Storm-damaged vehicles may now be on the market

Rick Wagner • Oct 20, 2007 at 12:00 AM

Although it’s been more than two years since Hurricane Katrina, some salt water flood-damaged cars from the Gulf remain on the market.

Lax state title laws and procedures and a lack of a national database of salvaged vehicles mean that vehicles with salvage titles or titles branded flood damaged can be washed clean, despite salt water residue and corrosion that still may be on the vehicles.

And even without the damage or destruction of about half a million vehicles from the fall of 2005 when Hurricanes Katrina, Rita and Wilma hit, vehicles damaged in this year’s floods in Texas and elsewhere add to the potential source for flood-damaged vehicles.

Of about 500,000 flood damaged cars (ranging from 400,000 to 600,000 by some estimates), about 200,000 cars were branded on their permanent paperwork as having received some sort of damage in the storm, according to an August USA Today article at www.usatoday.com/money/autos/2007-08-20-flooded-cars_N.htm. But at least 15,000 of those were registered in another state anyway, Experian Automotive reports.

Nearly 45 percent of those managed to lose their storm-damaged designation in the process.

Federal legislation languishes in Congress aimed at forcing insurance companies to share vehicle loss data, including flood damage, with online auto history companies.

The insurance industry has its own computer system listing loss data, but it’s not shared with outsiders.

“If you’ve got a car full of computer chips, any water is hard to deal with,” said Carolyn Gorman, vice president of the Washington, D.C., office of the Insurance Information Institute.

The trade group, representing the insurance industry, was involved in warning consumers about flood-damaged cars in the aftermath of Katrina.

Gorman went to Louisiana six months after Katrina and did a video news release, which can be viewed at www.iii.org/static/video/mediaplayer/katrinacars.wmv .

Potential signs of flooding

The Insurance Information Institute warns consumers to be leery of any vehicle that has:

• Mildew, debris and silt in places where it wouldn’t normally be found, such as under the carpeting in the trunk, or around the engine compartment.

• Rust on screws and other metal parts.

• Water stains or faded upholstery; discoloration of seat belts and door panels.

• Dampness in the floor and carpeting; moisture on the inside of the instrument panel.

• Moisture, mildew or grime in the seat belt retractor, as well as speakers in doors.

• And/or a moldy odor or an intense smell of Lysol or deodorizer being used to cover up an odor problem.

Based on information from the National Insurance Crime Bureau, Gorman further advised that vehicle buyers looking for signs of flooding should get as close as they can to the carpet, lift up the floor mats, and sniff for even the slightly musty odors and look for sand, mud or grit.

“Get your flashlight out. Get into the truck, and lift up those pads,” Gorman said.

Another sign of likely flood damage is rusted or corroded lug nuts and corrosion in the engine compartment.

On the other hand, Phil Bachman Honda General Sales Manager Jimmy McCoy of Kingsport said a vehicle that is much too clean and doesn’t have expected minor corrosion also is suspect.

“Some cars are too clean in the wrong places,” McCoy said.

Gorman also suggested potential buyers walk away from any vehicle if the owner will not allow the potential buyer to get an inspection by an outside mechanic.

Buying from someone who presents himself or herself as a private party seller but is actually a dealer, called curbstoning, also can increase the risk of getting a flood-damaged vehicle, according to the NICB.

The Internet also provides help to avoid unknowingly buying a flood-damaged vehicle.

The NICB has compiled a list of VIN or vehicle identification numbers of vehicles reported damaged in the 2005 hurricanes, and it is available free at www.nicb.org.

For a more general research aid, CarFax and AutoCheck using information from Experian, for fees will provide a vehicle title history check, and CarChex provides vehicle inspection services and extended warranties.

CarChex Chief Executive Officer Jason Goldsmith said that despite title history services like CarFax and AutoCheck, inconsistent state vehicle title laws and the lack of a single, national vehicle history database contribute to car buyers falling prey to unscrupulous car dealers.

“The potential for title manipulation and other consumer abuse can only increase as more and more consumers turn to the Web when purchasing their next vehicle,” Goldsmith said.

Flood cars in Kingsport

Three local sellers of used cars reported having no known Katrina or other flood cars.

“Through my personal experience, I haven’t seen any,” said Ron Baker, owner of Baker Motors in Kingsport. “The best way to avoid these is just deal with a reputable dealer, someone who stands behind what he sells.”

Baker, Rainbow Motors owner Randall Gibson and McCoy of Phil Bachman said as far as they know they’ve neither bought nor sold a Katrina flood vehicle.

“You have to be really careful on something like Katrina,” McCoy said. “We tightened our security.”

One source of flood cars can be auto auctions, but the three said they don’t use that as a source for used cars.

“I personally don’t use the auctions at all. I make my purchases from local dealers because that’s more convenient for me,” Baker said. “With the use of CarFax today, it has become increasingly difficult for people to hide things like accidents and flood damage.”

Gibson agreed, although McCoy said that some flood damaged cars from the South will be cleaned up and end up coming from northern states.

“I know dealers who will purposely deal with local cars, and I know dealers who make their living on auctions,” McCoy said.

“Even we (dealers) miss things and get burned from time to time,” McCoy said. “We’re still leery and we still watch.”

Gibson said some customers know they are trading or selling a reconstructed or salvaged vehicle, while some do not. And those who know don’t always share that information.

Case in point: Gibson said he recently purchased a used pickup truck from a new car dealer, who took it as a trade in. Gibson, in turn, sold the vehicle to another dealer, who called him the next day to say it was a reconstructed vehicle.

“They come back to you and make you look like a crook,” Gibson said. “It’s happened to everybody (in the used car business).”

In Tennessee, cars are branded with a reconstructed title if an insurance company declares a vehicle a total loss, which Baker said usually is if the repair costs would exceed 60 percent of the vehicle’s worth. Virginia has a similar designation, although the dealers said unscrupulous people can “wash” those titles clean.

“It’s supposed to be in Tennessee, but some of the other states will clean them up,” Gibson said.

However, Gibson and another dealer said CarFax will still identify a vehicle as reconstructed or salvaged.

“It will still show up on CarFax,” Baker said.

Insurers sell salvage cars

Ironically, the insurance industry itself is the source of flood-salvaged vehicles that end up being resold.

Dan Oldenburg, a columnist with the Washington Post, pointed that out in a March 2006 column at www.washingtonpost.com/wp-dyn/content/article/2006/03/25/AR2006032500098.html. And Gibson said it is well known in the used car business that insurance companies resell totaled or salvage vehicles that end up being fixed and resold, sometimes without the buyers knowing the full history.

The issue, Gibson said, is not when a buyer and seller both know the car’s history. It’s when an unscrupulous seller doesn’t tell the buyer about a flood or salvage condition that does not show up on the title or a cursory inspection.

Gorman, responding to those who fault insurance companies, said the companies in a situation like Katrina must “make their customers whole” and, in the process, sell off damaged vehicles.

“They ought to point their fingers at themselves and be careful where they get their cars,” Gorman said.

The bottom line is that flood vehicle or not, car buyers should be on the look out when a deal seems exceptional, Gorman said.

“If you find a car that looks too good to be true, as far as price or mileage,” Gorman said. “seriously question whether it is too good to be true.”

McCoy said that car buyers should be diligent and deal with reputable dealers, advice echoed by the other two dealers.

“Unfortunately, those few who do it the wrong way impact the reputation of everybody,” McCoy said.

For more information, visit the Insurance Information Institute at www.iii.org; CarFax at www.carfax.com; or AutoCheck at www.autocheck.com.

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