Don't Buy a Flood-Damaged Vehicle!

Flood Damage Can Be Difficult to Identify

Used car flag blows in wind against blue sky.
tillsonburg / Getty Images.
By
Marianne Bonner
Marianne Bonner

Marianne Bonner, a certified CPCU and ARM, worked in the insurance industry for 30 years as an analyst and underwriter among other roles and holds multiple professional designations. Marianne has written many articles for International Risk Management Institute's Risk Report.

Learn about our Editorial Process
Updated on 07/18/19

In early 2018, heavy rain in Southern California triggered mudslides that caused over $421 million in property damage. In May of that year, a huge rainstorm caused flash flooding that devastated a community in Maryland. Hurricane Florence struck in September, causing massive flooding in the Carolinas. As these examples demonstrate, floods are frequent events that can occur almost anywhere.

While floods can damage many types of property, they are particularly harmful to automobiles. Water can wreak havoc on a car or truck, particularly its electrical system. It can also damage the engine, transmission, and cooling system. Moisture that collects in carpet, upholstery or interior liners can generate mold.

While many businesses purchase used vehicles, few knowingly choose autos that have spent time in floodwaters. Signs of flood damage can be difficult to spot. Some buyers don't know what to look for. Even if they do, buyers may not consider flood damage if no floods have occurred in their area. Unbeknownst to many buyers, flood-damaged vehicles are often transported across state lines to used car lots located far from where the flood occurred.

Flood-damaged vehicles are often transported across state lines and sold on used car lots many miles from where the floods occurred.

What Happens to Flood-Damaged Autos?

The following scenario demonstrates how a flood-damaged auto might enter the marketplace. Suppose your company owns a small truck. You drive to your accountant's office and park your truck in an underground garage. While you are meeting with your accountant, a thunderstorm blows up that produces heavy rain. The parking garage floods and your truck is submerged for over a day.

You have insured the vehicle for physical damage under a business auto policy so you file a claim with your insurer under comprehensive coverage. Your insurer declares the vehicle a total loss. You sign a release form stating that you have no further claim to the vehicle and your insurer pays you for the loss. The vehicle now belongs to the insurer.

Branded Titles

As your insurer has no use for a junked vehicle, it will likely sell the truck to a junkyard or parts dealer. The junkyard will strip the vehicle, save any parts that can be reused, and sell them to retailers or the public. However, your insurer cannot sell the vehicle unless it has complied with state notification laws. Most states require insurers to inform the Department of Motor Vehicles (DMV) or other licensing agency that the vehicle has been declared a total loss. The insurer may also be required to obtain a branded title from the DMV.

A brand is a designation that describes the vehicle's history. Examples are salvage, junk, rebuilt, revived junk, and lemon law-buyback. Brands differ from state to state. Some states have created a separate brand, such as water-damaged, to identify flood-damaged vehicles. Others assign flood-damaged autos a generic brand like salvage or junk. A brand remains part of the vehicle's title for the remainder of the auto's lifetime so potential buyers will be aware of the vehicle's history.

If a flood-damage auto is not insured for physical damage, the owner may be obligated to report it as salvage to the state DMV. The owner may also be required to surrender the title. If the owner wants to keep the vehicle as salvage, he or she may be required by law to apply for a salvage title from the DMV.

Dishonest Dealers

Some flood-damaged autos are purchased by unscrupulous dealers who sell them to unsuspecting buyers. Dealers clean the vehicles and make minor repairs to hide evidence of flood damage. They may also "wash" the titles by moving vehicles to states that use brands other than those attached to the vehicles' titles. For instance, a vehicle branded "water-damaged" in one state is moved to a state that doesn't recognize that brand. The vehicle is assigned a new title without a brand and is then sold.

How to Protect Yourself

Suppose you have found a used auto you want to purchase. How can you determine whether it is flood-damaged?

1. VIN Search

The first step is to locate the vehicle identification number (VIN) so you can obtain a vehicle history report. You can order a report online from a provider such as Carfax, Autocheck, or VINcheck. VINcheck is a free service offered by the Nation Insurance Crime Bureau. Reports are also available from the National Motor Vehicle Title Information System (NMVTIS), a national database operated by the federal government.

Note that an auto may have sustained flood damage that isn't mentioned in a vehicle history report. This can occur if the vehicle's title was "washed" or if the vehicle wasn't insured for physical damage and the owner resold it.

Before buying a used vehicle, have it checked out by a mechanic who can identify signs of flood damage.

2. Inspection

If a vehicle history report comes up clean, you are ready for Step 2: the vehicle inspection. Have the vehicle checked out by a mechanic who can identify signs of flood damage. Here are some of them:

  • Wet, stained or moldy carpet or upholstery
  • Foggy lights or instrument panel
  • Grit in the seat belt locks or in crevices around seat belts
  • Musty odor or an excess of perfume to hide musty odors
  • Rust in areas that don't normally get wet (like the brake pedal or the trunk latch)
  • Water lines under the hood