Car Buying Scams: What to Know Before You Buy a New Vehicle

November 13, 2023


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    Can You Get Scammed While Buying a Car?

    Yes, you can be scammed while buying a car, especially if you’re making an online purchase from an unknown seller. 

    Extended warranties for used cars and flexible auto loans, for example, make it easy to buy and sell cars online. In fact, the ​​United States sells more of every car type — used and new cars alike — dominating the online car buying business in North America [*]. 

    However, these online marketplaces also lumber and creak with fake escrows, overpayment schemes, and used car scams.

    Last year, a California man presumed that he was purchasing a vehicle from a dealership in Indiana [*]. Only after he was swindled out of $82,000 did he discover that neither the car nor dealership ever existed.

    What Are Car-Buying Scams? How Bad Are They?

    A car-buying scam is an online scam that particularly targets people looking to buy used cars. These scams range from identity theft to fake ads, title washing, and curbstoning.

    In most cases, scammers pose as buyers or sellers with the sole purpose of stealing personal information or bequeathing damaged vehicles.

    Car-buying scams have become increasingly sophisticated as fraudsters adapt to changing market dynamics — like low inventory, surging used car prices, and the rising popularity of online car sales.

    In the graphic below, you can see how used car prices have soared since the beginning of the COVID-19 pandemic.

    Graph showing used car values from January 1997 to January 2023, where the car value index is 238.6 in 2023
    The price of wholesale used cars went up steadily in the first half of March 2023. Rates were up by 1.8% compared to February 2023, and by 3.8% without considering seasonal adjustments. Source: Cox Automotive Inc

    Every car-buying scam is unique; but in general, they all result in dire consequences for the buyer. Here are some of the biggest risks of falling for a car-buying scam.

    • Monetary loss: You could end up paying thousands of dollars for a car that doesn't exist or is grossly overpriced. The resale value of the car may also crater due to furtive liens or odometer tampering.
    • Fake or dangerous vehicle: The vehicle you purchase could turn out to be a stolen car — damaged or unsafe to drive, putting your safety (and your passengers) at risk.
    • Identity theft: Any personal information that you surrendered during the course of the transaction could be used to steal your identity. You may not just face legal and financial consequences but also whittling credit scores.
    • Harassment and other scams: Once scammers have your contact information, they may hector you — targeting you with more scams and spam calls.
    • Legal stumbling blocks: If you unknowingly purchase a stolen vehicle or are complicit in any illegal activity related to a car-buying scam, you could face legal action.

    🛡️ Take action: Identity Guard monitors your credit file and alerts you to any suspicious activity or unauthorized changes. Detect fraudulent attempts related to car financing or unauthorized credit applications made in your name. See how

    The 6 Latest Car-Buying Scams To Watch Out For

    There are dozens of scams that may be subsumed into a car-buying scam. The most common ploys target individuals with pliable credit scores, but here’s a closer look.

    1. Deals that are too good to be true
    2. Fake vehicle brokers and escrow services
    3. Gift card scams
    4. Title washing
    5. Curbstoning
    6. Requesting too much personal information

    1. "Urgent" car sellers offering unbelievable online deals

    In this scam, fraudsters post fake ads of suspiciously cheap cars, claiming that the steep discounts are offered in order to make a quick sale. The ad shows a photo of a real car — just not one the scammer is selling. 

    Most buyers are naturally wary of too-good-to-be-true prices. To circumvent this, sellers might offer a heart-wrenching story. For example, they may claim that they need to sell their vehicle at a significant loss due to an imminent deployment in the military.

    How to spot and avoid this scam:

    • Be wary of cars listed below market value. Everyone wants a deal, but scammers use low prices to get you to look past their scams. Research the fair market value for the vehicle you want to buy.
    • Never buy a vehicle that you can't see in person. If you can't inspect or test-drive a vehicle prior to the purchase, consider it a scam. If the seller demands an advance payment, walk away.
    • Emotional appeals should be a red flag. Tear-jerking accounts can create a sense of sympathy and urgency, which may encourage buyers to overlook misgivings and rush into transactions.

    2. Fake vehicle brokers, shippers, and escrow services

    Sellers also use fake car listings or car cloning as ruses to dupe buyers. Only this time, scammers direct buyers to pay a supposed independent third party, usually via wire transfer. These  escrow services will claim to hold your money and later ship the vehicle.

    To lend the scam an air of authenticity, scammers may insist that a well-known company like eBay or Craigslist protects the transaction. Or they might create fake websites for shipping escrow companies with addresses in real towns.

    You might be surprised to learn that the Better Business Bureau (BBB) receives hundreds of reports of phony vehicle shippers and escrow companies every year, with 41% of victims reporting financial loss [*].

    How to spot and avoid this scam:

    • Question requests for payments to third-party escrow accounts. Check the reputation and reviews of the seller and the escrow company. Verify their contact information and credentials. If a seller only communicates by email or text, give them a wide berth.
    • Validate the escrow service offerings. Compare the escrow website with the official website of the company with which it claims to be affiliated — such as eBay Motors or PayPal. PayPal provides purchase protection for a range of products; vehicles, however, are not covered.

    3. Gift card scams on eBay Motors and other platforms

    Another common scam occurs when sellers request payment in gift cards for the agreed-upon sale price of the vehicle. Vanessa Hale, an unsuspecting buyer, was left out of pocket by $800 after attempting to purchase a used vehicle online [*]. 

    She was made to believe that her purchase was secure under the carapace of eBay Motors. With a misguided sense of security, she paid the seller using eBay gift cards as requested.

    Scammers use this payment method because gift cards are non-refundable and hard to trace. Plus, the scammer doesn't have to meet the buyer in person. 

    Of course, many buyers are cautious of this tactic. After all, most sellers request payment for vehicles via cash, a cashier’s check, or a wire transfer. To sound convincing, fraudsters assert that gift cards are more secure or that they're having technical snags with their bank. 

    How to spot and avoid this scam:

    • If you can’t buy an eBay item on the eBay platform, you’re dealing with a fraudster. Legitimate eBay vehicle listings will always appear on where you then bid on or buy the vehicle at a fixed price. Items listed on Facebook, Craigslist, OfferUp, or elsewhere cannot be purchased on eBay and vice versa [*].
    • Never agree to purchase a vehicle using gift cards. Opt for secure payment methods with buyer protection — PayPal, credit cards, or a reputable escrow service. Do not pay with cash, wire transfers, gift cards, or other untraceable methods. The real eBay will never serve as an escrow service.

    ⛳️ Related: The 11 Latest Gift Card Scams (and How To Get Your Money Back)

    4. Title washing and other car title scams

    Car title scams, like title washing, involve manipulating a vehicle's title to remove or conceal information about the vehicle’s true history.

    For example, the seller might hide liens, past accidents, or flood damage that could lower the vehicle's value. Scammers may also alter the ownership history to make it appear that the car had fewer previous owners.

    How to spot and avoid this scam:

    • Verify title information with the Department of Motor Vehicles (DMV). Be aware of out-of-state titles or titles from states with lenient title regulations; they may be more susceptible to title-washing scams. Inspect the vehicle thoroughly for any signs of damage, wear and tear, or other issues that may not be disclosed in the title.
    • Run a vehicle identification number (VIN) check. The National Motor Vehicle Title Information System (NMVTIS) lists approved providers of vehicle history reports [*]. While neither Identity Guard nor the FTC endorses AutoCheck, CARFAX, or VinAudit, these providers may have additional reports on rebuilt titles.

    ⛳️ Related: Was Your Car Registration Stolen? Here’s What To Do

    5. Curbstoning

    Curbstoners pose as private sellers or dealers to sell salvaged or damaged cars to unsuspecting buyers. They often lure potential buyers to open spaces such as parking lots or roadside curbs, away from established businesses or residences. 

    Curbstoners cosmetically disguise cars to hide severe flaws, such as missing airbags or dangerous frame welding. These oversights can make vehicles ineligible for a legal sale.  

    How to spot and avoid this scam:

    • Inspect the car in person. Insist on test-driving the car yourself and having a qualified mechanic conduct a presale inspection. Beyond a body, frame, or engine check, experts can also read diagnostic trouble codes that indicate mechanical or electrical problems.
    • Ask to see the seller’s driver’s license and title. If the title is under a different name, it can be a cause for concern. Using the seller’s phone number, also check to see if the same vehicle has been listed on other marketplaces. 

    6. Requesting too much personal information during the sale

    Most vehicle scams feature sellers who pretend to be selling a car and request needless personal information from the buyer. These details can then be used to commit other types of fraud as grave as identity theft.

    How to spot and avoid this scam:

    • Only share your name and phone number. Genuine transactions do not elicit your Social Security number (SSN), date of birth, or banking information. In a cash transaction, you are only required to co-sign the bill of sale and procure the new title and proof of insurance for the car.

    What To Do If You've Been Scammed Buying a Car

    Most buyers looking to purchase used cars find car dealerships or private sellers in less than ideal environments. If you believe that you’ve been defrauded during the course of a sale, here’s what to do.

    Contact law enforcement and your bank

    Report the scam to your local law enforcement agency or the Federal Trade Commission (FTC). Give them all the details of the fraud, including any emails, phone numbers, or other evidence that you have collected.

    You can also file a complaint with the FBI's Internet Crime Complaint Center (IC3) and the Better Business Bureau (BBB).

    If you've made any payments to the scammer by using your bank account or credit card, contact your bank or card issuer immediately. They can help you freeze your accounts or reverse the charges.

    Also, reach out to the local police on their non-emergency line if you think your money or personal information is at risk.

    Protect your personal information

    If you've given sensitive personal information to a suspected scammer — such as your SSN, driver's license number, or financial information — take steps to protect yourself from identity theft.

    For example, monitor your credit reports regularly and consider placing a fraud alert or credit freeze to prevent unauthorized access. If you're worried that your driver's license may be lost or stolen, you should also contact your state’s DMV.

    🛡️ Take action: Did you unknowingly share your personal information with a scammer? Recover your identity and restore your credit with Identity Guard. See all plans

    Stay Safe While Buying a Car (Online or In Person)

    Car-buying scams are ever-pervasive — odometer fraud, for example, rose by 7% in 2022 [*], Buyers lose an average of $4,000 a year to similar scams; most victims remain unaware until much later. By taking a few simple steps, you can safely buy a car online or in person.

    Benefits of buying a car online
    The downsides
    Saves time and energy — you can shop from the comfort of your home without visiting multiple dealerships.
    No in-person inspection or test drive, which may lead to buyer’s remorse.
    Provides access to a larger inventory of cars and sellers beyond your local area.
    You could end up dealing with a scammer, especially when purchasing from a lesser-known dealer.
    No in-person sales pressure.
    Delivery and other fees can increase the purchase price.
    Straightforward — you can complete the entire car buying process online, from vehicle selection to financing and documentation.
    You may experience risks associated with shipping the car — such as damage during transport or delayed delivery.
    You can often see detailed information and vehicle history reports through CARFAX during your research.
    The actual condition of the car may differ from its online description, leading to disputes.
    You can read reviews and ratings from previous buyers to help you make the best decision.
    Lesser-known dealers or individual sellers may not have reviews, so determining their legitimacy can be challenging.

    To receive timely alerts of any suspicious activity on your credit reports, sign up for Identity Guard. 

    Otherwise, you may not always be privy to hard inquiries or accounts that you did not authorize. Identity Guard also offers robust identity theft protection and resolution services if your identity has been stolen.

    Keep your identity (and finances) safe. Get 33% off Identity Guard

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    1. Financial identity theft and fraud
    2. Medical identity theft
    3. Child identity theft
    4. Elder fraud and estate identity theft
    5. “Friendly” or familial identity theft
    6. Employment identity theft
    7. Criminal identity theft
    8. Tax identity theft
    9. Unemployment and government benefits identity theft
    10. Synthetic identity theft
    11. Identity cloning
    12. Account takeovers (social media, email, etc.)
    13. Social Security number identity theft
    14. Biometric ID theft
    15. Crypto account takeovers