Last updated Aug. 18, 2010
Millions of vehicles suffer flood damage and become victims of accidents and thefts each year. If the damage is severe enough, car insurance companies will declare them “totaled” – when the repair costs are equal to 75 percent to 90 percent of the vehicle’s value. Most of these cars are sent to salvage yards or auctions for buyers who want to disassemble them for parts.
But many thousands of these wrecks also find their way back into the used-car market, often with clean titles that give no hint that their electrical system was ruined by water or that their frame was bent in a rollover accident. They have been repaired just enough to make you think they are reliable used vehicles.
No surefire way to identify junked cars
Although Congress passed legislation in 1992 creating the National Motor Vehicle Title Information System (NMVTIS), which connects state motor vehicle departments electronically and requires car insurance companies and salvage yards to report the unique Vehicle Identification Numbers (VIN) of totaled vehicles, the system remains sluggish and unreliable.
“A lot of totaled vehicles are rebuilt and re-enter the market with clean titles because the states all have different tracking systems and each state has different salvage and disclosure laws,” says Bailey Wood, spokesperson for the National Automobile Dealers Association. “Consumers don’t want these cars, and dealers don’t want them on their lots.”
Wood says auto dealers want the 18-year-old NMVTIS database improved so that it gives the public faster and more complete access to data on totaled vehicles. They want car insurance companies to electronically disclose the VINs of all totaled vehicles to vehicle-history providers such as CarFax and AutoCheck.
That electronic process would take no more than seven days, Wood says — far faster than the current system, which takes up to 90 days for a vehicle to make it through the paper-oriented auction and DMV-updating process. It’s during that period when cars can be quickly repaired and retitled to appear as though they are sound.
How to avoid a rolling wreck
Although most car insurance companies require auto wreckers to dispose of totaled vehicles, Loretta Worters of the Insurance Information Institute says you can still purchase a salvaged vehicle without knowing it.
Vehicles that were flooded are by far the worst type of salvage vehicle you could buy, Worters says, because their electrical systems have probably been destroyed.
She says there are certain red flags that can help you determine if a vehicle is a salvage car that has been repaired and unscrupulously put back on the market as a clean-titled vehicle: They include:
- Vehicle was purchased for an unusually low price or from out of state, and has an incorrect VIN.
- Vehicle is a new or a late model with no lien holder.
- Vehicle was purchased from an individual running a newspaper ad and using a cell phone number.
- Vehicle’s speedometer displays kilometer-per-hour rather than miles-per-hour.
- There is mildew, debris and silt in places where it wouldn’t normally be found, such as under the carpeting in the trunk, or around the engine compartment.
- There is rust on screws and other metal parts.
- There are water stains or faded upholstery; discoloration of seat belts and door panels.
- There is dampness in the floor and carpeting; moisture on the inside of the instrument panel.
- There is a moldy odor or an intense smell of Lysol or deodorizer being used to cover up an odor problem.
“To avoid inadvertently purchasing a flood-damaged car, it is important that consumers only buy a used car from a reputable dealer, have a certified mechanic look for flood damage and check the car’s VIN number,” Worters says.
Checking the vehicle’s history
Although some wrecks won’t show up on online title-checking services, Worters recommends that if you’re buying a used car you should check the vehicle’s history at one of these Web sites:
- The National Insurance Crime Bureau (NICB): It will tell you if a vehicle has been reported stolen or is a salvage vehicle. NICB created the database after the 2005 hurricanes put a lot of flooded vehicles on the market. It was updated in 2008 to include all total losses reported by participating insurance companies.
- Carfax: It uses VINs and public DMV records to red flag salvage vehicles. It checks for title problems and whether the vehicle has ever been declared a total loss or endured frame damage.
- AutoCheck: Operated by Experian, this service matches state records to purchasing histories and service notes.
- CarChex: Connects you with a mechanic from a nationwide network who will examine used vehicles for flood damage, evidence of past accidents, and oil and exhaust leaks. CarChex’s 155-point pre-purchase auto inspection examines the condition of body and paint, dents, scratches, rust, tires and wheels, glass, interior, missing parts, electrical items and drive train performance.
Going down the wrong road
Some drivers will nevertheless be tempted to knowingly purchase a vehicle with a “salvage title” because of the cheap price. If you buy such a vehicle and have it repaired so you can drive it, you may find that many car insurance companies will require you provide a DMV inspection certificate or a “garage report” from a mechanic stating that the car is roadworthy.
But be forewarned: Worters says salvage cars are no longer roadworthy and should be avoided at all costs. Some car insurance companies will not write collision or comprehensive coverage on a salvage or flood-damaged vehicle, but they may sell you liability coverage, she says.