Now that the flood waters from Hurricane Harvey are beginning to recede, the recovery and rebuilding effort is underway. In the wake, it’s estimated that 300,000 to 500,000 vehicles may have been destroyed, according to Cox Automotive chief economist Jonathan Smoke. Cox Automotive is the parent company of Kelley Blue Book. These owners are confronted with two questions, what to do with the damaged cars they have and what should they replace them with. Even more important on the latter is avoiding flooded cars.
Owners should take a page from Mike Jackson, CEO of auto retailing giant AutoNation, who said his group will be scrapping all the flooded vehicles in inventory. “Any time you get a flood level in a vehicle above a foot or two, you really should scrap the vehicle,” Jackson told CNBC’s Squawk Box. “The damage that’s done to the electrical systems in these high-tech cars—just forget about it. They’re all going to have to be replaced.”
Evercore ISI, an investment banking and research firm, estimates that one in seven vehicles in the Greater Houston area may have been destroyed by the flood. Owners should be able to collect from their insurance firms on the loss, it’s when they are looking for a replacement, they should look out for vehicles being sold at fire sale prices or with salvage titles. This advice also applies to used car buyers outside the flood area, where some damaged cars may be sent in an effort to unload rather than outright scrapping them.
In the flood’s aftermath, insurances companies decide the fate of affected vehicles. Many are written-off, branded as flood damaged and sold for salvage. However some will hit the roadways once again – slowly deteriorating from the inside out – and due to a tactic called “title washing”, you might never know you’re driving one.
Laundering the ownership trail
Title washing occurs when a vehicle’s title is branded in one state – for example, as “flood” damaged – but then transported to another state that may have different criteria for title branding. Due to these slight differences, certain vehicles branded as flood damaged in one state may receive a clean title in another.
In the wake of a flood, less than reputable sellers can use this underhanded method to pass off their cars on unsuspecting buyers, many of whom won’t notice a problem until it’s too late.
The best defense is a good offense–go online and buy a vehicle history report. These comprehensive overviews can be accessed from sites like Experian’s AutoCheck, and will track important information including title branding and registration over the vehicle’s life, regardless of where the vehicle is registered.
Other helpful tools include the Department of Justice’s National Motor Vehicle Title Information System as well as the National Insurance Crime Bureau’s VINCheck service, which is free to use. VINCheck compiles data from insurers and allows consumers to see whether a vehicle has ever been declared a total loss or salvaged.
Sniff out a vehicle’s condition
It pays to complement a vehicle history check with a thorough inspection of the vehicle by a trusted and certified mechanic. When cars are submerged during a flood, water and debris will reach areas they normally wouldn’t reach. Even if a vehicle has been refurbished and cleaned up, a mechanic should be able to spot tell-tale signs of water damage.
Following the 2012 Hurricane Sandy flooding, the National Automobile Dealers Association highlighted a number of vehicle areas to check on your own, which include the following.
* Examine the vehicle’s interior and trunk for signs of water and debris. Feel the carpet for moisture and look under it for fading, stains and rust. New or a freshly shampooed carpet isn’t usually a good sign, neither is rust on metal components in the center console or under the dashboard. Make sure to test any electrical components such as the windshield wipers and air conditioning. Also, be aware of any odd odors, as these could be signs of mold and mildew.
* Inspect the car’s exterior and engine bay. Waterlogged headlights or a visible waterline should set off an immediate red flag. While underneath the hood, check for dirt and debris in alternator crevices, tucked in small recesses near the starter motor, power steering pump and behind wiring harnesses. Further, check for visible corrosion and wear to the car’s electrical components.
* Check underneath the car. Make sure to look for caked-on debris, as well as premature rusting and metal flaking, especially on newer vehicles. Brake discs will begin to show rust very quickly.
In the wake of the recent flooding in Texas, the NICB estimates that between 7,000 and 8,000 insured vehicles were damaged by rising flood waters.
“I would advise anyone looking to buy a used car, period, to look into that vehicle’s history,” notes Roger Morris, NICB communications officer. “Consumers should be very cautious of any used vehicle they buy in the aftermath of a flood like this. You can clean up a car pretty well, but it’s the two to three months afterward when problems really start to show up.”