The economic damage from Hurricane Sandy could hit $50 billion, making it the second most expensive storm in U.S. history, ranking right behind Katrina, according to forecasting firm Eqecat.

The cost to insurance companies could range from a low of $10 billion to as high as $20 billion. Vehicles will be a significant part of the loss. There is a potential that an estimated 80,000 to 100,000 vehicles from storm-affected states will be declared total losses. Unfortunately, there is also a chance that a lot of these total losses will resurface in the used car market. Here’s what you need to know now.

The two major causes of total loss will be flooding and damage from falling trees. While falling tree damage can be easily spotted, once flood damage is cleaned up, it becomes more difficult for the unwary buyer to detect. Vehicles totaled out by insurance companies will most likely carry a “salvage” or “branded” title indicating that the vehicle was declared a total loss. However, a process known as “title washing” allows unscrupulous car dealers and individuals to remove salvage branding from car titles to minimize their losses.

Titles are washed by transferring a salvaged vehicle to a state that doesn’t recognize the damaged title brand. When the state issues a new title, it may no longer show that it had been salvaged. If not, the seller will just keep moving it from state to state until the branding is gone. Once that happens, the vehicle’s history will have been “washed” clean.

What’s Wrong with “Flood” Cars?

When water rises to the dashboard reaching expensive and complex electrical parts, most insurers deem the car more expensive to repair than the vehicle is worth. The reasoning is that water will get into and corrode all electrical connections and damage vital engine and airbag components. Interior components like seats have padding that absorb the dirty flood water like a sponge, and once dried, retain the lingering odor of that water. Door panels and other nooks and crannies may not fully dry initially, causing black mold spores to grow. Unwitting buyers of flood vehicles from Hurricane Katrina wound up with vehicles that had continual electrical and drivability problems and exposed them to the potential health hazard of black mold.

Buyers, Beware 

Car buyers can safeguard themselves from this scam by first finding out if the prospective vehicle was registered in one of the hard hit areas. Using the 17-digit Vehicle Identification Number (VIN), consumers can perform an online title search. This can also help buyers determine if the vehicle has recently changed hands, or has several previous state titles, which could be an attempt to cover up the clues of flood damage. Of course, the best thing consumers can do is have a qualified mechanic inspect the vehicle for evidence of flooding. A mechanic will charge an inspection fee of $100 or more to disassemble key components and look for evidence of water damage. That’s inexpensive insurance that could save you thousands in repair bills down the road.      

There are an estimated 36 million used cars sold each year, and making sure consumers (and insurers) don’t get stuck with a flood-damaged car takes a little work. But, when you consider that a car is most likely the second largest purchase most of us will make, spending a little money doing a title search or having a mechanic do an inspection is money well spent. 

Statements and opinions expressed in this article are solely those of the author.  They are not offered as and do not constitute legal advice or opinion of Mitchell International, Inc.