WENDY KNOWLER | Beware: some flood-hit write-offs will end up in used-car dealerships

Widely shared images of the destruction caused by the extraordinary storm in many parts of KwaZulu-Natal are utterly heartbreaking.

Lives, homes, roads, bridges, cars, all swept away by ferocious muddied rainwater; a disaster with unfathomable consequences.

Watching all those cars swept up in the torrent, and the car park of hundreds of half-submerged, fresh-off-the-production-line cars in the Toyota’s Prospecton plant made me wonder what would become of them.

And social media was full of comments from others asking the same question.

“What is Toyota going to do with these cars?” one asked. “Please tell us if Toyota decides to auction these cars ...”

Toyota is not yet saying just how many Hiace, Hilux, Fortuner, Quest and Corolla Cross models ended up under water, but a spokesperson confirmed to me they would be sold “as is” in due course.

That is, as water-damaged cars with no warranty.

When it comes to consumer protection, disclosure and transparency are key.

Those cars will be sold at much-reduced prices, but buyers will know why, and they’ll know the cars carry no warranty for that reason.

It’s a risk they will take knowingly.

But many a car caught in a flash flood while being driven — and later declared a “write-off” by insurers — has gone on to be sold at auction, repaired and then sold as an “ordinary” used car, its soggy past undisclosed to the unsuspecting buyer.

Here’s why: neither dealerships nor consumers have any way of finding out whether a car has previously been “written off” — in other words, deemed to be uneconomic to repair.

I discovered that when investigating the story of a Fiat 500 back in mid-2019.

Iqbal Shaikh was among the many motorists who found themselves floating down the N3 South near the Linksfield off-ramp in November 2016.

“In a matter of minutes, the water level rose more than 2m,” he said. 

He managed to abandon his car and take refuge on higher ground, where he watched his car drift away.

A report by an assessor with the car’s insurer at the time, Alexander Forbes, found that the car was a “write-off”.

The report included photos of the engine and interior full of dried mud, concluding: “Vehicle has no power and does not start, so possible wiring, electrical, engine and mechanical damage. Code 3 write-off.”

A code 3 is a car that, according to the SA Insurance Association (SAIA), might not be able to be repaired to the specifications of the manufacturer. Such cars fetch relatively low prices at auction, and banks and insurers are reluctant to finance or insure them.

But then Alexander Forbes changed its mind about the Fiat’s code 3 status.

At that point I’d advise them to take the car to a franchised dealer for a full diagnostic assessment.

—  Johan van Vreden, motor industry ombudsman 

“After further investigation into the condition of the vehicle, the lack of structural damage and the SAIA code of conduct, [we] concluded that the car should be categorised as a code 2 vehicle,” I was told.

So the insurer sold the little car to an auction house as a code 2: in layman’s terms, an “ordinary” used car, and that’s the code it had when a dealership bought it then sold it in December 2017.

I was never able to find out who bought the car at auction and repaired it, but clearly they weren’t able to fully deal with the issues which arose from the car’s unexpected swim.

The buyer had mechanical and electrical issues with it, so after a bit of a fight the deal was cancelled and the car returned to the dealership, which had the “issues” repaired before selling it a second time, to Ridwaan Ismail of Durban.

He also had buyer’s remorse, because the car started playing up almost immediately.

He took it to a motor workshop, which found that the car’s computer wasn’t responding and, during a manual investigation, water residue was found in the car’s fuse box and under the carpets.

More investigation on Ismail’s part led him to Shaikh and tale of the car which became a floater.

He brought his story to me and the upshot was that he was refunded by the dealership in full.

The big question arising from this story was and remains: why don’t dealerships and consumers have access to a database which reveals that a particular car was once written off by an insurer as a code 3, or a code 2 for that matter, given Ismail’s experience?

Several insurance sources told me at the time that as flooding seldom causes structural damage — a prerequisite for code 3 — such vehicles could be assessed as code 2, regardless of any wiring, electrical, engine or mechanical damage.

“While there is an initiative under way to enable more information to be shared between insurers belonging to SAIA, this has not yet developed to an extent where we are able utilise such information consistently,” an insurance company spokesperson told me at the time.

Almost four years on, that’s still the case, but not for too much longer.

SAIA recently revealed it had formally confirmed its decision to open the association’s Vehicle Salvage Database (VSD) to the public, a move intended to help stop previously written-off and poorly repaired vehicles from re-entering the used market.

But SAIA is not quite ready to let it go live.

“SAIA’s board has noted that the VSD Task Force still needs to investigate several issues to ensure all risks have been considered and evaluated before the database is made public,” the organisation said last month.

Further investigation of the inherent risks — data security and potential misuse of information by fraudsters — is required, SAIA said.

“Potential users of the VSD should be aware that access to information is not guaranteed to be a complete solution to fraudulent behaviour,” said SAIA CEO Viviene Pearson.

And it won’t be of any help in the case of the majority of SA cars, which are uninsured.

For those who unwittingly buy a once-submerged car, their best hope of recourse is for any resultant problems to manifest within six months, when the Consumer Protection Act warranty applies.

“At that point I’d advise them to take the car to a franchised dealer for a full diagnostic assessment,” says motor industry ombudsman Johan van Vreden.

“It will cost about R900 or R1,000, but it will provide the owner with the means to get recourse.”

Except if you knowingly buy one of those previously submerged, voetstoets Toyotas.

CONTACT WENDY: E-mail: consumer@knowler.co.za; Twitter: @wendyknowler; Facebook: wendyknowlerconsumer