Flooded cars go to market with little to stop them

The Chevrolet Cavalier that Erik Leiken discovered on the Internet lacked curb appeal. Though only 5 years old, the car, with patches of primer paint, appeared to have had a hard existence.

Still, the odometer showed only 70,000 miles. And the car was a private-party bargain at $2,400, far below what he figured a dealer would charge.

But by the time the Chevy broke down a second time in San Diego freeway traffic, Leiken concluded that he had bought a clunker damaged in Hurricane Katrina.

"I should have had alarm bells going off," says Leiken, 21, who says his suspicion was confirmed by mechanics who found telltale rust, salt and water damage in the engine and residual moisture in the trunk. A Carfax vehicle-history report proved the car was in Louisiana when the hurricane struck.

As the second anniversary of the storm approaches, relatively little has been done to protect consumers from the estimated thousands of flooded cars and trucks from Katrina that eluded scrappers. And that's to say nothing of the cars and trucks that will become flotsam in hurricanes yet to come.

Here's why:

•A crazy quilt of state vehicle laws allows unscrupulous sellers to "wash" flood designations from vehicle titles by registering them in states that don't recognize water damage as trouble.

•The federal government has yet to fully implement a 15-year-old law creating a national database of vehicle histories. Many states still aren't participating.

•Legislation languishes in Congress aimed at forcing insurance companies to share vehicle loss data, including flood damage, with online auto history companies such as Carfax and Experian.

The insurance industry has its own computer system listing loss data, but it's not shared with outsiders. Critics say wider distribution of the database could help reduce the number of flood-damaged cars making their way to sales lots.

"There is evidence these cars are being cleaned up and sold to unsuspecting consumers," Sen. Trent Lott, R-Miss., said in a statement earlier this year. "A number of these cars are unsafe and shouldn't be on the roads. And folks are overpaying for vehicles they believe are mechanically sound."

Louisiana officials estimate that 350,000 to 400,000 cars were lost to Hurricanes Katrina and Rita in August and September 2005. Mississippi had at least 60,000.

The vast majority were scrapped. About 200,000 cars were branded on their permanent paperwork as having received some sort of damage in the storm. But at least 15,000 of those were registered in another state anyway, Experian reports.

And nearly 45% of those managed to lose their storm-damaged designation in the process.

In effect, their titles were washed, re-registered in a way that erases any mention of them being flood-damaged.

Damages can be hidden

Flood-damaged cars are considered time bombs, slowly being eaten away as salt corrodes onboard computers and other vital components. Outside, they can be cleaned up and look good as new on a sales lot. "These cars were immersed in salt water for two or three weeks. … They were in bad, bad shape because of the salt," says Rodley Henry, a deputy director for Louisiana's attorney general.

And buyers often don't find out until it's too late.

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