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Dried Out and Title-Scrubbed, Flooded Cars Lure the Unwary

March 18, 2013

Doug Kuntz

BORDENTOWN, N.J. — At the far end of an enormous hangar, used cars rolled up one by one to the auction block. They had been buffed to a shine, but some carried telltale signs of damage. Puckered leather seats, a hint of mildew, headlights beaded with condensation. Just over two months ago, they had filled with seawater during Hurricane Sandy.

Vehicles floating in a parking garage in the Wall Street area in October were covered with a layer of fuel after the hurricane.

One buyer at the Manheim car auction last Wednesday, Hakim Shittu, kept his hands in his pockets. He was looking for totaled vehicles to export to Nigeria, where they would be fixed up and resold; but these, he said, were too far gone. Saltwater destroys cars, he explained, and even when rebuilt they can be unsafe. “I never buy the flooded ones,” he said.

But all around him, other buyers showed no such compunction. The flooded cars sold briskly, for prices like $2,600, $5,300, $3,000. Some were to be dismantled into salvageable parts, like wheels and fenders; some were to be melted down for their rubber and steel. And yet, while all have titles branding them flood cars, not all were destined for the scrap heap.

Many were headed to out-of-state resale markets where, because of inconsistencies in state laws, buyers will have no inkling that the vehicles were so damaged by floodwater that insurance companies deemed them a total loss.

“People masquerade those things as perfectly good vehicles without any hint that they had been flooded or exposed to water,” said Frank Scafidi of the National Insurance Crime Bureau, an industry-financed nonprofit organization that investigates insurance fraud and vehicle theft. “There is a market for these vehicles, even though we might never want to see them on the road again.”

Though this practice provoked outrage in the aftermath of Hurricane Katrina and other major storms, dealers and industry experts said the brisk trade in flood-damaged cars since Hurricane Sandy had highlighted how legislative efforts at the state and federal levels have failed to stem the resale market.

The Insurance Crime Bureau said over 230,000 cars were damaged by the hurricane, predominantly by the ocean water that surged into seaside communities, filling engines and interiors with sand and corrosive saline.

In Broad Channel, Queens, scores of dead cars sat at crazy angles for weeks after the storm all along Cross Bay Boulevard, a reminder of the brute strength of the waves. In areas like Lower Manhattan and Hoboken, N.J., car owners returned to expensive parking garages to find their cars floating in the soup of sewage and river water that had poured into the underground lots. Even the Federal Bureau of Investigation and the Secret Service lost cars, according to line items in Congress’s hurricane-relief package.

Yocasta Lachapelle had watched in shock as water poured into her garage on Cherry Street in Lower Manhattan during the storm; her 2011 Prius sank underneath. By the time the water was pumped out nearly a week later, the car was a total loss. “It still had water inside it when I opened the door, in the glove compartment and the cup holders,” she said.

Ms. Lachapelle was fortunate: she had total-loss insurance. A few weeks ago, her 2012 Prius arrived. But for the destroyed car, like the 150,000 other New York cars that were flooded, according to the Department of Motor Vehicles, the odyssey had just begun.

Once the cars are declared a total loss, specialized firms swoop in on behalf of insurance companies to tow away, spruce up and resell the cars. One of those companies, Insurance Auto Auctions, which estimates that it is handling about 40 percent of the region’s storm-damaged cars heading to the salvage market, employs people to study weather forecasts and predict where the next disaster will be.

For the hurricane, the company dispatched 400 tow trucks to the area and leased huge holding facilities even before the storm hit. One of those was an airport in Calverton, on Long Island, where the runways were leased at a rate of $2.7 million for the year, according to Sean M. Walter, the town supervisor of nearby Riverhead. Since the storm, about 18,000 cars have packed the tarmac end to end, he said. “When you sit there and look at these cars with their children’s seats in them and the briefcases and the uneaten lunches — it’s just surreal,” Mr. Walter said.

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