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| Steer clear of flood cars | |||||
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Hurricanes have swamped hundreds of thousands of new and used cars. Some of them will be polished up and sold in used car lots near you. Here's how to protect yourself. By Chris Solomon Perhaps 10% of cars and trucks in Louisiana and Mississippi -- 571,000 vehicles -- were destroyed in Hurricane Katrina, according to an initial estimate by the National Automobile Dealers Association, and Hurricane Rita covered tens of thousands more. At one point, about 50 auto dealerships in and around New Orleans, including some of the states largest, were underwater, says Bob Israel, executive vice president of the Louisiana Automobile Dealers Association. Thats bad, you say -- but what does it have to do with me, in Boston or Denver or Las Vegas? Plenty, if youre going to be in the market for a used car in the next several months. So-called "flood cars" -- cleaned up and then put on the block by sellers who sometimes hide the cars past -- will start appearing around the nation in the coming months. A little water, not so bad -- but a lot of water? A car that sat for a short time in top-of-the-wheels water after Katrina may not have suffered irreparable damage, says Alan Rosenblum, service manager at Adams Automotive in Houston, a metropolis that saw 50,000 flood-damaged cars after Tropical Storm Allison hit in 2001. Replacing the fluids in the engine is often enough to get the car running well again, he says.
But if water enters a cars passenger compartment, as happened in Katrinas wake, its trouble for many reasons:
Where the cars go So what happens to all of these water-wrecked cars, anyway? Of the vehicles damaged at Louisiana dealerships, most will be total losses, says Israel of the Louisiana auto dealers group. After past hurricanes, a few cars have gone to Hollywood for movie work. Some have been recruited for safety tests. The bulk of them will be sold for scrap or salvaged for parts. Many, however, will make it back on the road, often driven by unwitting buyers. Related news and commentary on MSN Money Here are four chief ways that consumers get fleeced: The uninsured seller. An owner whose vehicle was caught in a bad flood -- usually with damage in excess of 75% of the autos worth -- is required by law to get a new title that says that the vehicle is a "salvage" or "flood damage" vehicle, depending on the terms the state uses, says Keith Kiser, registration and title program director for the American Association of Motor Vehicle Administrators, which represents officials in state departments of motor vehicles. But a seller who doesnt have insurance to cover repairs or who doesnt want the car branded as damaged will just clean it up without informing a buyer of its past, says Kiser. Unscrupulous salvage buyers: When a car is declared a total loss, the insurance company will cut a car owner a check, take possession of the vehicle and then sell it for pennies on the dollar to professional salvage or auction companies. These companies buy cars in bulk and sell them for parts and scrap, or sometimes to recondition them. Along the way, the vehicles titles should have been branded to indicate their damage "but in some cases it doesnt get done," says Kiser -- which allows unscrupulous salvagers to clean them and sell them for prices several times higher than salvage cars. And its not just run-of-the-mill scofflaws who have profited. In January, State Farm Insurance, the nations largest auto insurer, agreed to a $40 million settlement after it admitted it had sold thousands of salvaged cars without salvage titles, as required by law. Title "washers." Criminals sometimes will take a vehicle whose title is marred by the words "flood damaged" or "salvage" to another state and use the discrepancies in state standards to help "wash" the title clean. "Not all states have the same brands" such as "flood car," or have the same thresholds for applying those terms, explains one former investigator for the federal government who didnt want his name used. "Because of that, you can manipulate the process" and move a car to a state where the cars past sins are expunged from the title. Since some states, such as North Dakota, use the more general term "salvage," a flood-damaged car thats retitled in North Dakota would be harder to spot. Some hide the title. The last ploy is remarkably easy: Some devious dealers distract would-be car buyers and never show the vehicles actual, existing title (which may tell them of the cars status) until its too late, says Jon Sheldon, a staff attorney for the National Consumer Law Center and co-author of "Automobile Fraud: Odometer Tampering, Lemon Laundering, and Concealment of Salvage or Other Adverse History." Your best defense If you suspect that youre dealing with a flood car, experts advise that you: Get a hired gun. Take an expert mechanic to look over the car. Your Uncle Earle doesnt count. Be very afraid of buying something as expensive as a car over an online auction site like eBay in which you and your mechanic cant get a chance to see the car in person, or actually drive it.
Crawl all over the car. Good detailers can hide a lot of sins with a scrub brush, a few cans of shampoo and a pine tree-shaped air freshener dangling from the rear-view mirror, but they cant get all the grime. Look everywhere. (See where to look to the right.) Be an electronic snoop. Find out as much as you can about the car before buying. There are a few ways to do this:
Eyeball the title. Insist on seeing the vehicles existing title. If it says that the previous owner is an insurance company, "that would be a pretty good indication" that theres an issue with the car, says attorney Sheldon. Also, check where the car was recently registered. The Big Easy? Biloxi? That should raise an eyebrow. And if the owner or dealer wont show you the title, walk away. And always ask about "damage disclosures" at dealerships. Should you ever consider a flood-damaged car? Is a flood car ever a smart buy? Almost never. "Total restoration of a flood-damaged car can be as extensive and expensive as restoring a classic car," cautions John Nielsen, director of AAAs Approved Auto Repair Network. "Compare the value of the vehicle to be restored to the cost of restoration" before jumping in, he warns. Mechanic Rosenblum is more specific about what to look for: "You have to watch for a water line in the vehicle," he says. A high-water mark thats higher than the cars major electronics, and especially up by the dash, is evidence that the electronics have been fried -- and "I would not buy it," he says. "Youre looking at a ton of problems down the road." He recalls an Oldsmobile brought into the dealership where he worked in the early 1990s that should have been declared totaled, but the insurance company didnt write off the car. Over the next few years, repairs ran $7,000 to $8,000, he recalls. However, for cars with less significant damage, others see possibility.
"Lets say a car had water in the floor. The most common things that are going to be affected are the wire connections to the rear lights and some other wire connections," says the former federal investigator. And, of course, the carpeting. "Ive got a grandson whos 17 years old. Would I mind buying a $3,000 car to send him to college with, if it had minimal flood damage?" If the car is otherwise safe, a car that might last for two or three years might be worth it, he says. "Its always about disclosure," he concludes. "An honest dealer will always tell you whats been done to the car." | |||||
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