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The Scam After the Storm?

Consumers Can Be Taken for a Ride in Resold 'Flood Cars'

By Dina ElBoghdady
Washington Post Staff Writer
Tuesday, September 28, 2004; Page E01

After remnants of Hurricane Gaston hit Richmond, Michael Wright's 1999 Honda CR-V sat under water just blocks from his office for three days before a towing company hauled it away.

Then an insurance claims agent declared the small sport-utility vehicle a total loss. Wright handed the title over to the insurance company, which in turn took possession of the CR-V and wrote him a $9,000 check. Last he heard, his Honda was in a warehouse near Chesapeake, Va.

Flooding from Hurricane Ivan leaves a car swamped in Pensacola, Fla., this month. (Dudley M. Brooks -- The Washington Post)

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"I don't know what they do with the cars there," said Wright, creative arts director at a Richmond advertising firm. "Do they clean them out? Salvage the parts? Where will my car go?"

Most likely, Wright's vehicle and tens of thousands of others damaged or totaled by recent hurricanes and floods will be auctioned off by firms that specialize in selling salvaged automobiles. Within the next few months, some of those vehicles -- from as far away as Florida and as close as Richmond -- should trickle into the Washington market and onto area roads.

Consumers are attracted to "flood cars" because once water damage is disclosed, a vehicle's value drops by at least half, said Jesse Toprak, an analyst at Edmunds.com, an online automotive resource for consumers.

"Some vehicles do have use left in them," Toprak said. "Perhaps it's better for everyone and the economy to make use of them somehow and not just discard them."

But problems arise when consumers do not realize they are driving a water-damaged vehicle either because of lax state disclosure laws or because scam artists tampered with the paperwork.

The District, Maryland and Virginia require that damage to a car be noted in the title, but the threshold for reporting damage varies from state to state, and crooks learn to take advantage of the differences. Weeks or months after a purchase, unsuspecting motorists could end up with electrical problems including faulty cruise controls and malfunctioning air bags.

At the very least, consumers who are considering purchasing a used vehicle should take it to a mechanic and pay for a search of the car's history through services such as those offered by Carfax Inc. and Experian Information Solutions Inc.'s AutoCheck, said John B. Creel Jr., an investigator with the Montgomery County Division of Consumer Affairs.

"Some less-than-honest people who get their hands on these cars pump the water out of the trunk, put on a shiny coat of paint, shampoo the carpets, and off they go," Creel said. "I would venture to guess that thousands of flood-damaged cars will end up in Maryland, D.C. and Virginia."

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