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A half-million flooded cars and trucks could be scrapped after Harvey

  • Auto dealers are expecting a surge in business once Houston gets back on its feet.
  • Used-car values are already close to a record high, and Mannheim Auto Auctions says prices could climb even higher over the next couple of weeks due to the tighter supply.

They seem to be in almost every picture or video of flooded neighborhoods in and around Houston.

There are scores of cars and trucks with water up to their windows and in some cases over the hood and roof.

In fact, the flooding is so extensive, Cox Automotive estimates a half-million vehicles may wind up in the scrap yard.

"This is worse than Hurricane Sandy," said Jonathan Smoke, chief economist for Cox Automotive. "Sandy was bad, but the flooding with Hurricane Harvey could impact far more vehicles."

After Hurricane Sandy battered New York and New Jersey in October 2012, an estimated 250,000 vehicles were scrapped.

While the New York metropolitan area has more residents than Houston, the number of vehicles per household is much higher in Houston.

That means more cars, trucks and SUVs were parked on the street and in garages when Harvey swamped the city and surrounding areas.

With so many vehicles in the flood zone, auto insurers will be busy handling claims and cutting checks so flood victims can buy another car or truck.

Auto dealers are expecting a surge in business once Houston gets back on its feet.

Houses and vehicles at the Highland Glen subdivision stand in floodwaters due to Hurricane Harvey in Spring, Texas, U.S., on Monday, Aug. 28, 2017.
Luke Sharrett | Bloomberg | Getty Images
Houses and vehicles at the Highland Glen subdivision stand in floodwaters due to Hurricane Harvey in Spring, Texas, U.S., on Monday, Aug. 28, 2017.

Those shopping for a used car may be surprised at the prices they see. Used-car values are already close to a record high, and Mannheim Auto Auctions says prices could climb even higher over the next couple of weeks due to the tighter supply.

Meanwhile, not all of the flooded vehicles will wind up in the salvage yard. Many will be cleaned up and resold, often without the new buyer realizing they are buying a salvaged car or truck.

"It's going to happen, that's inevitable," said Frank Scafidi with the National Insurance Crime Bureau. "Look at all those vehicles floating around. There are people who will try to take advantage of the situation."

The resale of repaired flooded cars is not illegal, as long as the flood damage is disclosed on the title to buyers. After Hurricane Katrina, thousands of rebuilt flood vehicles were sold to unsuspecting buyers with titles that had been washed or reissued in a different state.

"We didn't see this on a huge scale until Hurricane Katrina," said Scafidi. "Since then the public awareness of the problem is greater, but with thousands of flooded vehicles it's hard to prevent this from happening."

Questions? Comments? BehindTheWheel@cnbc.com.

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