How Will Flood Damaged Vehicles Impact the Used Car Market?
This hurricane season has been one of the worst in recent memory. And over the past few weeks, we have seen the devastation of Hurricane’s Harvey and Irma in Texas and Florida. And just as the recovery process was beginning we had Hurricane Maria devastating the Carribean. Fortunately for the U.S. mainland, Maria was downgraded to a category 1 tropical storm and moved east over the Atlantic. Puerto Rico, Dominican Republic, Turks and Caicos weren’t so lucky!
The combined scope of damages left by Harvey and Irma is an estimated $110-300 billion dollars. The aftermath of these two storms is going to take a tremendous toll on the federal and state economies. It’s rare for a category 4 hurricane to hit the U.S. inland. How rare? This is the first time in U.S. history that two category 4 hurricanes hit U.S. land one on top of the other. Many people have lost their homes, their vehicles, or both. An estimated 800,000 vehicles were damaged by severe flooding in Texas and Florida. In Texas, 1 in 4 people either do not have insurance or do not have the comprehensive coverage needed to pay for flood damage.
Like most of the stuff in our lives, we can sometimes take our cars for granted. But, what if you woke up tomorrow and your vehicle was totaled by flood waters? Even worse; you didn’t have the comprehensive insurance coverage needed to pay for the damage or replace your totaled vehicle? An estimated two-hundred-thousand people have found themselves with a totaled vehicle and without the necessary insurance to repair or replace it.
An Estimated 400,000 Flood-Damaged Vehicles Will End Up Back on the Road
According to CarFax approximately half of the estimated 800,000 cars damaged in Hurricanes Harvey and Irma will be filtered back into the marketplace. Over the next year, thousands of these flood-damaged vehicles will be sold all over the country legally. Many will be purchased for salvage, melted down for rubber, and stripped down and sold for parts. Many of these totaled vehicles will be repaired with a flood, salvage or rebuilt title and will end up back on the road.
A vehicle with a flood, salvage, or rebuilt title has a significantly lower value than similar vehicles with clean titles. Most of us wouldn’t trust a vehicle that was previously totaled and whose title isn’t clean. It’s not illegal to sell a vehicle with a salvage, flood or rebuilt brand on the title. Any attempt to doctor or cover up a vehicle’s history is illegal.
However, after we experience natural disasters like Harvey and Irma there are thousands of scam artists who come out of the woodwork looking to purchase flood-damaged vehicles that have been totaled by insurance companies. After Hurricane’s Katrina and Sandy an estimated 200,000 vehicles with washed titles were sold to unsuspecting buyers.
How Flood Totaled Vehicles are Resold to Unsuspecting Buyers
Most of us have never heard of Title Washing. What is title-washing? Title-Washing is when scammers will purchase flood-damaged and flood-totaled vehicles dirt cheap. They will then spend a few dollars to cover-up any major signs of flood damage. The owner will then register the vehicle in a state with looser title laws, thus removing the flood totaled brand from the title. The vehicle now has the appearance of a clean vehicle with a clean title. The owner now turns around and sells the vehicle to unsuspecting buyers for full value. The new owner is now driving around in what is potentially a dangerous vehicle or a vehicle that may cost them thousands in repairs. If you’re reading this, rest easy! There are a number of ways to uncover flood damage.
How to Avoid Being Scammed into Buying a Flood-Damaged Vehicle
There are many signs a vehicle has been flood-damaged. Many of these signs can be covered up with a little work. There are a few telltale signs that a vehicle isn’t on the level. The infographic below could arm you with the information you need to avoid becoming a victim.
Statistics
Forecast Predicts Heavy Economic Damage From Harvey, Irma (U.S. News)
AccuWeather expects the back-to-back hurricanes will run up a nearly $300 billion bill.
A.Soergel – September 11, 2017
https://www.usnews.com/news/articles/2017-09-11/irma-harvey-forecast-to-do-290-billion-in-economic-damage
Cox Automotive: Value of Harvey-damaged vehicles could reach nearly $5 billion
http://www.autoremarketing.com/wholesale/cox-automotive-value-harvey-damaged-vehicles-could-reach-nearly-5-billion
Irma damages up to 400K vehicles and sets up buying spree
http://www.foxbusiness.com/markets/2017/09/12/irma-damages-up-to-400k-vehicles-sets-up-buying-spree.html
Hurricane Irma and Harvey Damaged 1 Million Cars. What Happens Now?
http://fortune.com/2017/09/20/hurricane-irma-harvey-damaged-cars/