Buyer Beware: Avoid Buying a Flood-Damaged Car

On The Road

Buyer Beware: Avoid Buying a Flood-Damaged Car

Remember those pictures in the media of cars up to their windshields in muddy water or floating in flooded underpasses. Ever wonder what became of those four-wheeled victims of Hurricanes Harvey and Irma or nasty weather events that occurred closer to home? Bet you thought they would all wind up in the junkyard. Most do. But there are some that don’t. Some are dried out, deodorized and then make their way to the used car market. If you buy one of them, you could be in for a never-ending round of costly repairs or worse.

U.S. authorities estimate Hurricane Harvey alone could have damaged as many as 500,000 cars south of the border. And some of them could be headed to Canada, warns the Ontario Motor Vehicle Industry Council (OMVIC)

Water damage can be invisible and dangerous

“You may find yourself in a situation next summer when you’re on the highway and the car cuts out on you.”

The danger with flood-damaged cars is that even the most trained eye can’t spot the problems that will develop. Water is corrosive to the mechanical parts of a car and the damage doesn’t stop once it’s dried out. It goes on its corrosive way, tenaciously working its mischief on the car’s electrical system, airbag sensors and anti-lock brakes.

It can take a year or more before the harm shows up.

Fraudsters count on that. That’s why they’re pleased to let you take their car for a test drive. Just because the car drives well when you take it for a spin, it doesn’t mean that major flood damage issues won’t come up in the future.

“It’s a huge concern,” warns Bob Wagstaff, Property Claims Manager for Allstate. “They appear to be running and driving fine, while the water is doing its work on computers and connectors. Then you may find yourself in a situation next summer when you’re on the highway and the car cuts out on you.”

Title-washing U.S.A.

The National Insurance Crime Bureau (NICB) defines a flood-damaged vehicle as “being completely or partially submerged in water to the extent that the engine or other mechanical component parts have been damaged.”

Once a vehicle is flooded, the owner’s insurance company settles the claim by buying the vehicle. The vehicle’s title will then carry a flood brand, meaning it’s irreparable. The problem is that it might go off to auction, and be bought by a dishonest buyer. The buyer will then move the vehicle to another state where there are weaker laws that let them title it without disclosing the flood brand. That’s called “title washing”.

Title washing will allow the fraudster to offer an unsuspecting buyer a clean registration from the state where the vehicle was reregistered without any record of the flood brand.

But once a vehicle has been branded flood-damaged, that brand cannot be wiped clean from the vehicle’s original title history. A vehicle history search will reveal the flood-damaged brand.

Flood-damaged cars that were part of a company’s fleet and self-insured at one point may also wind up at auction or on the open market with no flood brand.

How flood-damaged cars get into Canada

The Registrar of Imported Vehicles (RIV) is the Transport Canada agency that has the task of keeping flood-damaged vehicles out of Canada and out of consumers’ hands. Vehicles branded non-repairable in the U.S. cannot get into Canada except for scrap.

If branded salvage, a vehicle may be imported into Canada and licensed for resale once it has been rebuilt and if it passes a provincial/territorial safety inspection. But the vehicle cannot lose the salvage brand. That will always be on its title.

Despite the efforts of the RIV and provincial/territorial agencies, flood-damaged vehicles can get into Canada after being sold for parts and reassembled and cleaned up. Then there are the self-insured, fleet vehicles. Those can be sold without being branded.

So, agencies like the RIV and OMVIC warn consumers to beware.

We have bad weather in Canada too

Wagstaff points out that Canada has had its share of bad weather. Over the last three years, there has been severe flooding in Calgary and more recently in Windsor, Ontario, parts of Quebec and parts of the Maritimes. So, there’s a lot of homegrown, flood-damaged cars around, too.

He says Canadian insurers typically brand a car irreparable when the flooding in the car reaches the bottom of the dash. Then the insurer registers it as irreparable and may sell it at a salvage auction for parts only. These auctions are usually only open to licensed, trade buyers, not the public. Some auctions may be public.

Cars branded salvage may go back on the road but only if they meet provincial/territorial safety standards. The salvage brand will always be on the title.

But despite strict regulation here, fraudsters are at work. They may even be able to pass off a damaged car to an unsuspecting dealer.

What’s a consumer to do?

“Don’t rely on feel, touch or smell. And above all, buy form a reputable dealer”

OMVIC lists a number of touch-and-feel tests a car shopper can use to detect flood damage. They include looking under the carpeting for water residue and mud or grit in the spare tire compartment.

Still, Wagstaff warns that the car shopper is up against professionals who know how to hide telltale signs.

“Don’t rely on feel, touch or smell.”

He advises car shoppers to turn on the ignition and look for fault of diagnostic trouble codes on the dash. These are warnings that something is seriously wrong with the car.

“But above all, buy from a reputable dealer,” urges Wagstaff.

Buying privately leaves the car buyer with one option if the car turns out to be a water-logged lemon: sue the seller. The seller could be long gone by the time the damage shows.

Buying from a registered dealer means the buyer has someone to turn to if their vehicle comes down with a case of flood damage. There will also be a regulatory provincial/territorial body that the dealer will have to answer to, in the event that you choose to escalate your complaint to that level.

Even then, Wagstaff advises car shoppers to insist on a vehicle history report. Obviously, the history will show a U.S. registration if there is any. And even if there is no flood-damage branding on a car from the south of the border, he warns shoppers to beware.

“If it’s from out of Canada, ask why it’s here. Only a high-value vehicle would be worth bringing here because of the dollar and the tax.”

How to read the vehicle history report

The vehicle history report (VHR) will show when the car was first registered, any changes of registration, accident history and recalls.

Wagstaff offers some telltale signs of a flood-damage vehicle to look for on the report.

Has the car moved from the province/territory where it was originally sold and re-registered in another? Usually, most vehicles are resold within the province where they were originally sold and registered. Most often, only those with questionable quality leave the province/territory.

Has the vehicle changed hands a few times? Wagstaff warns buyers to beware of a car that’s been with an owner for, say, four years then changes hands quickly and is up for sale again.

It takes time for an owner to realise they own a flood-damaged car

George Iny is the Executive Director of the Automobile Protection Association (APA). Founded in 1969, the APA operates from offices in Montreal and Toronto. The APA’s goal is the protection of consumers in the retail auto market.

Iny doubts that the cheap looney will keep flood-damaged cars out of Canada because there’s money to be made selling them here.

But it will take time before the unlucky owners realise they’ve been had and start complaining.

“People don’t suspect fluid damage just because the car has $1500 in electrical wiring repairs unless the technician spots it,” Iny says.

But there may be no reason for the technician to check.

“When they have a series of random repairs, the owner becomes suspicious.”

Tighter regulations have helped but there’s no reason to relax when buying a used car

Iny says the days in the ’90s and early 2000s when there was a network that exported damaged cars to Canada are in the past, largely due to tighter regulations. But there’s no reason for shoppers to relax.

Some car owners don’t have flood-damage protection. Or the car they own may not have suffered enough damage to be a write-off. In the latter case, the owner may have been warned that their vehicle has suffered enough flood damage to eventually need major repairs. So, the owner wants to get rid of it.

They may be tempted to sell their car privately or pass it off to an unsuspecting dealer.

“When you buy privately, ask for maintenance records. A curbsider – an illegal, unlicensed dealer whose stock in trade is defective vehicles – won’t have them.”

And whether you’re buying privately or from a registered dealer, get a VHR.

Iny and Wagstaff agree that it is wisest to avoid buying privately and to avoid purchasing used U.S. vehicles in Canada. But for those who are still tempted to buy a used vehicle imported into Canada, both advise doing a VIN check on the National Insurance Crime Bureau’s website to see if the vehicle has been branded salvage by “cooperating” NICB insurance company members. It’s free.