Hurricane Ian caused widespread flooding in Florida, North Carolina and South Carolina in October, resulting in an estimated $41 billion to $70 billion in damage. According to Carfax, up to 358,000 vehicles were damaged by flooding.
When the vehicles are declared total losses and go up for auction, there is a good chance that a significant number of them will be back on the road, contributing to a global claims fleet that includes countless collision damaged vehicles.
By the end of the quarter, Copart, the dominant company in late-model vehicle auctions, received nearly 70,000 vehicles damaged in Hurricane Ian, Copart co-CEO Jeff Liaw said during a earnings call on the first quarter 2023 on November 16th.
How many of these vehicles will get back on the road instead of being recycled? About 20% on average, according to a number Liaw provided during a previous earnings call.
“Our vehicle retrieval and storage, title processing and online marketplace are essential to the reuse, harvest and recycling of literally millions of automobiles per year,” Liaw said during the Sept. 8 call. “We estimate that around two out of every five vehicles we sell are driven again somewhere in the world. The rest is harvested and recycled for parts or metals, reducing demand New Mineral extraction and production emissions.”
Liaw didn’t break down the number, and Copart didn’t respond to questions from Repairer Driven News about how many of those vehicles were total losses that insurers put up for sale.
However, in a September filing with the Federal Securities and Exchange Commission, Copart says the sellers are “consisting primarily of insurance companies” and that the majority of vehicles sold on behalf of insurers are “either damaged vehicles that qualify as a total loss; not economically repairable by the insurance companies; or they are salvaged vehicles for which an insurance settlement has already been concluded with the vehicle owner.”
Liaw said the company is a leader in sustainable environmental practices. “Copart is a key enabler for the circular economy. Our business enables the reuse and recycling of vehicles, their components and materials, significantly reducing the carbon footprint of the transport sector,” he said.
Untold and beyond Copart’s control is where those sold vehicles end up and whether they were properly repaired before the keys are given to another driver.
NPR’s Planet Money podcast recently explored the problem of reselling wrecked vehicles overseas and chronicled the story of a 2021 Lexus RX350 that turned up at a mechanic’s shop in Turkmenistan. What they found, the show’s host said, was an “international bling underground.”
In the podcast, which originally aired Sept. 7, Scott Gurian explains that he was contacted by a mechanic in Turkmenistan named Oraz, who he had befriended six years earlier. Oraz, whose last name has been withheld, had contacted him because he had recently been hired to fix the Lexus and was curious as to how it had ended up in his country.
Oraz “explained that he brings cars into his shop from the US all the time, but they’re not usually like this one,” said podcast host Alexi Horowitz-Ghazi. The vehicle had a New Jersey registration.
“You wouldn’t believe it, but every second or third car here comes from America,” said Oraz. “And these are all damaged cars.” Gurian added: “He usually gets the legacy ones – cars that arrive wrinkled and dented. Oraz fixes them and gets them back on the road for his customers.”
Planet Money tracked down the buyer, a businessman from Turkmenistan identified only as Magtim. He explained that he bought the vehicle through a Copart auction and arranged for it to be shipped to him.
“There were some electrical issues and rust, but nothing that a trusted Turkmen mechanic couldn’t fix,” said podcast host Alexi Horowitz-Ghazi. The program does not go into detail about the repair work on the Lexus.
When asked by Planet Money, a Copart employee declined to say how the Lexus ended up in the company’s inventory. At this point, the program located a former Copart employee named Steve Lang.
Lang explained that “Copart specializes in wrecked cars,” Horowitz-Ghazi said, and that “this distinction between regular used cars and wrecked cars is the big red line in the used car world,” Gurian said.
The result is the following back and forth:
Horowitz-Ghazi: “Total cars have gone through something so catastrophic that they are no longer legally allowed on the road. And before we spoke to Steve, I figured that a wrecked car would be wrecked – totally worthless. But Steve says it doesn’t work that way.”
Gurian: “So you say something really bad happened to your Lexus. Your insurance company will send a representative to find out how much the repair will cost. If they say it will be more than 75-80% of the car’s blue book value then they declare it a total loss.”
Long: “They’ll tell you, you know what? look at this thing I mean, it’s almost a pretzel. You can’t play around with that. guess sir Your car is no longer a car, at least not for you.”
Horowitz-Ghazi: “The insurance company writes you a check for a new car and now they have to figure out what to do with your junky Lexus, how to squeeze as much value out of it as possible, where these special auctions are coming in the game. Steve says about 2 million cars pass through them every year.”
Lang: “The buyers of these cars can be professional body shops, car recyclers and junkyards or exporters. It can be people who send these vehicles abroad.”
Horowitz-Ghazi: “And that’s often how you get the most out of a totaled car – by selling it abroad.”
They reported that vehicles repaired after being declared a total loss receive a salvage title that reduces the vehicle’s domestic resale value. “But when the car leaves the country, those records and regulations don’t always follow. It depends on the laws of the country it’s going to,” Horowitz-Ghazi said.
In some countries, Gurian added, the lower labor and parts costs can make the cost of “restoring a damaged car on the road” much less.
Copart acknowledges that some of the vehicles sold leave the United States. According to its 2023 Environmental, Social and Governance (ESG) Efforts Report, “We estimate that approximately 2/3 of the vehicles sold from our US auctions to international members go to developing countries, as does the Department of Economic and Social Affairs defined by the United Nations.”
“In general, endemic poverty and poor access to transportation are highly correlated – our global auction platform enables residents of emerging market countries to access vehicle transportation, which in turn offers them social, educational and economic advancement opportunities not otherwise available to them,” says the report.
Planet Money’s further investigation revealed that the Lexus had been in Hurricane Ida in September 2021 and had been impounded by the local police department. Police were able to identify the former owner but declined to give his name for the podcast.
A truck is pinned under debris from Hurricane Ian in Fort Myers, Florida in this October 1, 2022 photo. (felixmizioznikov/iStock)