Katrina Cars and Rita Rip-Offs
Sunday, March 26, 2006
The "gallon" in "miles per gallon" refers to gasoline -- everyone knows that. But for tens of thousands of vehicles flooding the used-car market nationwide, it may as well stand for H2O.
Think of these storm-fouled cars and trucks as the leftovers of the devastation from the Gulf Coast hurricanes of 2005 washing ashore -- sometimes as fraudulent used-car sales on Web sites, or at auto auctions, used-car lots and shady roadside sales (and I do mean shady).
Insurance companies have designated most of the 600,000 flood-damaged cars in the wake of the gulf hurricanes of 2005 as total losses. Those bashed beyond repair end up as crushed scrap metal at a salvage yard. But after such soggy disasters, lots of wrecks get spiffed up and steered back into the commercial used-car market. Usually they're for sale in states other than where they took the swim, states where their titles don't always identify them as flood vehicles.
"Every time there's a major storm with a lot of water damage, there is always a problem with unscrupulous car dealers who buy flood-damaged cars and try to sell them as normal used cars," says Jeanne M. Salvatore, spokeswoman for the Insurance Information Institute, a nonprofit public-education group financed by the insurance industry. "But those hurricanes were a huge disaster last year, and there was a lot of flooding."
Meaning many more flood cars than usual that have been dried out and shipped across state lines for sale to unwitting consumers.
Want to test the waters? Don't be surprised if you look over a list of flood-damaged automobiles honestly marked as such and start thinking about the possibilities. Hey, nice Porsche! How cheap is it? How hard could it be to fix that up -- just for myself? How much could I make if I resold it?
Go ahead. Check out the cars for sale at an online auction such as Insurance Auto Auctions, a company with live-auction locations nationwide, including in the Washington area. IAA is putting hundreds of Gulf Coast flood cars on the block several times a week -- directly from Jackson, Miss., and Baton Rouge, La. All are apparently tagged flood cars. Some are shipped to auctions in other states. Many are sold for parts -- but not all.
Wednesday's Jackson auction lists 359 flood cars, and Friday's Baton Rouge sale lists 241.
Ebay Motors listed 20 flood cars this week. One was a 1996 red Corvette convertible the seller says was flooded up to the dashboard during Katrina. Even with a Louisiana flood-salvage title, that baby attracted 15 bids and $5,600 the day before the auction was scheduled to end.
But cars clearly identified as flood cars aren't the consumer problem. "From a safety standpoint, buying a flood-damaged car isn't a good idea for most consumers," says Salvatore. "But it's not necessarily illegal to buy or sell flood-damaged cars." What is illegal is not pointing out that a car has suffered water damage.
To put a flood vehicle "back in the commerce stream" without letting it be known, you need two things, says Frank Scafidi, spokesman for the National Insurance Crime Bureau: "The vehicle has to have high enough value to make it worth your trouble, and you need a clean title."
But how does a flood wreck get a clean title? "You pick up that flood-damaged 2004 Chevy Tahoe at auction for $5,000 because it's a total loss," says Scafidi. "It might've cost $25,000 undamaged. But you're going to refurbish it. Some states don't recognize a title brand from another state, and there is always the outright corruption. So, one way or the other, you get a clean paper. Now you have a vehicle you paid $5,000 for, then put another $5,000 into it to get it looking good, and you sell it and make $15,000 on that one transaction."
The mechanical troubles with flood-salvaged cars are wide-ranging, says Rosemary Shahan, president of the Consumers for Auto Reliability and Safety, a Sacramento consumer car-owner advocacy group. "All the electronic components are hopelessly compromised. They will inevitably corrode. Anti-lock brakes will fail, engines will intermittently die in traffic, and air bags may not inflate in a crash."
Flood cars can also pose allergy risks from mold and mildew and carry dangerous pathogens from sitting in floodwaters contaminated with sewage, toxic chemicals and human and animal remains. "People with asthma or allergies will be at particular risk of breathing in substances that are a threat to their health," says Shahan.
Since the hurricanes, advisories have gone out to emergency personnel and automobile mechanics warning of the risks of potentially fatal infected cuts or scrapes from flood cars in hurricane states.
There have been efforts to prevent unsuspecting consumers from getting stuck. Soon after the hurricanes, CarFax (which charges $19.99 for a vehicle history) flagged all vehicles in its system from the Zip codes of the affected states as potentially flood-damaged.
And NICB worked with local law enforcement in the Gulf Coast states and insurance companies to collect a database of vehicle-identification numbers from flood-damaged cars in those states. Used-car buyers can search the free database to verify that a car wasn't a flood salvage or involved in a hurricane claim.
Scafidi says that with the 2006 hurricane season not far off, NICB plans to continue updating the database and keep it available to consumers.
So how does a used-car shopper know he isn't buying a flood vehicle? Flood cars often show telltale signs, says Shahan, including silt in odd places such as between door panels or in the area for the spare tire, rust and corrosion, musty smell, new upholstery or carpeting, a "salvage" or "flood" title, and a history of being sold at auction or of coming from Louisiana, Texas, Mississippi or Florida -- though flood salvage cars can originate anywhere.
Besides checking the car's title history on a title database service such as CarFax, she recommends having a trusted mechanic go over the car before buying it.
She also recommends that you beware of sellers who balk at your getting your own inspection. "That's a huge red flag that they are hiding something," she says.
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