10/10/2005

Flooded Cars, Easy to Spot!

Remember the blog awhile ago about those rotten car dealers who were selling cars that had previously been floating down a street in New Orleans? Well, from an article I just read, it seems as if many people are nervous about accidentally purchasing a flood car. According to the article, 571,000 cars were destroyed by water from Katrina and Rita. Half of those cars will be repaired and distributed to dealers! I agree with the efforts to salvage what they can, but I sure don't want to be the proud, but oblivious, owner of a Katrina Cadillac! Not to worry, FEMA and Carfax are here to save the day! It is easy to find out if a car has been flooded. All you have to do is enter the 17-digit VIN into the "Carfax 'Flood Damage' search field." The search will provide you with information about the car, when and where it was registered last, and if it was, in fact, a flood car. This is helpful, because believe me, car dealers won't voluntarily warn you about bad cars!

1 comment:

Dr. Tufte said...

-1 on Logan's post for a grammatical error.

Even so, there will be an adverse selection problem here. That occurs when people are unable to directly or accurately observe quality, so they assume everything is average quality and make an average bid for it. The response from a used-car lot manager (who generally understands the quality of a car better than the buyer) to this is to accept the bids on the low quality cars and decline them on the high quality cars. Flooding the market with low quality cars from floods will exacerbate this problem. Thus, you may be more likely to get a low quality car whether or not you can avoid a flooded car.