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Uncovering Washed Titles and Traces of a Watery Past

When the floodwaters recede, they often leave behind damaged cars, and that's where trouble can begin for used-car buyers. After the owners of damaged cars settle up with their insurance companies, vehicles are sometimes refurbished and resold. And sometimes, a middleman buyer intentionally hides a car's history as a flood-damaged vehicle through a process known as "title washing" and sells it to an unsuspecting buyer in a state unaffected by the disaster. Electrical and mechanical problems then surface later — long after the seller is gone — leaving the new owner with an unreliable car and no recourse against the seller.

Serious floods have affected several regions of the U.S. in recent years, including the devastation that Hurricane Sandy brought to the Northeast in the fall of 2012. Estimates of the number of cars flooded by Sandy varied widely, with some sources putting the number of cars potentially lost at 600,000. Based on claims information, the National Insurance Crime Bureau put the number at 230,000 but noted that some of the damage might be minor. An Associated Press analysis of claims made with several major insurance companies in early November 2012 put the number of damaged cars far lower, at about 40,000.

After Hurricane Katrina in 2005, Automotive News estimated that cars from some 200 dealerships across Alabama, Louisiana and Mississippi were damaged or destroyed. Carfax, a vehicle-history checking company, reported that more than 500,000 cars were likely affected.

In the wake of disasters such as Katrina and Sandy, state motor vehicle registries "brand" cars that have been inundated by flood waters. Such branding changes the car's title to a salvage title, which alerts future buyers that the car was declared a total loss by an insurance agency, either because of a serious accident or a number of other problems. A flood title specifically alerts future buyers that the car has damage from sitting in water deep enough to fill the engine compartment. The branded status will be called out on a vehicle history report, according to vehicle history report company AutoCheck.

More than half of the vehicles with salvage titles are resold, estimates Larry Gamache, Carfax's communications director.

"Flood-damaged cars end up going to places where consumers don't suspect it," Gamache says. "But as the con men get smarter, we get smarter on how we deter it." Carfax spokesman Christopher Basso says the sale of flood-damaged cars happens most often in private-party sales than on dealer lots. Reputable dealers use vehicle history reports to check cars they're offered so they can avoid such problems, he says.

Car shoppers should follow that example. A history report will detail the vehicle's past, including the states in which it's been registered, experts say. A vehicle history report should reveal any branding for flood damage, even if someone has washed the vehicle's title by moving it through multiple states with differing regulations.

To get the straight story, a good, low-cost starting point is the National Motor Vehicle Title Information System, operated by the Department of Justice. For $7 or less, you can get a report that includes federally mandated information on the vehicle's status that comes from junkyards, salvage yards, auto recyclers, insurance carriers and most state motor vehicle departments. This should be enough for most people to determine if they want to move forward. For more information on a car, there are the vehicle history reports from Carfax and AutoCheck. They vary in price, but single reports are about $30. And as with any used-car purchase, the buyer would be wise to have a mechanic check the car out.

In addition to getting a vehicle history report, here are some flood-spotting tips from the National Automobile Dealers Association that will minimize the risk to used-car buyers:

1. Be alert to unusual odors. Musty or moldy odors inside the car are a sign of mildew buildup from prolonged exposure to water. It might be coming from an area the seller is unable to completely clean. Beware of a strong air freshener or cleaning solution scent, as it may indicate the seller is trying to cover up something. Run the air-conditioner to see if a moldy smell comes from the vents.

2. Look for discolored carpeting. Large stains or differences in color between lower and upper upholstery sections may indicate that standing water was in the vehicle. A used car with brand-new upholstery is also a warning sign, as a seller may have tried to remove the flood-damaged upholstery altogether.

3. Examine the exterior for water buildup. This may include fogging inside headlamps or taillights and damp or muddy areas where water naturally pools, such as overhangs inside the wheelwell. A water line might be noticeable in the engine compartment or the trunk to show that the car sat in standing water.

4. Inspect the undercarriage. Look for evidence of rust and flaking metal that would not normally be associated with late-model vehicles.

5. Be suspicious of dirt buildup in unusual areas. These include areas such as around the seat tracks or the upper carpeting under the glove compartment. Have an independent mechanic look for caked mud or grit in alternator crevices, behind wiring harnesses and around the small recesses of starter motors, power steering pumps and relays.

According to Fraud Guides, if you suspect a local car dealer is committing fraud by knowingly selling a flood car or a salvaged vehicle as a good-condition used car, contact your auto insurance company, local law enforcement agency or the National Insurance Crime Bureau at (800) TEL-NICB (835-6422).

Of course, the best advice when trying to avoid a flood-damaged vehicle is the adage you've heard so often: If a deal seems too good to be true, it probably is.

Updated: 06/04/2014  - by , Senior Consumer Advice Editor


For more information, contact us at 713-515-5774 or 713-858-8113
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