What problems can flood damage cause to a car?

Mostly corrosion. Rusting parts inside the dash, oxidized electrical parts (nightmare!), and mold growing in the seats and other hidden places. The air box in the dash is the only part inside the car that actually has a drain built in. Water can gunk up power windows inside the doors, freeze the mechanisms that make the seat belts work properly in a crash, and ruin the cardboard that makes the speakers sound good (a minimal concern, but true). A flood damaged car may also harbor harmful bacteria. Many mechanics in the south after Katrina became infected by various diseases when they got cut or scratched by the parts of flood damaged cars. If your car has flood damage, make sure you file an insurance claim! Flood damaged cars are no longer safe in any way.