Reporter’s Notebook BY GREG HORN
Storm-Damaged Cars Could
Resurface in Used Car Market
age vital engine and airbag components.
Interior components like seats have padding that absorb the dirty flood water like
a sponge, and once dried, retain the lingering odor of that water. Door panels and
other nooks and crannies may not fully
dry initially, causing black mold spores to
grow. Unwitting buyers of flood vehicles
from Hurricane Katrina wound up with
vehicles that had continual electrical and
drivability problems and exposed them to
the potential health hazard of black mold.
The economic damage from Hurricane Sandy could hit $50 billion, making it the second most expensive storm in U.S. history, ranking right behind Katrina, according to forecasting firm Eqecat. The cost to insurance companies could range from a low of $10 billion to
as high as $20 billion, and vehicles will account for a significant part of the loss. In fact,
there is a potential that an estimated 80,000 to 100,000 vehicles from storm-affected states
will be declared total losses. Unfortunately, there is also a chance that a lot of these total
losses will resurface in the used car market. Here’s what you need to know now.
The two major causes of total loss will be flooding and damage from falling trees.
While falling-tree damage can be easily spotted, once flood damage is cleaned up, it
becomes more difficult for the unwary buyer to detect. Vehicles totaled out by insurance
companies will most likely carry a “salvage” or “branded” title indicating that the vehicle
was declared a total loss.
However, a process known as “title washing” allows unscrupulous car dealers and individuals to remove salvage branding from car titles to minimize their losses. Titles are
washed by transferring a salvaged vehicle to a state that doesn’t recognize the damaged-title brand. When the state issues a new title, it may no longer show that the car had
been salvaged. The seller will just keep moving the vehicle from state to state until the
branding is gone. Once that happens, the vehicle’s history will have been “washed” clean.
Car buyers can safeguard themselves
from this scam by first finding out if the
prospective vehicle was registered in one
of the hard-hit areas. Using the 17-digit
Vehicle Identification Number (VIN),
consumers can perform an online title
search. This can also help buyers determine if the vehicle has recently changed
hands, or has several previous state titles,
which could be an attempt to cover up
the clues of flood damage. Of course,
the best thing consumers can do is have
a qualified mechanic inspect the vehicle
for evidence of flooding. A mechanic will
charge an inspection fee of $100 or more
to disassemble key components and look
for evidence of water damage. That’s inexpensive insurance that could save you
thousands in repair bills down the road.
There are an estimated 36 million used
cars sold each year—and making sure consumers (and insurers) don’t get stuck with
a flood-damaged car takes a little work.
But, when you consider that a car is most
likely the second largest purchase most of
us will make, spending a little money doing a title search or having a mechanic do
an inspection is money well spent. K
What’s Wrong with
When water rises to the dashboard,
reaching expensive and complex electrical parts, most insurers deem the
car more expensive to repair than
the vehicle is worth. The reasoning is
that water will get into and corrode
all electrical connections and dam-
F Greg Horn
There is a potential that
an estimated 80,000 to
100,000 vehicles from
will be declared total
Greg Horn is vice president of industry
relations for Mitchell International. Previously, he served as vice president of material damage claims at GMAC Insurance.
Horn may be reached at greg.horn@
mitchell.com; www.mitchell.com. Be sure
to also visit his “Sounding the Horn” blog
Statements and opinions expressed in
this article are solely those of the author.
They are not offered as and do not constitute legal advice or opinion of Mitchell