Calif. Commissioner, Auto Club Warn Consumers of Flood-Damaged Cars

California Insurance Commissioner John Garamendi joined the Automobile Club of Southern California Tuesday to warn Southland used-car buyers who might be duped into purchasing a flood-damaged vehicle hauled from hurricane-ravaged Gulf Coast states.

According to the Commissioner’s office, seven 2005 Nissans listed in the National Insurance Crime Bureau database as hurricane-damaged were sold at a Southern California auto salvage auction late last year. As many as 600,000 vehicles were swamped by flood waters from the heavy rains, breached levees and storms of hurricanes Katrina, Rita and Wilma last year. Many of the dried out and cleaned up vehicles are now showing up at local used car and auto salvage auction lots, or listed on ads for auto salvage auction networks, the Commissioner’s office indicated.

“Don’t let a washed-up car take you to the cleaners,” Garamendi said during a news conference at the Auto Club’s Gardena auto salvage yard in Los Angeles. “If you’re in the market for a used car, remember that hundreds of thousands of flooded vehicles are out there. Make sure you run a thorough background check before you purchase a pre-owned car.”

After last year’s hurricane disasters, unscrupulous dealers and auto salvage auction houses began buying flood-damaged vehicles and having them cosmetically repaired for easy sale to unsuspecting buyers, he said.

“Hurricanes Katrina and Rita and other storms damaged between 300,000 and 600,000 vehicles in 2005, “said Steve Lenzi, the Auto Club’s senior vice president of public affairs. “It is estimated that at least half of those will end up on the used car market instead of being scrapped.”

Flood-damaged vehicles have also turned up on lots in Arizona, Florida, New York and Oklahoma, according to anecdotal evidence reported to law enforcement and insurance crime bureau authorities. A process called “washing the title,” transfers the salvaged title through several states until the salvage “brand” eventually is left off of the ownership documents. Because the salvage brand has disappeared from the title, used car buyers looking for a bargain can be fooled.

According to Department of Motor Vehicle statistics, California has roughly 2.5 million registered “salvaged” vehicles. Another 145,000 are added each year. A salvaged vehicle is one that has been wrecked or damaged and is considered too expensive to repair by the owner, insurance company, leasing company or financial institution.

Herb Lieberman, an automotive industry recycler based in Santa Fe Springs, Calif., and past president of the national Automotive Recyclers Association, said the seven flood-damaged 2005 Nissans sold in California were advertised on the internet by a Gardena, Calif.-based auto auction yard late last year. “These current model cars were being advertised and sold as saltwater damaged vehicles with Arizona salvage certificates,” Lieberman said. “I found it very peculiar since there are no saltwater bodies in the state of Arizona.”

This raised a “big red flag,” according to Lieberman, who checked the National Insurance Crime Bureau’s (NICB) free online database consisting of motor vehicles and boats affected by the Gulf Coast hurricanes. He found the vehicle identification number (VIN) for the Nissans and subsequently reported the flood-damaged autos to Arizona state law enforcement officials.

Garamendi urged consumers to use the NICB’s comprehensive online database www.nicb.org before purchasing a pre-owned vehicle. He also recommended the following precautions:

*Limit your search to vehicles with a demonstrated history of being registered and owned away from flood areas. While most states require vehicle titles to indicate flood damage, some auto wholesalers may intentionally transfer and “wash the title” to avoid having the damage noted and not diminish the value of the car.

*Look beyond looks. While the car may look perfectly fine on the surface, there could be hidden defects that are not immediately noticeable. Flood damage can compromise the car’s electronic computer and safety mechanisms, air bag sensors, fuel systems and emission controls. This poses a significant safety hazard to the new owner.

*Research the vehicle’s history on the Internet. Comprehensive vehicle history reports are available with the Vehicle ID # (VIN) on the NICB, or other websites such as Carfax (www.carfax.com), Auto Check (www.autocheck.com), or Consumer Guide (www.autoconsumerguide.com).

*Check the smog history of the vehicle. California’s Bureau of Automotive Repair makes available the smog test history of any vehicle, either by license number or VIN. The results provide dates and smog test stations each time a vehicle was tested in the state. To find out if a car has spent its time in a water prone state, visit www.smogcheck.ca.gov. Click on “Smog-Check” and then select “Query Test for a Vehicle.”

* Inspect the car yourself, and with a qualified mechanic.Check the engine for a high water mark on the block or radiator, which is a clear indication that the car has been flooded. Look for rust and corrosion on wires and other components under the hood. Be suspicious and ask questions if the carpet smells damp or mildewed or has the heavy odor of air fresheners to cover up mold.Consider taking the car to a qualified mechanic to inspect it thoroughly.

*Ask questions and consider where you buy. Before purchasing the car, ask the dealer to obtain a report with a detailed history of the vehicle. Flooded vehicles oftentimes end up at car auctions. Know with whom you do business and shop at a reputable dealership.
The Department of Insurance provides consumers with tips to prevent buying flood-damaged vehicles on www.insurance.ca.gov or by calling the toll-free help line at 1-800-927-HELP.

Topics California Auto Flood Hurricane Arizona