7 Used Car Scams and How to Avoid Them

7 Used Car Scams and How to Avoid Them

Used car scams come in many forms, but these are some of the ones you're most likely to encounter. Here's how they work and how you can avoid them.

1. Curbstoning

Curbstoning is when a dealer poses as a private seller to skirt licensing requirements and consumer protection laws, including lemon laws. It gets its name from the practice of meeting buyers at the curb in front of a private residence or in an empty parking lot. In some cases, a private party buys and resells defective cars for profit without getting the required dealer license. If you fall victim to this scam, you could pay more than the car is worth.

How to avoid it: Check that the name on the title matches the seller's name. If it doesn't, the seller may be trying to avoid leaving a paper trail connecting them to the car. Also search the seller's phone number online. If it shows up on several car listings, you're likely dealing with an unlicensed dealer.

You can also check the vehicle's history through Experian AutoCheck or Carfax to see if it's been in any accidents or has a salvage title that the seller might be trying to conceal.

2. Title Washing

A car title is invaluable when you're buying a used car because it can tell you whether the vehicle has been totaled, sustained flood damage or holds outstanding liens or other issues. However, some scammers hide that history by altering the title or moving the car to a state that doesn't recognize certain title brands like salvage or flood. If you're not careful, you could pay more than the car is worth without knowing anything about its damage or defects.

How to avoid it: Get the vehicle history report to check for title brands. You can also give your insurance company the vehicle identification number (VIN) to see if it has any records on the car.

Learn more: What Is Title Washing?

3. Odometer Rollbacks

This scam dates back to when odometers were analog, but the illegal practice continues today. More than 2.45 million vehicles on the road have odometers with fewer miles than they've actually been driven, according to Carfax data. The scam costs consumers an average of $3,300 in value, not including maintenance costs, from purchasing a vehicle overvalued by a rolled-back odometer.

How to avoid it: To spot a rollback, inspect the vehicle for wear and tear that appears to exceed the advertised mileage. Also consider hiring a mechanic to look for signs of tampering. You can ask to see the original title (not a copy) to compare the car's mileage when the document was created.

If the title shows that the car had more miles at an earlier transfer than it does now, it may have been rolled back. Also refer to the vehicle history report, which may show the vehicle's mileage when certain events are recorded, such as service appointments and previous sales.

4. VIN Cloning

The 17 letters and numbers that make up your car's vehicle identification number are its unique identifier. This is a scam where someone tries to sell a stolen car or one with a salvage title by removing the VIN from the vehicle and replacing it with one from a legally registered car with the same features.

The consequences of buying a car with this problem are severe. You could lose the car if authorities seize it and give it back to the original owner or to the insurer that paid the owner's theft claim.

How to avoid it: Look at the VIN plate on the driver's side dashboard and the VIN sticker inside the driver's door to make sure both numbers match the title. Also look for scratches or fresh paint around the plate, which could indicate it's been tampered with.

Finally, read the vehicle history report to learn more about past accidents and title brands. For example, if the report shows registration or repairs in different states around the same time, it could be a sign of a clone.

5. Lowballing

If a seller is asking far less than the car's book value, it could be a sign of a used car scam. They might say they're willing to accept less just to get rid of the vehicle. They may even admit the car was in a minor accident but provide only vague details. The low price could be a tactic to get you to buy without asking more questions.

How to avoid it: Ask the seller why the price is so low and walk away if they can't give you a clear answer. If you feel like a deal is too good to be true, take the car for a test drive to see if you notice any major mechanical problems. Also ask the seller to allow a mechanic you trust to inspect the car before you buy it. The mechanic can check the car's overall condition and look for problems the seller hasn't disclosed.

6. Fake Online Listings

When you're shopping for a used car, be aware that some of the vehicle listings you come across on various websites and social media platforms may be fake. Some scammers go so far as to clone dealership sites and fake vehicle history database sites, both with the intention of deceiving unsuspecting buyers.

In one version of this scam, the seller promises to ship you the car for a trial evaluation period. You're then directed to send payment to an escrow company they secretly control. The car never arrives, and you're out the money.

There's another version of this scam where the seller clones a dealership site, and may even use the same logos and listings. The goal is to trick you to pay for the car up front. When you show up at the dealership, however, you discover the dealership doesn't have a record of the purchase.

How to avoid it: It's generally not a good idea to buy a used car sight unseen. Always inspect and drive a car in person before paying for it. If the seller won't let you see the vehicle in person, it's likely a scam. If the car is located too far away to visit, hire a mobile inspection service to inspect it for you.

Use a reverse image search to check whether the car's photos appear in other ads with different prices or phone numbers. Don't buy from a seller who insists on upfront payment via wire transfer and report them to the Federal Trade Commission (FTC) at ReportFraud.ftc.gov.

Learn more: Don't Fall for These Online Marketplace Scams

7. Spot Delivery Financing Scams

Spot delivery, sometimes referred to as conditional financing, is when you agree to buy a car and the dealer lets you take it home before the loan has been fully approved. While spot delivery financing is technically legal, you must be careful because it can also be exploited by scammers.

Dealers may include a clause in some contracts that makes the sale conditional on financing approval. If the lender doesn't approve the loan as agreed, the dealer may ask you to accept different terms.

If you take the car home before the loan is fully approved, the dealer can then tell you they couldn't get the financing you agreed to. Instead, you'll need to accept a loan with less favorable terms, such as a higher interest rate and a larger down payment.

How to avoid it: Don't drive home a car until your financing is fully approved at the rate and terms you agreed to and both you and the dealer have signed the loan agreement. If the loan approval isn't final, don't sign any contracts and keep your current car until then.

If the dealer says they can only approve you at different terms that you don't agree with, return the car and ask for a refund of your down payment. You're not obligated to agree to new financing. Another option that may help you avoid this problem is to get preapproved for a car loan before you start looking at cars so the dealer isn't your only financing option.

Warning Signs of a Used Car Scam

Look out for these red flags of a scam when you're shopping for a used car:

• Suspiciously low prices: Compare the car's asking price with its book value and listings for cars with the same make, model and year and similar mileage. A substantially lower price may be a warning sign of a scam.
• Untraceable payments: According to the FTC, consumers lost more than $4 billion in scams, including used car scams, after sending money by bank transfers or cryptocurrency. Don't send payments by wire transfer, gift card or payment apps because they can be difficult to reverse. The FTC recommends not sending money to anyone who requires you to pay one particular way.
• Refusal to meet in person: Don't send money to anyone who refuses to meet in person so you can inspect and drive the vehicle. If a seller won't meet you and pushes delivering the car to you instead, it could be a sign there's no car at all.
• Pressure tactics: A common sign of used car scams, and scams in general, is pressuring you to rush into a decision before you can check anything. A legitimate seller doesn't mind waiting while you check the VIN and vehicle history report.
• Name or VIN doesn't match: Always check to make sure the seller's ID matches the name on the title. Also verify that the VIN on the title matches the VIN on the dashboard near the windshield and on the label inside the driver's door.

How to Safely Buy a Used Car

With so many scams out there, it's important to be vigilant about protecting yourself and your money. Fortunately, there are a few steps you can take to weed out most scams:

• Ask for a vehicle history report. Many private sellers will order one to make things easier for potential buyers. If they refuse, get the VIN and get one from AutoCheck or Carfax. You may be able to save some money by ordering multiple reports from one company if you're considering multiple cars.
• Hire a mechanic. A prepurchase inspection typically costs between $100 and $200 but can save you thousands of dollars if the mechanic spots a major problem that the seller tried to conceal.
• Verify the seller's story. Check the original title, registration and VIN on the car against the vehicle history report to verify they're all the same.
• Pay with a cashier's check. A cashier's check requires the legal name of the recipient, so if you do fall victim to a scam, you'll have that information. Avoid cash sales because they don't provide a paper trail.

What to Do if You Fall for a Used Car Scam

If you fall victim to a used car scam, take swift action and follow these steps.

1. Gather All Records

You'll want to have all your records handy when you notify your bank and file reports with the proper authorities. Start by saving the original listing, receipts, contracts, payments and all communications with the seller. Take screenshots of online listings and messages so you still have copies if they're deleted.

Also gather all the information you can about the vehicle. Collect the car's title, bill of sale, VIN and vehicle history report. Write down key dates, how much you paid and anything the seller promised or claimed about the car or the deal.

2. Contact Your Bank

As soon as you discover the scam, notify your bank or the payment provider you used to dispute the charge and ask them to reverse the payment. If you paid by check or cashier's check, act fast and ask them to stop the payment before the seller cashes it. Once a check clears, or if you paid via a wire transfer, your bank can't get the money back.

3. File an Official Report

Armed with your records from the deal, visit ReportFraud.FTC.gov or call 877-FTC-HELP to file an official fraud report with the Federal Trade Commission (FTC). The steps are relatively simple. Click "Get started now" to start the process and follow the prompts. You'll provide details about what happened to the FTC and they can guide you on how to protect yourself. The agency shares the report with their law enforcement partners to track down scammers.

4. Contact State Authorities

Contact your state attorney general about dishonest car ads or dealers. You can find your state's attorney general office by searching the National Association of Attorneys General website. Also report the scam to your state's DMV or motor-vehicle agency if it used a fraudulent title or odometer.

5. Notify Local Law Enforcement

Finally, call your local police department's nonemergency number or visit their website to file a police report. Local law enforcement can investigate suspected fraud, such as if you paid for a car you never received or were sold a stolen vehicle.

Protect Your Credit From Scammers

Criminals can be incredibly creative and convincing with their scams, and if you get duped, they may have covered their tracks well enough to make it impossible to find them again. As a result, it's crucial that you be on your guard when buying a used car, particularly from a private seller.

A car deal can also put your personal information at risk, since dealers and sellers may ask for your driver's license or Social Security number. If you think a scammer has yours, you have the right to place a free fraud alert on your credit file, which tells lenders to verify your identity before opening new accounts. You can also check your Experian credit report and FICO^® Score^Θ for free, which can help you spot accounts you didn't open.