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Flood-damaged cars: Don’t get soaked

Here’s how to protect yourself and avoid buying a flood-damaged car or truck.

Whether it’s post-Sandy news reporting from New Jersey or an update on spring flooding in the Red River Valley, the images are similar: inundated neighborhoods, cows in boats — and submerged cars. We hope the neighborhoods are cleaned up quickly and the cows returned to pasture, but what happens to all those cars? According to the vehicle-history reporting service Carfax, Hurricane Katrina in 2005 claimed more than 600, 000 vehicles. In 2008, Hurricane Ike left more than 100, 000 vehicles under water in Texas and Louisiana. Just this summer, Hurricane Isaac, a much smaller storm, left behind 3, 000 flooded vehicles in Louisiana, according to State Farm Insurance. Carfax estimates that more than half of these flood-damaged cars end up back on the road, often in the hands of an unsuspecting owner many states away.

Flood cars not easily identifiable “It is often not easy to identify a flood-damaged car, ” says Bailey Wood, spokesman for the National Automobile Dealers Association. “People who try to resell these cars purchased from insurance auctions may have done a very good job of cleaning the vehicle and know how to remove a flood ‘brand’ from the title. No reputable dealer wants to sell a flood-damaged vehicle, because it’s likely to have problems in the future.”

It’s possible to clean up and dry out a car that’s been filled to its windows with nasty floodwater, but underlying problems are likely to linger. Mold grows under seats, water-soaked electrical connections corrode, a silt-contaminated transmission fails — often months after the flooding occurred.

If a car is declared by an insurance company to be “totaled” because of flood damage, the owner is compensated and the insurance company assumes control of the vehicle title. The title should then be “branded” as flood damaged, an imprint that is supposed to stay on the title after the vehicle is sold, usually at an insurance auction. The car can then legitimately be parted out or recycled, but it should not return to the road. But standards for vehicle titles are controlled by each state, and can be different across the country.

“For example, most states in the South have a title brand specifically for hail-damaged vehicles, ” Wood says. “But a state in the North, where hail damage is less frequent, may not even have a provision to brand a title with hail damage. So you take a hail-damaged car from the South and simply retitle it in another state, and the record of hail damage disappears. The same thing happens to titles with a flood brand.”

Title washing — Watch for transfers, retitles To “wash” a title, a vehicle may be moved around the country and retitled in several states before it is finally resold, usually at a wholesale auction attended by dealers. According to the Justice Department, Experian Automotive recently reported that in just the first six months of 2008, more than 185, 000 titles were branded in one state, and then transferred and retitled in a second state specifically to create a clean title.

To stop title washing, the department is creating a national “total loss disclosure” database that will be a permanent record of vehicles reported stolen or branded as junked, salvage or flooded. This database, called the National Motor Vehicle Title Information System, is based on the vehicle identification number (VIN) rather than the title, so it can’t be washed. All states, insurance carriers and junk and salvage yards are required to report to the database. When fully implemented, it will have data from every state and will be queried before any state issues a new title, making it extremely difficult to wash a flood designation from a vehicle.

Since August 2012, the database has been available to consumers through 10 data provider companies, which are incorporating the information into the reports they sell to dealers and the public. Those companies are Auto Data Direct Inc., Carco Group Inc., Carfax, CVR, Experian Automotive, Mobiletrac, Motor Vehicle Software Corp., RigDig, VINAudit.com and VINSmart. The information will include title information, the most recent odometer reading, brand history and, in some cases, historical theft data. Consumers can also get a free check for a theft or salvage brand at VinCheck, a service of the National Insurance Crime Bureau.

Title branding differs from state to state The Justice Department says that currently 88 percent of DMV data is in the database, with 32 states fully participating (see this report here). However, there are still holes in the system when it comes to spotting a flood-damaged car. Not every state has a flooded title brand, and insurance companies may sometimes be reluctant to brand a title as flooded even after it has paid off the claim, because the vehicle has a higher resale value with a clean title. Even the notion of what is considered a flooded car is subjective, according to dealers we talked to.

“When we had significant flooding in our community a few years ago, all the detail shops were busy drying out cars, ” says Jim Jacobson, a 30-year veteran of the car sales business and owner of Jacobson Auto Sales in Oshkosh, Wis. “There were carpets hanging out to dry all over town. Instead of declaring the car totaled by flooding, the insurance companies just paid to have it cleaned out, or the owner never made a claim. But if there’s been floodwater inside the car, it’s almost certain that there will be problems down the road, from corrosion on electrical connections and ABS and airbag sensors to failed transmissions. Or it will just smell bad.”

Follow these tips from pros to avoid buying a flood-damaged car from a dealer or a private party:

Buy a title history report, which may reveal if the car has ever had a flood-damage brand. Thanks to the Justice Department database, these reports are becoming more comprehensive, but you want to back them up with a careful inspection, especially if the vehicle has been titled in other states.

Use your nose, Jacobson says. The first step in his inspection at a wholesale auction is to simply sniff the interior of a vehicle. “If it smells musty, I’ll just walk away, ” he says. “Only bleach will really disinfect the interior after a flood, and that’s going to ruin upholstery — and then you’ll smell the bleach. A huge red flag for me is strong air freshener, which is covering something up.”

Carpet or upholstery may just be damp from cleaning, but look deeper. Most auto carpet has a plastic backing, so shampoo does not really go through it. Try to pull up the carpet to see if the padding beneath is wet or muddy or smells bad — a sure sign that the car has been flooded.

To remove the carpet for cleaning and drying, the seats must also be removed. Check the bolts that secure front seat mounts for signs that they’ve been loosened or that they are rusting.

Look for a scum line or signs of silt in out-of-the-way locations. Check under the dashboard and in the glove box, a spot that is often overlooked by flood detailers. Check the trunk for a waterline, moisture under a mat or under the spare tire, or silt that’s collected in inner fender areas accessible through the trunk.

Look for signs of mud, silt or water in turn signals or headlights, which are expensive and frequently aren’t replaced on flood-damaged cars.

Check the chassis and suspension for signs of rust or other corrosion that seems out of place for the car’s location or its mileage.

Respectable car dealers want to protect the reputation of their business and will do all they can to avoid selling a vehicle with flood damage. In many states, dealers are legally required to inform a customer of any issues with a vehicle, even if the customer does not ask. You may also have recourse against a dealer who sells a vehicle with an undisclosed flood or salvage history. If you are buying from a private party, be sure to use your nose and check under the carpeting and in more than one footwell.

Article frm MSN