Watch out for flood-damaged vehicles on the market: ‘There are cars that can fly under the radar’

"There are all sorts of problems that can be below the surface."


Vehicle prices are still high thanks to the pandemic and a global microchip shortage. The average used car value in August was over $26,300. But as the U.S. recovers from Hurricane Ida and preps for future storms, shoppers may have something more than costs to consider.

Thousands of vehicles were damaged by floods when Ida hit Louisiana, the mid-Atlantic, and the Northeast last month. And while cars affected by the storm or with other issues may detail that on their titles, it's still possible consumers could overlook it and purchase one in poor condition.  

"There are cars that can fly under the radar, especially in a scenario where there wasn't a comprehensive insurance coverage, and therefore no claim was filed," says Josh Sadlier, an editor at auto website Edmunds. "So the insurance companies never heard about it."

Standard procedure dictates that when an insurance company gets a claim for a car damaged through water corrosion or another incident, the vehicle's history is updated to reflect that. Depending on the extent of the damage, those vehicles are typically sold to a salvage yard, according to Consumer Reports.

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Not every driver files an insurance claim, though, meaning some cars in poor condition could hit the market.

In places where title rules are less strict, some individual sellers even try covering up damage. "Unfortunately, following major hurricanes or flooding events, we see fraudsters try to scam consumers by selling cars damaged in the flooding," Tully Lehman, public affairs manager for the National Insurance Crime Bureau, previously told CNBC.

"It could be some kind of fly-by-night procedure where the car goes to a chop shop and they just take out the signs of obvious flood damage and recondition it," says Sadlier.

Take a close look at the car, inside and out

It's important to do your homework. Check the vehicle's history report for red flags before you buy, especially since cars damaged in one area can end up on a lot states away from where it started.

For starters, look at online services like Carfax and Edmunds' Auto Check, where you can input a vehicle's identification number to check out its record, including the number of previous owners, plus any accidents or recalls.

"We always recommend in any car-buying scenario to get a vehicle history report on the vehicle in question," suggests Sadlier. If that information is available, "it will tell you that the vehicle was potentially registered in a region impacted by a FEMA major disaster declaration," for example.

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Have a vetted mechanic look at the car, but pencil in a test drive for yourself and give the car an eye test, too, experts suggest. Be wary if you notice a musty odor inside, loose upholstery, damp carpets or stains, or rust, as these signs indicate water damage.

"Most people aren't going to pop the hood and get their hands dirty," Sadlier says. Still, you can look for signs of danger, "like where a line might have been from standing water in the engine compartment, discoloration, where the upholstery around the door may be part-way up. There are all sorts of problems that can be below the surface."

Even if your car is damaged, don't leave it 'on the side of the road'

If you do end up having bought a damaged car even after taking the steps to vet the purchase, all hope isn't lost, according to Sadlier: "If the seller knowingly misrepresents the condition or history of the vehicle, there may be legal remedies and [the buyer] may want to pursue that avenue with a lawyer."

On the other hand, if you knowingly purchased a ride with a checkered history in order to save money, or bought a vehicle new that later was damaged, it doesn't mean you have to "leave the car on the side of the road," says Sadlier. "The fact that there's damage doesn't necessarily mean it has no value for you. It could be that the engine escaped relatively unscathed."

A number of cars that are discarded by markets for various reasons are refurbished and "can end up running for years as a reliable means of transportation," he adds.

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