Beware of used cars with flood damage
Water can ruin key parts, consumers are warned
By Phuong Cat Le
P-I REPORTER
Seattle Post-Intelligencer
Tuesday, November 21, 2006
A thick layer of mud caked the engine of the Nissan Pathfinder. Water dripped from the driver's door. The seats squished like a wet sponge.
But the SUV started up without trouble when Pemco Insurance adjuster Gene Kelly got behind the wheel at the Tukwila salvage yard. With new carpets and an extensive detail job, an unsuspecting buyer might never know that the SUV had been partially submerged in water and mud during this month's floods.
Consumer advocates warn that a flood-damaged car can be resold without a buyer knowing its waterlogged history.
"We'd advise people to be careful," said Brad Benfield, spokesman for the state Department of Licensing. Flood damage can ruin electronics, contaminate lubricants and threaten mechanical systems. Airbag controllers or braking systems may also corrode over time.
Still, it's not illegal to sell a car that has flood damage. Such problems should be disclosed to buyers, Benfield said, and car dealers are required by law to disclose what they know about a car's history. But private sellers are not.
Cars that are declared total losses are often resold at salvage auctions. If the cars are reregistered with the state, the title is branded "rebuilt" but nothing on the title says it has been flooded.
So there's no easy way for consumers to find out whether a vehicle in this state was totaled because of flood damage.
Consumer experts say the best protection is to avoid rebuilt cars altogether.
"What they really should do is destroy them. If it's really a flood car, they don't even belong in the market," said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a non-profit based in Sacramento.
Because state motor vehicle laws differ, cars that are wrecked or flooded in one state could be registered in another state while hiding the history.
Some insurers, such as Pemco, voluntarily report the vehicle identification number of flood-damaged vehicles to Carfax and AutoCheck, commercial databases that let consumers track a vehicle's history.
However, most insurers don't. The NW Insurance Council recently surveyed 16 members that offer auto insurance and found that only two voluntarily report to commercial databases. The council would not reveal the names of any of the companies in the survey, however, and when contacted some insurers referred inquiries back to the council, which is a non-profit educational organization funded by the industry.
Jon Osterberg, a Pemco spokesman, said the company reports flood-damaged vehicles because, "It helps to keep unsafe flood-damaged cars off the road, and it helps to protect people."
The Seattle-based insurer has already processed 11 cars damaged during this month's flooding, including the blue, mud-caked Pathfinder.
If a vehicle is totaled, the VIN -- a vehicle's unique number-- should be disclosed to the public so consumers can spot rebuilt wrecks even if the title appears clean, said David Regan, president of legislative affairs for the National Automobile Dealers Association, a Virginia-based group representing 20,000 dealers.
The organization is backing legislation to make it mandatory for all insurers to report the VIN and the reason for a total-loss determination to commercial databases.
Some states such as Florida issue "flood titles," but Washington does not. It is one of several states that participate in the National Motor Vehicle Title Information System, allowing it to share information from other states, but consumers can't directly access that data.
After an estimated 500,000 cars were damaged by Hurricane Katrina and Hurricane Rita last year, the National Insurance Crime Bureau partnered with insurers to set up a database so buyers could enter a VIN and see whether it had "flood damage."
Scott Wagner, a special agent with the bureau, recently investigated a case in which a Renton woman bought a used Saturn for $10,000, only to find out that it had been flooded during Hurricane Katrina and was really worth $3,000.
The car was reregistered in two different states and its history was "washed." When the woman bought the car, the title was clear, he said.
Allstate Insurance doesn't report that information to Carfax but works with its salvage vendor to mark a car's windshield flood-damaged, said Caitlin Gorand, an Allstate spokeswoman.
She added that when insurers report totaled cars to the state Department of Licensing, there's no way for them to note how that car was damaged.
"We do all that we can to mark the car, all our paperwork," said Gorand. "We're very confident in our procedures. We also obviously encourage consumers, when you're in the market, do your due diligence as well."
Most car buyers don't see a vehicle title until after they buy a car, though, so experts say there's no substitute for hiring a good mechanic to check out a car.
"Even if you see the title, it might not mean that much to you if it's 'rebuilt,' " said Shahan.
"Floods are a little different animal. If it's in a crash, and the (car's) frame isn't bent too much, you might be able to restore it and it's OK. But if it's in a flood, it gets all that silt and particles in the electronics."
Shahan wants that information disclosed on the used car buyers guide that the Federal Trade Commission requires dealers to post in every used car sold.
"Why should you be the last to know?" she said.
HOW TO SPOT A FLOOD-DAMAGED CAR
• Have a reputable mechanic inspect the vehicle.
• Be extremely careful when buying a "rebuilt" car;
some consumer advocates say avoid them altogether.
• Look under carpets to see if the floor is wet, damp or muddy.
• Check the seat-mounting screws to see if there is any evidence
of rust or that they were removed to dry the carpets.
• Inspect lights; a water line may show on the lens or the reflector.
• Look for mud and debris in difficult-to-clean places, such as the
gaps between panels in the trunk and under the hood, and on the bottom
edges of brackets or
panels where it couldn't naturally settle.
• Check the rubber drain plugs under the car and on the bottoms of doors.
If they look as if they have been removed recently, it might have been done
to drain floodwater.
