Market May Be Flooded with Water-Damaged Cars

In the aftermath of Hurricane Irene and the widespread flooding that took its toll on the Northeast, water-damaged cars could end up for sale on a lot near you — regardless of where you live. Experts say about half of these flooded vehicles, possibly tens of thousands of them, could find their way back to the used-car market in the coming months.¹

Unfortunately, shoppers who live far away from the affected areas may be less likely to suspect that a car might have been waterlogged as a result of a storm.

It’s not illegal to sell a flood-damaged car as long as the buyer is informed. However, some unethical salvage operators, dealers, and private sellers go to great lengths to hide the truth, including “washing” or forging the title so that it no longer identifies a vehicle as salvaged. And it may not be very difficult to hide a car’s real history, because many state motor vehicle agencies do not share records and will inadvertently issue clean titles when cars are resold in a different state. If you are thinking about buying a used car, you may want to watch out for vehicles that have been subjected to water damage, declared a total loss by an insurance company, then dried out and resold as salvage.

Buyers Beware

Problems lurking under the hood are not always obvious at first glance. In fact, it can take several weeks or even months for some hazardous issues to appear. Exposure to water can impair the mechanical and electrical systems that control safety features such as anti-lock brakes, airbags, and turn signals. If water or sand made its way into the engine or transmission, more expensive repairs could be required down the road.

In addition, the interior might deteriorate into a toxic environment. If dirty water and chemicals seeped into the seating, carpet, and ventilation, high levels of bacteria or mold could eventually cause health problems.

Steering Clear

Keeping an eye out for the following indicators may help you spot and potentially avoid purchasing a flooded car.

The presence of silt, mildew, or debris in unexpected places, such as under the carpet in the trunk or around the engine compartment.
Rust or signs of corrosion on screws or other metal parts.
Dampness or water stains on the carpets; faded or discolored upholstery, seatbelts, or door panels.
Moisture beads on the inside of the instrument panel.
An unpleasant odor, or the intense aroma of deodorizers (which could be used to mask moldy smells).

It’s also important to do business with a reputable dealer when shopping for a used vehicle, and have a certified technician check the car for signs of flood damage or related mechanical problems before you buy. Many experts also recommend researching the VIN number with a reliable industry database, such as CARFAX (for a fee) or the National Insurance Crime Bureau’s (NICB) new VINCheck service, which is free and accessible on the NICB home page.

1) DailyFinance.com, September 14, 2011

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.