Industry tracks Sandy-damaged cars

Keeping cars and trucks that were damaged by Hurricane Sandy out of the nation's pool of used vehicles won't be easy.

But automakers, auction houses, inspection companies and vehicle-history reporting agencies are among those working to make sure that Sandy-flooded vehicles are either destroyed or sold with titles describing their true condition.

For example, Toyota Motor Sales U.S.A., American Honda Motor Co. and Nissan North America said they will destroy thousands of new vehicles that were damaged by the storm while being unloaded at ports.

Despite the industry's best efforts, though, some unscrupulous individuals will find a way around industry safeguards, says Frank Scafidi, a spokesman for the National Insurance Crime Bureau. The bureau is funded by the insurance industry to identify, catalog and share with the public information about damaged vehicles for the insurance industry.

'Up for sale'

"When something like this happens, flawed vehicles that shouldn't be on the road always wind up for sale in places far away from the event," Scafidi says. "They could be cleaned up and sold in California or shipped out of the country."

The storm hit the East Coast almost a month ago, leaving dealers and manufacturers to contend with power outages, severe wind, water damage and, of course, flooded vehicles.

The number of vehicles damaged by the storm is not known, but estimates range from 250,000 to more than 680,000.

As of mid-November, the National Insurance Crime Bureau had compiled a registry of about 45,000 vehicles for which insurance claims had been paid as a result of Sandy's floods and high winds. A lot more vehicles are expected to be added, Scafidi says. The registry is available free of charge to the public on the bureau's Web site, nicb.org.

Whatever the true number, the sheer volume of vehicles creates the possibility that dealers and consumers may unwittingly buy some of them. Reputable used-car buyers and sellers, as well as those who monitor used-vehicle prices and inventory, agree that a vehicle's title should indicate whether it was salvaged.

'Junk' or 'Salvage?'

A title brand refers to words on a vehicle's title issued by a state motor vehicle department noting its condition. Vehicles damaged by Hurricane Sandy may carry one of several brands such as "Scrapped," "Junk," "Water-Damage" or "Salvage."

Flood-damaged vehicles are mechanically risky and generally worth a lot less than vehicles in good condition. Unscrupulous rebuilders sometimes repair salvaged vehicles, then obtain clean titles by moving them out of state. The practice is known as title washing.

To help prevent title washing, many states participate to varying degrees in the National Motor Vehicle Title Information System, a database of vehicle title information to which 40 states contribute, according to the U.S. Department of Justice Web site. The other 10 states and the District of Columbia are developing systems.

Executives at the nation's two largest auction houses say their companies are being especially vigilant about conducting inspections designed to spot flood damage.

Manheim is offering free flood inspections of dealer-owned vehicles for which condition reports are purchased at 11 auction sites in its Mid-Atlantic and Northeastern markets. ADESA redoubled its inspection efforts and gave its field operations guidelines about how to spot flood vehicles.

'A low risk'

Paul Lips, chairman of the National Auto Auction Association, says virtually all association members routinely run Experian Automotive's AutoCheck vehicle-history reports on the vehicles they sell for customers. He said there is "a low risk" that flood vehicles will be sold at an auction without the proper disclosures.

"I think we do a good job being proactive," says Lips, who is also executive vice president for operations and finance at ADESA.

Alliance Inspection Management, a third-party, new- and used-vehicle inspection company in Long Beach, Calif., is working hard to help, says CEO Jim Yates. On the weekend after the storm, at the direction of Tokio Marine Holdings Inc., an insurance company client, the inspection company deployed 25 employees to a port in Newark, N.J., to inspect and register 10,000 new vehicles that were at the port when the storm hit.

Shane Rice, Alliance Inspection's Northeast regional director, said 353 of the vehicles were parked in a warehouse and sustained no damage. The rest were parked outside and were submerged in 15 to18 feet of water. They sustained what Rice called "severe to extremely severe damage."

'Every vehicle'

"My suggestion was that every vehicle parked outside be scrapped," Rice says.

Carfax is adding notifications to its reports of vehicles titled in federally designated flood disaster areas. Experian Automotive's AutoCheck has said it will do the same. The notifications alert buyers to inspect the vehicles more closely. Both also say they will add flood designations to the reports as the information is made available.