Buying a Car After a Flood: What You Need to Know

When you’re buying a car after a flood, there is a lot you need to know at each step of the buying process. If you aren’t careful, you could end up with more problems than you started with.

After a flood, it’s common to see plenty of deals pop up all over the place. Cars that you normally may not be able to buy are suddenly affordable. You might even have some money from a flooded vehicle claim, and you find yourself in need of a new car.

We worked with our auto lending team and our Nationally Certified Credit Counselors to find out what you need to know before you buy a car after a flood.

Car Shopping After a Flood

If you’re looking to buy a car for personal use, it is never okay to buy a flooded car. Cars that have experienced flooding are very unreliable. It may run well at first and then start causing serious problems later on down the road. The interior could be rusted and corroded, causing major parts to break and fall apart, putting you, your passengers and other drivers at risk.

Don’t be fooled by a beautiful looking car in the lot, either. The car might look nice and shiny on the outside, but the inside could be holding on to its last breath. The inside of the engine and pipes may be corroded and ready to give way at any moment. These are unseen problems that will cause plenty of headaches and tons of money down the line.

According to Heather Hunter, the Director of Public Relations for AAA, problems from flooding may not occur until later on down the line.

“Items may work okay initially following a flood, only to fail at a later date due to contamination by dirty water,” Hunter explained.

Where are some safe places to buy cars from after a flood?

It’s important to research the person or company selling the car you’re buying, especially when it’s after a flood or other disaster. There are lots of people out there looking to make a quick buck on unsuspecting buyers, so it’s best to shop around in places that won’t try to pull one over on you. Your safest bet would be to stay away from the deals that start to pop up on Craigslist, eBay or local “for sale” Facebook groups and online forums.

If you’re looking for a pre-owned car, you should start by checking out “Certified Pre-Owned” cars from companies that are well-established and have a long-standing reputation. Check out places like Enterprise Car Sales or a local authorized dealership when you start looking for a car. These reputable dealers are more likely to give you a good deal, and you won’t have to stress about buying a lemon.

How do I tell if a car I’d like to buy has been flooded?

There are plenty of ways to tell if a car has been flooded. The first step would be to check the VIN on CARFAX to see if a flood has been claimed against the vehicle. This is normally a great way to tell if the vehicle has been involved in a flood, but some vehicles and owners may not always report that a vehicle was involved in a flood.

If the vehicle doesn’t show up in the CARFAX VIN search results, there are still ways for you to see if the car has been under water. Here are some important things you need to do to tell whether or not the car you’re looking to buy has been flooded:

• Interior
  • Put on a glove and check the carpet for dampness.
  • Check the car for a strong musty odor or overly-saturated air-freshener that may be covering up a smell.
  • Inspect the upholstery/carpet and note if it is loose, stained or mismatched (i.e.: brand new carpet in a 2012 mini-van).
  • Look for dirt or mud inside the glove compartment and under the seats.
  • Check inside the interior lights for fog or moisture.
  • Ensure that the wires under the dashboard are not loose, dirty or fragile.
  • Look for stains, dampness or excess dirt in the trunk and inside the spare tire.
  • Pop the hood and scan the engine for excess dirt or flood remnants.
  • Ask the seller to pull out the paper air filter for a color check to ensure it is not discolored or wet.
  • Check the engine oil for water (water = very bad sign).
• Exterior
  • Look for rust around the doors and inside the hood and trunk.
  • Check inside the exterior lights for fog or moisture.
  • Look for leftover debris in the wheel wells.
• Operational Checks
  • Test drive the vehicle; do not purchase the vehicle if you cannot test drive it.
  • Turn on the ignition, see if it starts properly and check that all of the lights on the instrument panel light up.
  • Test all interior and exterior lights, the air conditioning, windshield wipers, radio, turn signals and brakes repeatedly.
  • Ask an expert if you aren’t certain about your inspection (some may charge a small fee, but they could save you thousands of dollars and headaches).

Auto Loans and Flood Claims

Buying a car comes with its own questions, but buying a car after a flood can cause headaches when you can’t find the answers you need. Here’s what our lending team says you can expect from your lender and insurance company when shopping for a new vehicle:

How long do flood claims take for vehicles?

Flood claims generally take less than a week. With the magnitude of the Great Flood of 2016, it could take anywhere from a week to a couple of weeks for insurance companies to process flood claims.

Will my insurance rate go up after I claim against a flooded vehicle?

According to CBS Money Watch, vehicle flooding is included in comprehensive coverage. When you file a comprehensive claim, the claim generally does not count against you. CNBC says you might see a small increase in your premium after filing a comprehensive claim. The average premium increase is around 2% and varies depending on your state’s insurance regulation and your insurance provider.

What can I do in the future to cover my losses if my car’s value is less than my loan amount?

GAP (Guaranteed Asset Protection) insurance is the best way to protect you when your car’s value is less than your auto loan amount. If a loss occurs, the GAP insurance coverage on your vehicle will pay the difference between the actual cash value of the vehicle and the current outstanding balance on your auto loan. A GAP insurance policy costs between $500 and $700, on average, and is generally financed into your auto loan.

Example: Your car floods, and you owe $25,000 on your auto loan. After totaling out your car, the insurance company determines that its actual cash value is $23,000 ($2,000 less than you owe on your auto loan). GAP insurance pays this difference between what you owe and what the insurance pays (plus your deductible).

Budgeting for a Car After a Flood

When buying a car after a flood, the first thing you should do is find out what your insurance company will reward you for your flooded vehicle. Then, you can determine if and how much you owe on your auto loan and use any remaining funds toward the purchase of a new or used car. If you were upside-down on your totaled car’s loan and you did not have GAP insurance, it may be possible to get an unsecured loan to pay off the difference.

It is always beneficial, especially in a disaster situation, to keep your monthly loan payments at the same or lower level than before since additional expenses will arise. Plus, you are trying to secure housing, meeting with contractors and working—it’s stressful! Don’t add more to your plate by taking out large loans that cause your average expenses to increase significantly.

If you can’t get another car now, it’s a good idea to look for housing in areas with public transportation. The system here in the greater Baton Rouge area is not as robust as in other large cities, but Uber or a cab could be worked into your budget if you are close to where you are traveling daily. Carpooling is also an option! Many friends and neighbors are in the same situation and probably wouldn’t mind sharing the cost of gas (especially with how bad the traffic is these days)!

Our Nationally Certified Credit Counselors also addressed some budgeting questions you may not even know you have:

How do I budget for another car if I have new, unexpected and unbudgeted expenses due to a disaster?

Budgeting for auto loan payments due to a disaster is no different than budgeting for loan payments at any other time. You may need to cut back in some areas to ensure that you can cover all of your household expenses. Prioritizing expenses is the key to balancing your household budget.

You should always determine the amount you can afford to pay for a car note and car insurance before buying. To get an idea of what your car note will be, you can window shop via manufacturer websites as well as local dealerships. Plug that number into a car loan calculator to get an idea of what your monthly payment will be.

Knowing what the fair market price to pay for a vehicle is essential to budgeting (and purchasing). You can find out the Kelley Blue Book value of a vehicle online to make sure you are budgeting (and purchasing) the car at the right price. If you determine you can afford a car note, make sure the car you select allows you to stay within your budget!

Don’t forget to call around for lower insurance options. If you are limited to a smaller budget, try to find a second-hand car that is in good condition. This helps lower your insurance premiums!

If you want to buy a new set of wheels, make sure you know how to tell if you can afford a new car.

How do I budget for another car if I am upside-down on the loan of my totaled car?

You should start by analyzing your monthly expenses to see how much of a car note and insurance payment you can afford, if any. If you can afford both payments, make sure you stay within your budget. It may also be possible to get an unsecured loan to cover the difference and payoff the previous loan.

However, when you continue to bring negative equity from one vehicle purchase to the next, you are not putting yourself in a good place financially. We recommend that you work to reduce the negative equity by making a down payment on the new purchase, purchasing a used vehicle with positive equity or searching for rebates and other buyer incentives.

If you still have any questions, contact our credit counseling team or send us a message. We’re more than happy to work with our auto lending team and credit counselors to answer any questions you may have. We want to help in any way we can!

*Pelican State CU membership required to take advantage of free credit counseling services. Visit pelicanstatecu.com/join to become a member. You have the right to a free credit report from AnnualCreditReport.com or 877-322-8228, the ONLY authorized source under federal law. Credit counseling is not intended to give you financial advice, but the financial education you need to make informed decisions. Results may vary. Pelican and its employees are not responsible for any claim, suit, action or damage resulting from credit counseling.