How Credit Unions Can Identify Flood Damaged Cars Returning to the Used Vehicle Market

With the recent hurricanes in Texas (Harvey) and Florida (Irma), there are estimated to be as many as one million flood-damaged cars, many of which are being put up for resale at auctions across the US. This article explores the concern for members as well as our credit union clients and how to identify flood-damaged cars returning to the used vehicle market.

Many newer vehicles hit by the storms will be written off as total losses by the insurance companies. The owner will receive a check, and the insurance company will take possession of the vehicle, reporting it to searchable databases.

The more concerning situation is that not all states define salvage in the same way. Vehicles that have been in floods but have little apparent damage may be returned to the road without replacement of some electrical parts. That can lead to problems that take weeks or months to surface. Corrosion often takes time to become bad enough that connections are lost or short circuits emerge, so a car that seems undamaged may break down at a most inopportune time.

Watch the video featuring our partners at Auto Exam/Vision Warranty talking about the issues concerning the water damaged cars in Texas.

The lack of uniform standards among states can also lead to a maneuver called “title washing.” This happens when a seller transfers the ownership through states that will issue clean titles to vehicles once branded as salvage. While the rules have tightened, but there are still workarounds, including the use of mechanics’ liens to obtain a fresh title.


Telltale Signs of Water Damage

Consumer Reports has suggested tips for identifying cars that may have spent time underwater. A buyer or mechanic should look for these telltale signs:

  • Caked-on mud and a musty odor from the carpets. New carpets in an older vehicle may be another red flag.
  • A visible water line on the lens or reflector of the headlights.
  • Mud or debris trapped in difficult-to-clean places, such as gaps between panels in the trunk and under the hood.
  • Rusty exposed screws under the dashboard. Unpainted metal in flood cars will show signs of rust.
  • Rubber drain plugs under the car and on the bottom of doors that have been removed. That may have been done to drain floodwater.


Mayersohn, Norman. “How to Avoid Buying a Car Flooded by Hurricanes.” The New York Times, The New York Times, 21 Sept. 2017, Accessed 28 Sept. 2017.

Eisenbaum, Joel. “Flooded cars already being put up for sale.” KPRC, 8 Sept. 2017, Accessed 28 Sept. 2017.