Car Rental Companies Should Be Wary of Water-Damaged Cars from Texas

water-damaged carsphoto courtesy of KUSI News

Recent reports of massive flooding in Texas means car rental companies need to be on the lookout for water-damaged cars.

According to a June 1 story by Mark Huffman, a consumer news reporter for ConsumerAffairs, the National Insurance Crime Bureau is working with car rental companies “to identify and catalog water-damaged vehicles to keep them from being resold to consumers”.

In this situation, the owners of the water-damaged vehicles are supposed to file claims with their insurance companies. Then, the insurance companies will likely consider the cars a total loss and have them salvaged for the parts that still work. It may be difficult though to account for the thousands of water-damaged cars, so car rental companies need to be cautious when adding new cars to their inventory.

Car rental companies need to know that the titles for these cars must be changed to show that their status is now “salvage.” In the coming months, make sure that any cars bought from Texas have updated titles or you may be at risk of fraud claims from your customers. Failure to provide an updated title may be in violation of your surety bond as you will be providing false information about the condition of your cars to your customers, even if it is unintentional.

Some of the people who are selling water-damaged cars out of Texas are part of a scam called title washing, and it’s really hard to catch if you’re not looking for it. First, the title washers will either alter the original title or forge a new one so that it no longer has salvage status. Then, they’ll register the car in a different state that is either unaware of the previous damage or has a different definition of a salvaged vehicle. For a more detailed description of the title washing process, read on here.

Car rental companies and their consumers are in danger of paying too much for these new cars that they’re adding to their inventories. Salvaged cars are often worth half of their non-salvaged equivalents. Additionally, these cars are often not safe for the road and create a greater risk for accidents.

Luckily, there are some ways to counter a title washing scam. Ask to look at the physical copy of the title. The name on the title should match the name of person selling it to you. Title washers often use false identities when registering new titles, so the name on the title is not going to match their real name. This is a major red flag. If there is still some doubt, you can use a used car information service like Carfax to check the history of the car and its title.

If you are unsure about what is required of your company in this situation under your current surety bond or have any questions regarding surety bonds, then please get in touch with our surety experts at SuretyBonds.com by submitting a bond request form. You can also call us at 1-800-308-4358. Surety bond education is our main focus, and we will be happy to have a conversation with you.

About the Author

Jon Gottschalk
Jon Gottschalk is the Senior Marketing Director for Suretybonds.com and regularly blogs at the Surety Bond Insider to keep consumers informed on new legislation and updates in the commercial surety industry. He is also a licensed property & casualty insurance producer in Missouri.