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Vigilance needed to avoid flood-damaged vehicles flowing from Gulf

November 22, 2010

The devastating aftermath of Hurricane Katrina has left a large population of flood-damaged vehicles.  The National Automobile Dealers Association urges dealers and consumers, even in unaffected areas, to remain alert to the possibility that some individuals may attempt to sell or trade flood-damaged used vehicles in the months to come.


"Dealers are very concerned that these affected vehicles could enter the used-car market," said NADA Chairman Jack Kain.  "Fortunately, there are steps that car-shoppers can take to detect water damage and protect themselves." 

Insurance companies will be writing off hundreds of thousands of flood-damaged cars as total losses, with the insurers selling them for parts. The problem is that some people will buy those cars and, without disclosing their waterlogged past, sell them as bargains to buyers throughout the country.


Unscrupulous vehicle salvagers "like to take those vehicles because they do look intact," said Mark Kulda, spokesman for the Insurance Federation of Minnesota. "You can clean it and do some minor repair work and make it look pretty good." 

But "even though you dry them out and make them look nice, internally many of the controls have been ravaged by the floodwaters and it makes the car much riskier to own," Kulda said.


Typically, the electronics remain messed up, and so does the computer that controls some operations, including air-bag deployment. Water damage to the air-bag sensor could cause it to fail to deploy when it should—in a crash—or deploy when it shouldn’t, like when the vehicle is traveling 60 mph down a crowded highway. 

Dealers rightly are taking pains to avoid accepting in a trade one of the estimated 250,000 to 500,000 vehicles damaged by the hurricane’s floodwaters.


"It’s a nightmare," said Jim Thelen, new Chevrolet sales manager at Polar (Minn.) Chevrolet-Mazda. "Sometimes the problem doesn’t show up for years and all of a sudden you start having electrical problems and there’s no fix." 

The half-million unit estimate is based on results after previous storms and on talks with state and law-enforcement agencies in Louisiana, Alabama and Mississippi. After Hurricane Floyd hit Florida in 1999, insurers wrote off about 75,000 vehicles.


Some flood-damaged cars are likely to reach Illinois, where dealers are required to disclose that a car has been flood-damaged or salvaged. 

"If we know it’s a flood-damaged car, we’ll take it on trade and wholesale it," Thelen said. Selling the vehicle without disclosing its history is out of the question, he added.


"There’s no way we could afford that publicity, not to mention that it’s the wrong thing to do. It makes no financial sense to deal in those cars." 

Indeed, the highest risk is consumers selling to consumers. Scam artists typically sell privately through ads or by parking a car with a for-sale sign in the window. "They’ll sell it just under market value," Thelan said. "They’ll come up with a story that plays to your compassion and takes advantage of your greed.


"It looks like you’re getting a great deal, but what you’re getting is a car that’s rotting from the inside out."