Avoiding Used Car Scams

Buying a brand new car is scary, but buying a used model can be even more intimidating because you don’t know what happened to a vehicle before it hit the used car market. Be cautious when buying a used car. Most used car sellers are good people, but some don’t have your best interest at heart. It pays to be able to spot the bad ones.

Types of Used Car Scams

One type of fraud is car cloning: Someone steals a car’s identity, or Vehicle Identification Number, and sticks it on a stolen car. Then, when you check the car’s background, it gets a clean bill of health, when in reality, it has problems.

Sometimes sellers may rollback a vehicle’s odometer to make it look like it has fewer miles under its belt. Other times, sellers salvage cars that are considered a lost cause. This was a common scam following Hurricane Katrina when a lot of flood damaged vehicles hit the market.

Another type of fraud is lemon laundering, which occurs when a dealer buys a car that has problems and doesn’t tell potential buyers about its past. If a car is a lemon, you could encounter title washing, in which a seller clears a vehicle’s bad history by taking it to a state that will provide a new title.

Regardless of whether your purchase a Honda Civic from a dealer or a neighbor down the street, you have to arm yourself with knowledge. Know how much the car you want sells for in your area, and don’t agree to pay a penny more.

Also, check the vehicle’s used car history. A great source is the National Motor Vehicle Title Information System. This $4 service provides vehicle background information. Pair this data with maintenance history. To get these documents, you’ll have to ask the dealer or owner for copies. Private companies like CarFax charge about $35. As you research, don’t forget to check for recalls. If the used car you want was recalled, ask the seller for paper work showing that nothing was wrong or that it was repaired. If they can’t supply that information, look for a similar model with a clean record.

Finally, always hire a mechanic to check your car, and don’t forget to evaluate the car yourself. For example, look for rust, dirt, moisture in the head and tail lights and faulty power windows – signs that the vehicle has flood damage.

How Do I Avoid a Scam if I am Buying from a Dealer?

Whether you buy through a franchise, independent dealer, rental car company, leasing company or used car superstore, avoid problems from the get go by contacting the consumer protection agency in your area, the state Attorney General or the Better Business Bureau to see if anyone has filed a complaint about a dealer. If there are complaints on record, approach the seller with caution.

Some dealers won’t explain confusing terms, so you should teach yourself about warranties and Buyers Guides. Dealers offer warranties, but most don’t allow you to return the car once you’ve bought it. Sometimes, dealers make promises that aren’t listed on the warranty. Talk is cheap, but repairs aren’t. Get everything the dealer says he’ll cover in writing.

Buyers Guides come with every used car and lists information you need to know. They tell you if the vehicle is sold as-is or with a warranty, how much the dealer will pay for repair costs under the warranty and tells you about potential problems and about the electrical and mechanical systems. You can request a copy of this document.

Your dealer may also offer you a service contract, which is similar to a warranty on a new car because it covers repairs and maintenance for a certain period. Only buy one if you need one. For example, if a used car is still covered with the manufacturer’s warranty, you may not need a service contact. However, if the car will need more repairs and doesn’t have a warranty, a service contact is a good idea.

There is a bonus to getting a service contract. According to the FTC, if you get a service contract for a car purchased as is, you also get an implied warranty on the engine. An implied warranty means that the basic functions of a car, such as a working engine, are in order. With both a service contract and an implied warranty, you could get longer coverage.

How Do I Avoid a Scam if I am Buying from an Independent Seller?

Don’t bypass a private seller because you’re nervous – you could miss a great price because independent sellers can sell for less since they aren’t running a business. But, keep in mind that used cars from independent sellers don’t have warranties (unless it’s still covered by the manufacturer), financing options or Buyers Guides. The best way to avoid getting scammed is to check the car’s warranty or service contract, if it has one. Your car may be covered, but in some cases, warranties won’t apply to new owners. Also, have a mechanic give the car a full inspection. With private sellers, you’re protected by fewer laws, but some states mandate that cars pass state inspection or have a minimum warranty. Know you rights before you buy.

Then, there’s payment. Do not make a payment until you get your vehicle and its title; someone could take your money and run. If a seller is using an escrow service, a third party that collects money from the buyer, make sure it’s legitimate.

Always be safe, especially if you’re shopping on eBay or Craigslist. Agree to meet in an public place, and bring a friend with you. Avoid offering too much personal information, and don’t meet a private seller if you feel uneasy, even if you really like the car. Your safety is most important. 

You’re ready to start shopping. Not only can you negotiate confidently, but you can also have peace of mind that you’ll find a used car that’s not a lemon.