominy. “However, things usually stabilize after a couple of months.”

Bob Smith, executive director of the Greater Los Angeles New Car Dealers Association, shared with the Free Press late Wednesday that most franchise dealerships are operating, but many employees have lost their homes. Smith mentioned that the association will collaborate with the National Auto Dealers Association, which has a relief fund to assist those affected.

Smith stated there are “countless stories” of people connected to individuals adversely affected by the fires, though it’s tough to determine how many have lost their vehicles. He remains optimistic that beyond an increase in used car sales, there will also be a rise in new car leases among Los Angeles dealerships.

“I’m just estimating, but I’d guess we might have to replace somewhere between 2,500 and 5,000 vehicles,” Smith asserted. “But that’s just a rough guess.”

How high will used car prices go?

Experts believe that the used car market will see the majority of the demand for replacements due to the fires because many people won’t receive insurance payouts for weeks, Jominy explained, yet they need a vehicle urgently. Lacking a trade-in and possibly not having insurance compensation yet, they tend to look for the most affordable options.

Although used vehicle prices are currently elevated, they remain lower than new ones. The average price for a new car in the fourth quarter was approximately $45,000, compared to $28,740 for a used car, as reported by J.D. Powers’ Banks.

Banks indicated that buyers searching for a newer model used vehicle will encounter a supply that is about 8% lower than last year and 15% down compared to 2019. This shortage is due to the scarcity of three-year lease returns, with supply expected to be 30% below 2019 levels.

Cox Automotive reported that at the beginning of January, there were 2.217 million used vehicles available in the U.S., which only includes those sold through registered dealerships and does not account for private sales.

The limited supply has driven the average monthly payment for a used car to $541 last year, compared to $416 in 2019 before the COVID-19 pandemic. This payment is still lower than the average for new cars, which was $725 per month in December, factoring in both purchases and leases.

Banks added that many used cars might be transported from other states to California to satisfy the local demand. This, combined with an already tight national inventory, will elevate the demand for wholesale used cars and consequently increase prices.

“However, I don’t anticipate that the price hike will be excessively steep, as prices are already high,” Banks commented. “There may be some pricier vehicles locally available, and I would suggest Consumers are encouraged to search beyond their local area to find the right vehicle at a suitable price.

New Vehicles Remain in Abundance

Banks are optimistic that recent disasters will lead to an increase in new vehicle sales for those replacing their damaged cars. Importantly, this situation is not expected to drive up prices, as there is a robust inventory of new cars available.

“I believe discounts on new cars will still be accessible and will not change,” Banks remarked.

Currently, the inventory of new vehicles has hovered around 3 million during the fourth quarter, which is approximately double the amount from two years prior and close to the levels seen before the pandemic, according to Mark Schirmer, director of industry insights and corporate communications at Cox Automotive. He also noted that December was a strong month for car sales, resulting in a reduction of the nationwide inventory to 2.88 million new cars as of January 16.

“There’s plenty of product available for those in need of replacements. However, logistics involved in distributing vehicles to local dealers may take some time,” Schirmer explained. “Additionally, vehicle shipping costs have decreased by 2.8% compared to the previous year and are likely to trend lower throughout 2024.”

Schirmer expressed hope that most vehicles were evacuated from the fire’s reach, but he acknowledged, “We’ve seen the tragic images of burned vehicles, yet we lack an estimate on the actual number lost. However, it’s likely that the losses won’t significantly outweigh the supply of replacement vehicles available.”

Automakers Step in to Assist

In the meantime, several automakers are extending support to residents in Los Angeles affected by the wildfires.

Ford Motor Co. spokesperson Said Deep informed the Free Press that the majority of Ford’s 83 dealerships in the Los Angeles area have remained operational. Some dealerships temporarily closed due to fire threats or power outages, but all employees, along with their families, are safe.

Ford is providing employee pricing to consumers impacted by the fires, as well as deferred payment plans through Ford Credit for affected existing customers.

Additionally, Ford has pledged two grants: one worth $100,000 for the Los Angeles Fire Department Foundation and another of $150,000 for the California Community Foundation’s Wildfire Recovery Fund. Ford Philanthropy also supports organizations like the American Red Cross, Feeding America, and Team Rubicon, which offer shelter, food, and various on-the-ground assistance.

General Motors (GM) is still in the process of assessing the overall impact on its vehicles due to the fires, GM spokeswoman Tara Kuhnen shared in an email to the Free Press. However, to aid drivers in Los Angeles, GM activated complimentary OnStar Crisis Assist Services for affected Chevrolet, Buick, GMC, and Cadillac customers.

“The health and safety of our employees and their families remain our top priority, which is why we’ve closed our facilities in the affected areas,” GM stated.

On Wednesday, Honda announced it would double its earlier commitment of $500,000 to disaster relief by donating a total of $1 million to the American Red Cross to help those affected by the wildfires. Honda Financial Services and Acura Financial Services are also implementing payment extensions and lease deferrals for impacted customers.

Stellantis announced similar support by offering employee pricing to those in need, while its finance partners are also providing assistance to affected customers.

Detroit vs. LA: The Auto Capital Controversy

At Galpin, Boeckmann shared that he held a staff meeting to encourage his team to review their extensive customer database for anyone located in areas affected by the wildfires—reaching out not for sales, but to offer help.

“If they require a vehicle, I’m more than willing to provide one for their use temporarily,” Boeckmann noted. “The intent of the call is purely to provide assistance, not to solicit anything.”

Once the concerning situation subsides, Smith from the Greater Los Angeles New Car Dealers Association conveyed that the automotive industry will assist those in need of transportation.

“While Detroit is recognized as the car capital, LA also claims a strong position due to its dense population and broad reach. Those who choose to stay will undoubtedly require vehicles,” Smith said. “Residents looking to rebuild will find ways to secure transportation. A silver lining in this unfortunate situation is that there are ample new vehicles available for those who need them.”

This article includes contributions from Free Press staff writers Eric D. Lawrence and Jackie Charniga.

Jamie L. LaReau is a senior auto writer covering Ford Motor Co. for the Detroit Free Press. Contact her at jlareau@freepress.com. Follow her on Twitter @jlareauan.