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Insurance companies say 500 vehicles have so far been written off after being affected by water in last month's floods.
And the Land Transport Safety Authority (LTSA) says car buyers in Manawatu need to be prudent.
The vehicles have been deregistered and are being sold through weekly auctions. Most are likely to be broken down for parts.
The LTSA is concerned owners of non-insured cars might seek to sell their defect-ridden vehicles to unsuspecting buyers.
Experts say vehicles that appear unscathed might still be time bombs if water has infiltrated complex electronics, now common in modern cars.
Cars flooded up to seat level are commonly being written off.
Water-damaged air bags cannot be relied upon to work properly, the authority said. And electronics that work initially might play up or fail completely over time.
Rotted trim and carpets and damage to hydraulics, engines and brakes are also possible.
A Palmerston North car salesman, who did not want to be named, said he had learned of a flood-affected late-model car that had been bought cheap and carefully dried out.
"They thought it was okay, but when they started it up, the air bags all went off."
LTSA spokesman Andy Knackstedt said non-insured cars in private ownership could be sold to unsuspecting buyers without authorities being any wiser.
The LTSA can only maintain a watch over the insurance write-offs. The vehicles, some nearly new, are being sold through auctions in Palmerston North and Wellington.
Two auctions have been held and five more are planned.
The vehicles have been deregistered and an LTSA record will show them to have been flood-damaged.
They appear to be fetching prices well below usual market value.
Any vehicle that is to be restored to road worthiness must pass a certificate-of-compliance test set by the LTSA and conducted by approved engineers.
"It's far more thorough than your average warrant of fitness test," said Mr Knackstedt.
"It is a very thorough inspection.
"The cars are also flagged in our system as having been flood-damaged."
Mr Knackstedt said the LTSA had done as much as it can to ensure that no rogue vehicles make it back on to the road.
Auctioneer Turners had agreed to pass on information to the authority about any suspect vehicles.
But anyone seeking to buy privately needs to be especially cautious.
"If a car has been severely flood-damaged, then it is basically stuffed," Mr Knackstedt said.
"Our advice would be to get any car thoroughly checked out by an expert before thinking about buying it."
The LTSA has an 0800 699-000 helpline for owners of flood-damaged vehicles.
- NZPA
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