Wrecked Rentals Focus of Lawsuits

Major rental car companies are systematically funneling wrecked automobiles into the used-car market without making proper disclosure or providing salvage titles as required by state law, a series of lawsuits has alleged in recent months.

Auto safety advocates say public safety is being jeopardized by many thousands of seriously damaged rental vehicles put back on the road every year in California alone by a network of rental car companies, salvage vehicle auctioneers and secondary repair shops. The involvement of at least one used-car dealership is under scrutiny by state investigators.

The lawsuits represent the first time the issue of rental company practices with wrecked cars has been broadly exposed. U.S. rental firms have the largest fleets of automobiles in the world, so their handling of wrecks has a major impact on consumers.

Because rental cars are typically less than 2 years old with low mileage, the repaired vehicles carry hefty price tags that could not be supported if buyers knew they had sustained heavy collision damage and were permanently tainted by salvage titles, the suits charge.

The victims of improper disclosure are the unsuspecting future purchasers of the vehicles and the general public that is endangered by unsafe vehicles, which in some cases have bent frames, compromised suspension systems and other mechanical defects, according to trial attorneys and consumer activists.

“The car rental companies take this twisted piece of metal and send it to the auction yards, and they go along without branding the titles as salvage,” said Rosemary Shahan, president of Consumers for Auto Reliability and Safety.

Although the rental vehicles are alleged to be unsafe, it is not known whether any deaths or injuries have resulted after they were put back on the highway. None of the plaintiffs in the suits was injured.

Enterprise Rent-A-Car Co. routinely sends heavily damaged rental cars into the salvage auction market without properly branding titles under California law, allowing the vehicles to be repaired and returned to the highway without any disclosure to future purchasers, according to a suit filed in Superior Court in Fresno this month.

The suit, which seeks class-action status, also charges that Copart Inc., a nationwide operator of salvage vehicle auctions, has participated in Enterprises’ allegedly fraudulent and illegal vehicle sales.

Enterprise spokeswoman Sarah Bustamante said the company had not been notified of the suit, but said it would “investigate these claims fully.”

Enterprise is the nation’s largest rental agency, with more than a half a million vehicles in its fleet.

Copart Senior Vice President Wayne Hilty declined to comment, saying the company was preparing a securities offering and was not able to make any public comments.

Under California law, owners of cars involved in serious accidents must inform the Department of Motor Vehicles to brand the titles as salvage vehicles if it is not economical to make repairs.

In the Enterprise case, the agency sold a damaged car with a clean title through Copart’s salvage auction pool, which was set up specifically to handle salvage vehicles, said Niall McCarthy, a Burlingame, Calif., attorney representing the family suing Enterprise.

A number of states have more exacting salvage laws, however, requiring branding if damage exceeds a certain percentage of the car’s retail value.

In such states, including Iowa, Florida and Texas, titles must be branded when damage exceeds 60% to 90%, according to consumer advocate Shahan.

California law “is not as tight as it should be,” she said.

Charges similar to those against Enterprise were made last summer against Alamo Rent-A-Car and National Car Rental, owned by ANC Rental Corp. That suit also seeks class-action status and also names Copart as a defendant.

Officials at ANC, which filed for Bankruptcy Court protection earlier this month, declined to comment.

“Not only are people being ripped off, but the cars are unsafe,” said McCarthy, who also represented plaintiffs in that case. “It is widespread.”

The suit against Enterprise was brought by dry-waller David Martinez and his wife, Gloria, of Los Banos, Calif., who purchased what they thought was a nearly perfect 2000 Pontiac Grand Am with 15,386 miles. But after a few days, the car began to exhibit troubling symptoms and strange noises, the suit said.

The Martinezes purchased the car from Ansaldi Auto Sales in Clovis, Calif., a two-hour drive from their home.

The car now is parked in the garage and the couple are making do with their 13-year-old car, having spent the only money they had for the defective car, Gloria Martinez said.

“We just wanted a safe car,” she said.

DMV records filed with the suit show that the Martinezes paid about $13,000 for the Pontiac. Ansaldi purchased the car for $4,900 from Enterprise, according to DMV records. The Martinezes were told specifically that the car had never been in an accident, according to the suit.

Ansaldi is not named in the suit, but DMV officials are investigating the dealership and have scheduled an administrative hearing to look into allegations that the dealership knew and failed to disclose that the Pontiac had an accident history, according to Marc Kapetan, an attorney representing the company.

The discovery that rental car companies could be selling wrecks without branding the vehicle titles began with a lawsuit against National in 1999 by lemon law attorney Steve Solomon of Benicia, Calif.

In that case, United Airlines mechanic J.R. Inman purchased a 1997 Chevrolet Lumina for $8,900, a few months after the car was wrecked by a National customer. National sold the car through Copart for $4,650 without branding the title.

An unlicensed rebuilder who could not be located purchased the car, and then it showed up on the sales lot of a Concord, Calif., dealer, where Inman purchased it, according to Solomon.

Inman quickly discovered the car had serious problems, which would have required repairs estimated by a dealer at $5,866, Solomon said. The defects included a bent frame, a floor pan that impinged on the gas lines and misaligned headlights, among much else.

The case was settled for an undisclosed amount.

If the National case is any indication, the bulk of seriously damaged vehicles from rental agencies end up in the used-car market with clean titles, Solomon said. Copart provided estimates that 40% to 55% of salvage vehicles from rental car companies that it auctioned had clean titles, Solomon said.

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Ralph Vartabedian cannot answer mail personally but responds in this column to automotive questions of general interest. Please do not telephone. Write to Your Wheels, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. E-mail: ralph.vartabedian@latimes.com.