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Flood Cars Hit Resale Market

By Aaron Crowe

Identify Flooded CarsThousands of cars damaged in the recent Texas and South Carolina floods could be finding their way into other states, with their damaged mechanical parts and electronics posing a risk for drivers, warns a Washington state licensing department.

The “flood cars” could get cheap or insufficient repairs and not look water-damaged from the outside. They could then be sold with the sellers or buyers being unaware of the vehicle’s true history, according to a warning from the Washington state licensing department.

While selling such a salvaged car isn’t illegal in Washington state, not disclosing its history is illegal. Flood cars must be marked as junk or salvage to warn future buyers of potential car problems, according to Kars4Kids.

In the three years since Hurricane Sandy hit the U.S., half of the 250,000 cars damaged by the hurricane will be resold, some in states that don’t require disclosure that they’re flood cars, according to a Kars4Kids graphic.

How salvage process starts

The process of determining if a water-damaged vehicle can be driven again is determined by insurance companies after a flood. They determine if a flooded car can be repaired or needs to be completely salvaged.

If a car is labeled as salvaged, it can still be sold if labeled as such on its title through the state DMV. If an insurer declares it a total loss, the salvaged vehicle will be auctioned to recyclers, who work with law enforcement and the National Insurance Crime Bureau, or NICB, to ensure they’re re-titled through their state with a “Salvage” title that shows the vehicle was flood damaged.

The cars then move down to recyclers, who take them apart and sell their salvageable parts.

Flood-damaged cars with a salvage title can still be sold. Some states require that flood damage be listed on the title, while others don’t. It’s up to the buyer to determine if they’re comfortable buying such a car with its checkered past.

Cars that aren’t listed as salvaged — but are still declared a total loss — can be repaired and sold in “good” condition.

Some salvaged cars from floods, however, bypass recyclers through unscrupulous sellers and the refurbished cars are sold to unsuspecting buyers who aren’t told about the car’s true history.

Some flood damage can’t be fixed

Cars aren’t built to be water tight, and even minor flooding can damage a car’s electronic systems that are often under seats or in other low points in vehicles. Mechanical problems may not happen immediately to a flooded car, with rust causing damage over time and axles falling apart from rust, for example.

“A lot of water-damaged cars are total losses,” says Robert Passmore, assistant vice president of personal lines policy at the Property Casualty Insurers Association of America.

A salvage title is the first tipoff that a low-priced may have been flooded and repaired. But not everything can be fixed on a water-damaged car.

“If a car is refurbished after a flood they can fix cosmetic items on the car but it is really hard to repair an engine that has water damage,” says Chrissy Nigro of Nigro Insurance Agency in Philadelphia.

How to spot flood-damaged vehicles

Along with using a reputable car dealer and staying away from cars that have extremely low prices that seem too good to be true, consumers can avoid being scammed with flood cars by doing a free NICB background check of the vehicle’s VIN, or vehicle identification number. Assuming the VIN hasn’t been changed, the check will show if the vehicle has ever been salvaged.

Buyers should also ask to see the title of a used car, checking the date and place of transfer to see if it came from a flood-damaged state and if it’s a “salvage’ title.

A car should also be inspected by a licensed mechanic, and buyers should look themselves for signs of water damage.

The Washington state Department of Licensing recommends the following checks for potential flood-damaged vehicles:

  • Check gauges on the dashboard to ensure they’re accurate, and to look for signs of water.
  • Test the lights, windshield wipers, turn signals, cigarette lighter, radio, heater and air conditioner several times to make sure they work.
  • Flex some wires under the dash to see if they bend or crack, since wet wires become brittle upon drying and can crack or fail at any time.
  • Check the trunk, glove compartment and beneath the seats and dash for signs of mud, rust or water damage.
  • Look for discolored, faded or stained upholstery and carpeting.
  • Check for a well-defined line, or watermark, on the car and for musty odors resulting from mildew.

Insurance for flooded cars

There are some insurance issues to be aware of after buying a flood-damaged car, and when making an insurance claim on a flooded car.

Generally, an insurance company will only offer limited coverage or none at all on a car that has been issued a salvage title, says Nigro, the insurance agent.

Insurers usually don’t need to pre-inspect a used car before insuring it, Passmore says. However, any damage to a car from previous owners, such as from a flood, won’t be covered by car insurance for the new owner, he says.

While homeowner’s insurance often doesn’t cover flooding, auto insurance does. For someone who has had their car damaged by a flood and wants to be reimbursed by their insurer for the loss, the comprehensive coverage in their auto insurance policy will cover flooding.