If there’s one thing we can count on, it’s the never-ending innovation of scammers and fraudsters. They can be so enterprising. They never fail to come up with new and nefarious ways to trick unsuspecting car buyers and sellers out of their hard-earned cash. Or cars. Or both. (Just think what they could accomplish if they put all that time and effort into something legit!)
Here are two of the latest scams on the rise in the last few months that every potential car buyer and seller should be aware of.
- The buyer pays for the car, but asks to fill out the paperwork
In this ruse, the scammer comes to look at the car, agrees to buy it, and actually hands over the money… but then they tell the seller if they’ll fill out the paperwork. From there, they can pull some unsavory schemes. They might never fill out the paperwork (so the seller is still considered the owner of record), and then get a title loan—basically taking out a loan, for cash, against the title of the car. But the seller is still on the hook for that, since the title is in their name, and no transfer has been recorded. Or, if the car is in bad shape, the ‘buyer’ might make some really poor quality/unsafe repairs to it, and then sell it for more money. Then, any liability that results from the shoddy repairs falls back on the seller whose name is still on the title, not on them.
How to avoid this:
- When you’re the seller, always fill out the paperwork yourself.
- If your state has a ‘release of liability’ form, or any other form that’s used to notify the DMV of transfer of ownership, be sure to submit that right away, as soon as you sell the car.
- If there’s a lien (lease or loan) on the car, do not allow the lender to send the title directly to the buyer. Have them send it to you, so you can verify it and pass it along to the seller.
- If the buyer is paying in cash, be careful to confirm the bills are genuine—the best way to do this is to meet them at your bank and deposit the funds together, so you can be assured the cash isn’t counterfeit. (A legitimate buyer should have no problem with transacting at the bank.)
- TRED will vet your buyer and handle the paperwork and payment—the whole transaction is guaranteed, so you don’t have to worry about any of the above shenanigans!
- The buyer asks for an unconventional payment method
During the pandemic, more people are buying cars at a distance, and making the deal remotely instead of in person. As a result, various scams are on the rise where sellers request gift cards as payment for the car (which is a red flag all on its own…), or payment through some sort of ‘escrow’ service that turns out not to exist. (Often it’s something like ‘eBay Escrow Fund’, which is not a thing. eBay car scams are a perennial theme, as are OfferUp car scams, so always be careful there!)
This scam (along with many others) is often combined with another red flag—a price that sounds too good to be true. If a car is well below market value, for no apparent reason, that almost always means trouble. Like it doesn’t exist. Or the seller doesn’t actually own, or even possess it. Sometimes, the scammers even misrepresent themselves as a specific, legitimate dealer that they have no affiliation with.
How to avoid this:
- Don’t ever pay for a car using an unconventional method, like a gift card. Don’t use an escrow service unless you found it and vetted it yourself. (And if you’re not comfortable enough with the seller and the info you have on the car, to the extent that you feel you need an escrow service, think hard about whether it’s a good idea to go through with the transaction at all.)
- Remember that if it sounds too good to be true, it probably is.
- Make sure you know who you’re dealing with. If you’re buying online from a dealer, go look up their license online (most states have a registry where you can look them up, and verify that their license is valid and in good standing). After you do that, look them up on your own—find their website, or other listings online, and call the main number. Make sure the person you’re in contact with really works there. Ask for references from other legitimate, verifiable businesses in the area, like body shops or tire stores they may work with.
- If you’re buying from a private party at a distance, without being able to see the car in person, you’re taking a big risk. Get an independent inspection, ask for copies of the seller’s driver’s licence, the registration and title showing their ownership of the car. (But understand that these docs can be falsified, so this isn’t a sure bet, either.) Look up the CARFAX and see if the history matches up with where the car is located and when the seller says they bought it.
- Use TRED for your transaction, so that ownership is verified, and payment and transfer are handled for you and guaranteed. Even if the car you’re buying isn’t listed on TRED, you can run the transaction through TRED for protected payment and transfer service—you can avoid the risk of being scammed and avoid the DMV!