TYLER, Texas — If you are in the market for a used car, the Texas Department of Insurance wants you to spend some extra time on your vetting process. It issued a warning that scammers could be especially active this summer attempting to illegally sell flood-damaged cars.
Two factors make it more likely that buyers would encounter cars with water damage. The first is that increased demand might lead scammers to take advantage of desperate buyers. A computer chip shortage has impacted the production of new cars, creating increased competition for used cars.
All you have to do is ask Jake McKnight, the sales manager at Fairway Auto Center, how hard it is to keep inventory these days.
“It's almost impossible,” he said. “If it's older than two weeks old now, it's getting old, as opposed to 60 days was always kind of the standard of, ‘it's been the last 60 days, it's time for it to go.’ But I think our oldest age unit now is less than 30 days old.”
McKnight said Fairway Auto Center used to rely on trade-ins to replenish its inventory but is now seeking out auctions and street buyers to make sure it has enough cars on its lot. It’s not alone in working harder to find pre-owned cars. According to Edmonds.com, the average price of a used car is up more than 21 percent in the last year.
The potential for profit could get the attention of scammers, as could the supply of flood-damaged cars. Texas received an above-average amount of rainfall this spring, and experts predict an above-average hurricane season.
“I mean, anytime there are natural disasters, it's more likely that somebody is going to try to recoup some of their money however they can,” McKnight said.
When a vehicle is damaged by flooding, if the damage is reported to an insurance company, the company will brand it with a salvage title to indicate that it is a total loss. Those cars can still go to auction so someone can buy it for parts. A scammer would attempt to clean it up and pawn it off on an unsuspecting buyer. McKnight said some of the common problems caused by flooding are not easily visible. “If some of those wiring harnesses got wet, especially underneath the dash, underneath the hood, they're not something that you can necessarily see,” he explained.
So how can you tell if someone wants to sell you a con instead of a car? McKnight says a test-drive is one way to determine if something is wrong with the car. “It's more of how the car behaves, you know,” he said, “gauges not functioning properly, you know, stereos doing wonky stuff.”
If a seller mentions that the car has new carpet, that may be because the previous carpet was damaged in a flood. McKnight said it is rare for a car to get new carpet.
If you do not trust your car knowledge to know if something is wrong, McKnight recommends getting a title report from a company like Carfax or an organization such as the National Insurance Crime Bureau. Companies like Carfax will charge a fee, while the NICB allows everyone a limited number of free reports. Those reports will show everything that the car has gone through based on its unique vehicle identification number (VIN).
But McKnight said the best way to protect yourself against buying a damaged car is to pay for an inspection. He said prospective buyers can take a vehicle to most mechanics and they will give it a pre-purchase examination. He mentioned that Fairway Auto Center charges $80 for the same inspection they perform on all the vehicles they sell themselves.
“I highly suggest,” he stated, “you know, anyone, anyone purchasing a vehicle that is not from a reputable dealership--you know, whether it's from an individual or somewhere out of state that you’re not really sure of or whatever--spending that small amount of money to have a reputable shop inspect the vehicle prior to purchasing and can save a lot of that potential future headache if there were to be something that was hidden that you didn't necessarily see you didn't know to look for.”
A person can legally sell a flood-damaged car in Texas as long as they disclose it. Knowingly selling a salvage vehicle is a felony that comes with a penalty of between two and 10 years in prison.
