The Secret World of Disastrous Cars

By Jsloan Posted : 10/07/2010

The Secret World of Disasterous CarsWhile shopping around for a new car, you find one that seems too good to be true. It looks perfect, yet the price is surprisingly low. You take the necessary precautions by running a title check on it through CarFax or some other vehicle-history service. It comes back without any indication that there's anything wrong with it. So you decide to save yourself thousands of dollars and you buy it.

Screaming deal? Or screaming headache?

Bad cars get new lives

Well, if your new car is one of millions of vehicles each year that have been damaged by flood or totaled in an accident and then quickly rebuilt and returned to the market with a "clean" title, you're probably facing a long-term headache.

Although vehicles that have been flooded or totaled in an accident are supposed to be branded "flood titled" or "salvage titled," there are many ways that those marks can be erased. It's possible for a vehicle to re-enter the market and be resold despite being unsafe and unreliable.

"In most cases, the salvage brand goes off the vehicle if it goes through two or three owners in different states," explains Rob Painter, a Dallas-area expert on stolen cars and refurbished vehicles. "I can buy a car in New York, then register it in Wisconsin and then move it to Ohio and register it again, and by that time it's no longer a salvage vehicle. The guy who buys it gets ripped off because he doesn't know it's been flooded or the frame has been re-welded and that the car is very unsafe."

Holes in the car titling system

The National Motor Vehicle Title Information System (NMVTIS) was created in 1982 with the goal of electronically linking state departments of motor vehicles and requiring car insurance companies to report damaged vehicles that are considered "totaled," meaning they have lost at least 75 percent of their value due to damage. Theoretically, this system would reduce the time it takes for a salvage vehicle to be re-titled from more than three months to just seven days -- eliminating the time unscrupulous sellers have to either rebuild the car or "wash" the title by registering it in multiple states or in states with lax car-titling laws.

But a bill that would give teeth to this law failed to pass Congress. According to Angie Wilson, the vice president of marketing and communications for the Automotive Service Association, the "Damaged Vehicle Information Act" did not move forward in 2010 and will have to be re-introduced in the 112th Congress.

The law, according to Bailey Wood of the National Automobile Dealers Association, would require car insurance companies to electronically disclose the vehicle identification numbers of totaled vehicles and allow that information to be quickly posted on such vehicle-history providers as CarFax and AutoCheck.

But even the new law won't stop a process called "title washing," in which a seller transfers the vehicle serial number plates from a clean vehicle to a repaired vehicle, increasing the repaired vehicle's value by thousands of dollars over what it would sell for as a "salvage only" vehicle. The answer to that problem, according to Loretta Worters of the Insurance Information Institute, is standardized state rules for salvage vehicles.

"States in many hurricane-prone parts of the United States have adopted rules that require the words 'flood vehicle' be included on the titles of vehicles that have been water damaged and rebuilt," she says. "Before such a vehicle can be sold, the buyer must be notified in writing of the vehicle's past flood damage. However, if one state in the region does not have such strict laws, it can become a dumping ground for undeclared flooded vehicles."

Worters recommends that you check a used vehicle's history at one of these Web sites:

  • AutoCheck: Compares state records to a vehicle's purchase history and service records.
  • CarChex: Suggests mechanics from a nationwide network who will examine used vehicles for damage from water or accidents.
  • Carfax: Flags salvage vehicles by comparing identification numbers with public DMV records.
  • The National Insurance Crime Bureau: Will tell you if a vehicle has been reported stolen or is a salvage vehicle.

Getting auto insurance on a salvaged vehicle

Although you can save thousands of dollars by buying a vehicle that is branded "salvage," you will likely have trouble buying full coverage from car insurance companies. Some auto insurance companies may sell only liability car insurance coverage on such a vehicle, but few will provide collision or comprehensive auto insurance coverage.

That's because most rebuilt salvage vehicles remain inherently unsafe, Painter says.

And flooding is the worst, Painter says. "After a car has been flooded, you can almost never make it safe again. Moisture will appear up inside the modules of the car and the seat belts and air bags and anything controlled by electronics may not work properly."

Although experts like Painter and Worters recommend that used-car buyers always check a vehicle's history, they warn that these reports don't always provide enough information about how a car was damaged to determine whether it is safe to drive.

 

Jim Sloan is a freelance writer in Reno, Nev.


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