Common Scams to Avoid When Buying or Selling a Used Car
October 25, 2020
Car Sales Fraud: Warning Signs and Basic Precautions
Photo credit: Pexels
Recently, the U.S. has been experiencing a resurgence of scams. According to the American Association of Retired Persons, fraud-related incidents accounted for more than $1.9 billion in losses in 2019. Because vehicles are such big purchases and their acquisition can be a very complicated process, car sales are a lucrative target for scammers. In fact, car sales scams are not exclusive to completely fraudulent entities, and can be carried out by legitimate businesses as well.
Identifying Scams Targeting Used And Junk Car Buyers
Used car buyers can be particularly at risk for certain types of scams related to auto sales. This is due to a variety of factors, including the less clear-cut value of used cars compared to new models.
Nowadays, many used car sales scams are conducted online. Online used-car scams will often offer a used vehicle that does not actually exist or that is not as valuable as the buyer was led to believe. Some warning signs that an online car sale may be a scam include:
- The seller is pushy or insisting on a restrictive deadline.
- The price is “too good to be true.”
- They want you to pay with gift cards, through a wire transfer, or by a bank-to-bank transfer.
- The seller makes excuses for why they can’t meet you or why you can’t see the vehicle in person before the purchase.
- The seller says they acquired the vehicle in a divorce or through inheritance.
- The seller says they are getting rid of the vehicle because they are moving.
- The seller says the sale is guaranteed by eBay, Craigslist, PayPal, Facebook, or a similar online marketplace. These websites do not guarantee such transactions.
It is also important to note that scammers may use photos of a vehicle that matches the given description, or may pose as an existing business that deals in auto sales.
When buying a used car online, it is helpful to deal locally, make sure you have met the seller in person, and acquire identifying information about the vehicle, such as the license plate and the name of the person it is currently registered to.
An escrow service is a middleman that handles a transaction according to the contractual agreements made between the buyer and seller. Used car scammers may offer the use of a fake escrow service to put the buyer’s mind at ease. They will explain that the funds for the vehicle will be held by the escrow service until the buyer receives the car, but will then either cut and run or request additional funds as soon as the transfer to the “escrow service” is complete.
Common Scams Targeting New Car Buyers
People in the market for a new car are far from safe from scams, even if you only deal with local, legitimate dealerships. However, many scams relating to the sale of new cars may employ different strategies than those relating to used cars.
Bait and Switch
Bait and switch advertising is illegal per consumer fraud laws. Bait and switch advertising occurs when a dealership advertises a certain vehicle or price, but never intends to honor the offer. They will either not have the advertised vehicle on premises when you arrive (with the intent to then sell you on a more expensive car), upsell you on a more expensive car after you have already paid a deposit on the more affordable vehicle that was advertised, or increase the price on the vehicle from what was advertised after you arrive.
Packing the Contract
“Packing the contract” is a scam that involves the inclusion of services and accessories that require payment and are unwanted or were not previously discussed in the buyer’s contract. Or, it could be the inclusion of such services and accessories for a price that was higher than what was agreed upon. In fact, the buyer may have been told that they would be included for free.
Financing Fraud/Credit Fraud
A common form of financing fraud is scams wherein the dealership falsely claims that the prospective buyer’s creditworthiness is insufficient to qualify for competitive financing rates to trick the buyer into accepting a worse deal than they are eligible for.
Fake Auto Dealerships
In some cases, scammers may pose as a legitimate auto dealership. They may even create a fake website. When assessing the legitimacy of a website, consider the following:
- Is the “dealer” being pushy about getting a payment? Scammers will try and create a sense of urgency to avoid further investigation on your part.
- Do the pictures look consistent with your area? Look for cues that pictures on their website may not be consistent with your area, such as a palm tree at a dealership supposedly located in Wyoming.
- Does the URL use “https://”? Most modern websites use secure connections to protect their websites, especially if the site is used to host financial transactions. If there is no “s” in the URL, it may be a red flag, although this does not always mean the website is a scam — it may simply be outdated, although that may be a separate cause for concern, as unsecured sites leave both parties more vulnerable to other, external bad actors who may hack or otherwise compromise the site.
- Is the domain name odd? Scam websites may have a domain name that is a meaningless hodgepodge of letters and numbers, or else it may be very similar to the name of a real domain with some minor changes. In the latter case, an example may be “H0nda.com.”
- Does the website look professional? Poor spelling and grammar, or general shoddy website quality may be indicators that the website is a scam.
Scams to Be Aware of After You Have Bought a Car
Scams aren’t something you only need to be wary of during the transaction process. You can also be swindled later on.
Expired Warranty Scams
A common scam involves phone calls that claim the warranty on your vehicle is about to expire. The caller will then prompt you to divulge sensitive personal information. Some warning signs that a call about an expiring warranty is fraudulent include:
- There is a pre-recorded message when you pick up. You will then be prompted to select a certain number or stay on the line.
- The caller is suspiciously pushy (e.g. they claim the deal is only good for that day). These scammers will not want you to get off the line or do further research on the situation.
- There is no Caller ID. Real telemarketers are not allowed to hide their phone numbers. However, it is still possible for scammers to use a seemingly legitimate phone number through spoofing.
- Their claims are not consistent with what you know about your warranty. However, it is possible for them to have gained legitimate information about your warranty that they could use to make their claims seem reasonable
It is important to note that scammers may still be able to provide you with details specific to your vehicle in order to trick you. If you are suspicious that such a call is a scam, do not provide any personal information and hang up. Attempt to contact the company that provides your warranty through completely independent channels, not those provided by the caller.
These scams may also be conducted through email or through the traditional mail service.
Scams to Be Aware of When You Are Selling a Car
Scams involving car sales are also not exclusive to buyers or owners of cars. Junk Car sellers can also be the victims of auto scams.
Buyer Scams on Online Marketplaces
Scammers may pose as prospective buyers on your postings on an online marketplace, such as Craigslist or Facebook. They will attempt to convince you to give them personal information, use a bogus payment service, or send them money (for shipping fees or various other reasons). Warning signs that a prospective buyer is trying to scam you on your marketplace posting include:
- You get an immediate response to the posting.
- The buyer has an excuse for why they can’t meet you in person.
- They try to control the transaction.
- The buyer offers additional funds.
Additionally, if your car has very little remaining value, it may be in your best interest to consider a professional trade-in service. This can help ensure you get a share of the value of your car, even without having to subsequently buy or finance another purchase.
Deposit fraud in a car sale is much like it is for any other sale. The “buyer” gives the seller a fake check or money order, or else bounce the check. They then take the car before the seller realizes the fraud. Therefore, it is always important to make sure the check is going to clear.
General Tips to Avoid Being Scammed
Although it is helpful to know about specific scam strategies, it is also important to be aware of more general warning signs and preventative measures.
When buying a vehicle, be aware of the following warning signs:
- The seller is pushy or provides an ultimatum.
- The seller changes the contract, makes excuses for changes, or pressures you to sign.
- The seller refuses to meet you in person.
- The car you were promised is not there when you arrive.
- The offer is “too good to be true.”
- A website or escrow they suggest seems unusual or unprofessional (e.g frequent grammar mistakes).
- The seller provides unusual stories and/or repeated excuses.
- The seller says they gained the vehicle through circumstance (divorce, inheritance, etc.).
The following preventative measures can further protect you:
- Always meet the seller in person.
- Do research about any company they claim to represent and contact the company independently.
- Do not offer personal information unless you are positive that the seller is legitimate and trustworthy.
- Do not pay for the vehicle using gift cards, wire transfer, or bank-to-bank transfer.
- Do not fold to pressure to meet an arbitrary deadline.
- Always check to ensure any website or intermediaries the seller suggests are legitimate or counter with another solution for how you can pay.
- Be cautious of incredible offers and do not become too invested in the offer too early.
- Don’t provide any payment without being absolutely sure of the offer’s legitimacy.
When selling a vehicle, be aware of the following warning signs:
- The buyer responds immediately after you post an ad for the vehicle.
- The buyer offers to pay you more than you asked for.
- The buyer wants to pay through a specific service.
- Websites or services the buyer suggests seem unprofessional or otherwise untrustworthy.
- The buyer asks you for money to pay for the shipment or some other additional cost.
- The buyer seems like they are in a hurry.
- The buyer gives you an odd story or makes a lot of excuses.
- The buyer doesn’t want to meet you in person or makes excuses for why they can’t.
The following preventative measures can further protect you:
- Always request to meet the buyer in person or speak over the phone.
- Make sure that payment methods are on your terms.
- Know how much your vehicle is worth.
- Do not provide any personal information.
- Be wary of any unusual requests, explanations, or websites.
- Do not let the buyer take the vehicle if the payment hasn’t cleared.
- Always sell junk cars to a professional service. *
Who Is Most At-Risk of Being Scammed When Buying or Selling a Car?
Individuals who are at particular risk of being scammed during a vehicle sale include:
- People who are not tech-savvy;
- First-time buyers or sellers;
- People in a poor financial situation;
- People who are desperate to sell their vehicle;
- People who are trusting;
- People who are timid;
- Younger people;
- The elderly.
What to Do if You Have Been Scammed
- FTC Complaint Assistant: Victims of scams can report them here.
- Federal Bureau of Investigation Internet Crime Complaint Center: Victims of online scams can report them here.
- Fraud.org: You can sign up here to get notifications about ongoing scams.
- Better Business Bureau: You can do research about the legitimacy and reputation of businesses here.