Monday, March 31, 2014

Buying flooded cars could be an option that is very tempting

After a major hurricane hits the country there are hundreds of thousands of insurance claims filed for damaged vehicles. In cases like Katrina or Sandy the number of totaled cars alone accounted for dozens of thousands, with insurers paying out billions of dollars for comprehensive and total loss policies. Those affected by the disaster use the payout money to buy another car while the destroyed one gets towed away by an insurer-contracted company, which specializes in car salvage after hurricanes. And that's where the totaled car starts its new life.
Most of the cars damaged by seawater or wind end up being broken down to salvage parts or melted for rubber and metal. But there are a considerable percentage of these cars that get out of the procedure completely intact to be sold to out-of-state and foreign buyers without ever being titled as damaged by flood. This scheme gets applied after every major hurricane, exploiting the inconsistencies in state regulations concerning totaled cars. And what's really troubling about the whole practice is that such cars are unsafe to drive despite their seemingly perfect appearance.
Because it enters all of its systems and damages various components with salt seawater tends to damage any car badly. Moreover, during hurricanes seawater gets mixed with sand, which is another highly corrosive agent, and assuming that some cars may stay flooded for weeks until the hurricane impact is eliminated, you can imagine how badly the car may be damaged. Those dealing with flooded cars know that very well, so they will never list them as totaled. Instead they will eliminate any mention of flood damage, which can easily be done when the car is taken to another state or overseas. And after some repair and refurbishing the potential buyer will never suspect that he's paying for a faulty and potentially hazardous vehicle.
When getting car insurance quotes for it one would assume that the fact that the car was flooded would be determined. And since insurers have a national database on all cars they've dealt with this is partially correct. However, the entries to this database can be sporadic and inconsistent, which lets too many flooded cars stay unnoticed even by the same insurer, which ends up dealing with a different car after its title has been modified by the fraudulent sellers and intermediaries. In a market where a flooded car of a recent production year can cost about $2000-$4000 and get sold for $15,000 the staggering revenue pushes the dealers to become really thorough when it comes to title editing. That's why there are thousands of such cars being sold legitimately after every major hurricane and very few buyers even suspect a fraud years after the purchase when the car starts to break down without an apparent cause.
The best advice experts give with regard to flooded cars is to be very cautious about the car's origin, especially when buying directly from the owner, not through a dealership. If it's a used car make sure to learn where it came from, especially if you're making the purchase sometime after a hurricane. A make sure to get car insurance quotes for this exact car - there's a chance that the national insurer database will contain a totaled entry for this vehicle.