Two hurricanes have hit in the United States in short order. The destruction in TX is devastating and the number of people who did not have flood insurance or low policy limits is going to be a staggering number. The number of total loss vehicles in TX alone is supposed to be close to 1 million vehicles. When the FL numbers come in the number could reach 1.25 million units.
I have seen and heard of numerous salvage yards that are pitching in to help people during these troubled times. We have a great industry when it comes to things like helping the community. It is also a great time for the debate about the viability to flood cars as salvage donors.
History shows us that it will take a lot of time to process all of these claims and get the salvage ready to be sold. We have also seen that a vehicle flooded in one area is being sold as salvage in a different area. That leads to the question of how will the salvage be required to be labeled? Will the titles be for demolition only? Will they be required to declare which storm the vehicle was flooded in? The answers have an impact on who is a contender for the salvage.
Why is that information important? A lot of people just don’t buy flood units. Other people love them because the bulk of the flooded vehicles were not running at the time they went under water. They are sealed tight and with a good cleaning the odds of it being a good unit go way up. Salt water brings that into question because of the erosion possibility. The vast majority of people who buy flood vehicles are scared of salt water floods. Knowing where the vehicle was located will help identify if it was filled with salt or fresh water.
The depth of the water also has an impact on the interest level in the vehicle. The overall number of vehicles that are being deemed total loss says that not all vehicles will be able to be physically looked at. The insurance company will be accepting pictures of the vehicle and zip code to determine the likelihood of it being a loss. We all know that pictures do not always tell the whole story. Some of the vehicles that will be declared totals will be prime pieces as they did not get that deep in water.
All of this creates opportunity for someone. While a lot of people will make a strong case that all flood totals should go straight to the crusher the simple fact is that someone is going to purchase these vehicles and a large percentage of them will profit from doing it. The question is will you participate and to what extent. You need to keep in mind that your trading partners may be buying some of these vehicles also. You might alert your QC staff to make sure the quality of your product does not get dinged by your customer for an ugly looking part getting to them. Remember that flood cars do not always have bad parts but they don’t always have good ones either. Fear on failure on install is a big reason why our customers avoid using us so do not let a part that looks like it was under water get to them.
At the end of the day the cities that got hit will find the resolve to rebuild their lives and possessions. The insurance companies will sustain huge loses which will have financial ramifications beyond our industry. People will have stories of great deals they got on really new model vehicles that had flood damage and an equal number will have a horror story of a rebuilt flood vehicle that they bought. Part sales will see some potential benefit. Traditional wrecked salvage could become a little cheaper with a glut of vehicles at the sale. Competition for this inventory will be competitive as a lot of people will adding these areas to the sales they normally work.
As an industry we will play a large role in cleaning up from these tragic events. It is important that we are good neighbors because it will pay dividends in the community as we help dispose of some of the largest items damaged in the storms, vehicles. We feel for the people that have had their lives destroyed but realize that there is an opportunity here. Does the opportunity fit with your business model? Only you can decide if flood vehicles are a potential profit or nightmare.
Mike Kunkel Bill Stevens
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