Flood Damaged Cars: Concerns and Safety Tips

600,000 cars sustained flood damage during last year's hurricane season

Thousands more have been damaged during other storms and flooding eventsNational Insurance Crime Bureau

Car-buying season is coming up, with President’s Day traditionally being a time when lots of new and used car dealers bring out special interest rates on auto loans and “low, low prices with huuuuge” savings. However, what appears to be good deal on the surface is not necessarily going be the the best (and safest) option in the long run.

One of the biggest problems that plague used cars in particular is the prevalence of flood-damaged cars. These are cars that have previously been submerged – either partially or completely – in flood waters caused by hurricanes, tornadoes, thunderstorms, or other severe weather events.

To help car buyers understand the problem, we’ve put together some information about why flood-damaged cars are a big problem on used car lots, and what you can do to protect yourself when searching for a safe family vehicle.

The Problem of Flood-Damaged Cars

Last year, neighborhoods in Houston and south Florida felt the brunt of the damage from Hurricanes Harvey and Irma. Eventually, the rest of the nation will feel the effects of these devastating storms, as well, but much of this damage will happen one driver at a time as they unknowingly buy a flood-damaged car. Your chance of falling victim depends on where you live. Some states make it easier to sell a flood-damaged car than others.

Irma and Harvey were historic storms. More cars were flooded in Irma and Harvey than Superstorm Sandy and even Hurricane Katrina. The storms left more than 600,000 flood-damaged cars in their wake, according to the National Insurance Crime Bureau (NICB) – a non-profit organization that partners with insurance companies, government agencies, and consumer protection groups to ensure safety for car shoppers.

So, what happens to these cars? It depends. Some will get scrapped. Others will go back on the road with salvage titles. A third set of cars will never get reported as waterlogged.

“The concern are the vehicles that folks are just taking, cleaning up, and selling. They’re not doing what they’re required by Texas law to do,” explained Clint Thompson, Chief of Title Services for the Texas Department of Motor Vehicles.

That includes drivers who didn’t have comprehensive insurance coverage at the time of the storm. They’re less likely to report the damage to state officials, than someone with insurance, because it will diminish the value of their car.

Auto experts say fixing up a water damaged car is a health, safety, and financial issue. Water damage is a potential health issue if mold grows on the carpets and other soft surfaces. It’s a safety issue if the electrical system gets wet, causing safety systems like the airbag to not work when needed most. Mechanical systems, such as the engine compartment, can also be affected if the water line rises high enough, causing performance and safety issues. Finally, it’s also a financial issue, since a flood-damaged car is worth less than a similar-aged used car.

That’s why drivers need to be on alert now and in the future. Flood-damaged cars from Harvey, Irma and and their predecessors will continue to be a problem for years.

Title Washing: How Criminals “Clean” Flood-Damaged Cars

There are many ways for flood-damaged vehicles with salvage titles to make their way back onto used car lots, where unsuspecting buyers can purchase them. Criminals have found a number of loopholes in state laws to remove the salvage brand from a car’s title in a scheme known as title washing.

Here’s how it happens: Every state has its own set of titling laws. There are different terms or brands for flood-damaged cars and some states use different damage thresholds. Title washers will use the differences in state laws to get the salvage mark removed, giving the vehicle a clean title. This is illegal according to the Federal Bureau of Investigation (FBI), and the federal agency prosecutes people for title washing – when it can catch them.

For example, Texas issues a salvage title if the cost of repairs exceeds the actual cash value of the vehicle immediately before the flooding. If the damage is so severe that the car’s only value is scrap or parts, the car gets a non-repairable title. However, other states have different standards.

“From a title perspective – and a consumer perspective as well – it would obviously be nice if everyone had these same statues and had the same thresholds. We understand the variations,” explained Clint Thompson, Chief of Title Services for the Texas DMV. The important thing, Thompson emphasized, is that branded titles get reported to a national database.

A number of states report flood-damaged cars to the National Motor Vehicle Title Information System (NMVTIS). It’s a database that every driver can check, for a small fee, from an approved provider. This electronic sharing of information is supposed to give drivers a glimpse of a car’s title history. That way it’s easier to identify fraud along with stolen and unsafe cars.

The problem is that not all states participate fully in this title-sharing system. Established by The Anti Car Theft Act of 1992, but, only thirty-nine states report data and use the system to research a car’s history before issuing a new or transfer title. Six states are partially using the system, while six others are still in development.

Getting a state’s title database tied into the shared system is a big undertaking. Thompson said it took Texas two years to get its systems operational, due to significant programming requirements.

Even without every state using NMVTIS, the government reports that 95% of state DMV data is available for use by consumers and state officials. While the national reporting is a big step forward in transparency, however, it hasn’t stopped title washing.

Protecting Consumers from Flood-Damaged Vehicles

Flood damage is such a concern, Louisiana took drastic steps to prevent these cars from ending up in the hands of buyers. The state requires severely water-damaged cars to be destroyed so criminals can’t clean them up and resell them. But drastic measures like Louisiana’s are not the norm in most states.

Government officials know drivers need a solution so criminals can’t move cars from state to state, losing the bad branding along the way. In 2006, a Congressional hearing on car title fraud discussed how to keep drivers safe on the road. Several agencies mentioned the need for federal legislation to solve the problem.

Rachel Weintraub, of the Consumer Federation of America, testified, “The differences in states’ designations of salvaged vehicles make deciphering these definitions almost impossible for consumers.” Eleven years after this testimony and several major storms later, however, we still don’t have uniform titling and disclosure laws.

Despite the different rules, Thompson, points out that NMVTIS takes the lack of uniform laws into account with common reporting terms. “Texas can take a look in the national database and see what another jurisdiction has reported,” Thompson explained. “We make a determination on that report based on Texas law. We apply our brands based on Texas law. We are not bound by the fact that this state reports at this threshold or that threshold. We look into the database and see what the brand is, and we have an equivalent that we apply here in Texas.”

Nonetheless, it’s unclear whether state laws will ever become consistent. That’s why car buyers and drivers need to know how to protect themselves.

Protecting Yourself from Flood-Damaged Vehicles

Used car buyers should always research the history of a vehicle before they buy it. The first step to doing this requires finding your Vehicle Identification Number (VIN) and checking it against several databases. In most vehicles, the VIN is located on the door jamb or on the dashboard.

Note that While this none of these sources has complete and perfect information. However, if you use every source available to you, the chances of finding out whether your car might have been damaged in a flood is much higher than checking only one source.

Car Title History

While NMVTIS isn’t perfect, it’s a resource every used car buyer should use. You’ll pay a small fee to run a VIN check through one of the federally approved providers, and in return you will get a report that gives you a snapshot of the vehicle’s title history.

Vehicle History Report

National Insurance Crime Bureau offers a free VIN check, which  includes flood-damaged cars, as well as lost, stolen, and other types of salvaged cars. You can also pay for a report from companies like Carfax or AutoCheck.

Mechanic Inspection

Finally, and probably most important, have a mechanic inspect the used vehicle. Mechanics will see telltale signs of flood or water damage that may not show up on the vehicle history report. Plus, having the title history report for your mechanic to review will give him a clearer picture of where the car came from, and potential problems he should look for.

Hurricane Flood Damage Still Unknown

While there are estimates on the number of flood-damaged Irma and Harvey cars, it’s still unclear how widespread the damage is. Texas officials issued more than 172-thousand salvage and irreparable titles this past hurricane season, and the number is still growing. That’s less than half of all the insurance claims filed in Texas, though.

When asked if that’s concerning several months after the storms, Thompson said, “There’s quite a bit of lag time on this. A claim may be reported to [the NICB], and it takes awhile for it to be settled.”

Drivers could feel the effects of these storms for years to come. Knowing how to protect yourself from potentially dangerous cars is important for your own safety and that of your family.