Alarming claims about flood-damaged cars inundating nation's used-car market aren't true

Cars sit in flood water as a result of superstorm Sandy Oct. 30 in Hoboken, NJ.

DETROIT — In the days since superstorm Sandy, an alarming prediction has flashed across the Internet: Hundreds of thousands of flood-damaged vehicles will inundate the nation's used-car market, and buyers might not be told which cars have been ruined.

Not true, according to insurance-claims data reviewed by the Associated Press. The actual number of affected vehicles is far smaller, and some of those cars will be repaired and kept by their owners. The dire predictions are being spread by a company that sells vehicle title and repair histories and by the largest group representing American car dealers.

It said the number of cars marred by Sandy could be larger than when Hurricane Katrina hit the Gulf Coast in 2005 and damaged more than 600,000 vehicles. But an AP analysis of claims data supplied by major insurance companies shows the total number of damaged cars is a fraction of that.

The companies — State Farm, Progressive, New Jersey Manufacturers, and Nationwide — have received about 31,000 car-damage claims.

More claims are bound to come in. But 10 days after Sandy, the rate is already starting to slow.

About 14,000 new cars were also damaged by Sandy while they sat on docks in the New York area awaiting shipment to dealers. But most of those vehicles won’t end up on sales lots.

Automakers will have severely damaged cars crushed because they don’t want their brand names hurt by substandard vehicles circulating in the marketplace.

Flood-damaged cars can be a serious problem. Once a vehicle is dried out, the damage may not be immediately apparent, so the car can be sold to an unsuspecting buyer.

Water can damage computers that control everything from the gas pedal to the entertainment system. Saltwater, like that from Sandy's storm surge, is especially harmful.

Companies such as Carfax, a Centreville, Va., provider of vehicle-history reports, stand to benefit if more buyers are worried about the risk of purchasing a flooded car.

The company charges $39.99 for a single report. About 170 million reports are viewed each year.

In an interview, company spokesman Larry Gamache estimated that more than 300,000 damaged cars would find their way back onto the market as used cars.

On Wednesday, the National Automobile Dealers Association estimated that 200,000 or more flooded cars could be resold as used.