Used-car purchases often begin with an online advertisement, and, as a result, there are an increasing number of scams involved in online car buying that seek to dupe unsuspecting shoppers.
Online car-buying scams are becoming increasingly sophisticated and, therefore, harder to detect, according to the Internet Crime Complaint Center, or IC3, a partnership between the FBI and the National White Collar Crime Center. From 2008 through 2010, the IC3 received nearly 14,000 complaints from car shoppers who have been targeted or victimized by an online car-buying scam. Victims lost $44.5 million over that time period.
The scam typically starts with a used car that is being sold on a reputable website for automotive advertisements. The car is priced below value with some plausible story for the rock-bottom price, according to an IC3 consumer bulletin. Common reasons for the low price include the seller suddenly moving for work or for military deployment, or the seller needs cash quickly because of a job loss or unexpected medical bills.
Gaining the buyer’s confidence
The seller increases the buyer’s confidence in the deal by suggesting they use a third-party wire-transfer or escrow service for full or partial payment. To further increase the buyer’s comfort level, often the seller indicates that using this service to facilitate payment offers built-in buyer protection, according to the IC3 bulletin. Buyers believe this because they recognize the third party as a reputable automotive website, but the third party is not actually involved. The used-car buyer is instructed to fax or email his or her wire transfer receipt to the bogus seller to schedule delivery, only the delivery never occurs, and the buyer’s money is gone.
Reputable companies that have been used by criminals to pull off these online car-buying scams include AutoTrader.com, Cars.com, eBay Motors, Edmunds.com and Kelley Blue Book, according to IC3 data. These companies, except for eBay Motors, offer no buyer protection services, and eBay Motors’ Vehicle Purchase Protection service only protects buyers whose transactions begin and end on their website.
“A seller on a completely different site (than eBay Motors) will post a listing for a car that doesn’t actually exist,” says Jack Christin Jr., eBay’s associate general counsel. “The sellers lend credibility to their listing by falsely claiming the sale will be insured by eBay Motors Vehicle Purchase Protection, when in fact this protection only exists for sales that start and end on eBay. Finally, the buyer is enticed to wire money for the car through Western Union or a similar service.”
Similar online car-buying scams have been reported using the names of numerous reputable automotive websites, though car shoppers seem to get duped more often when eBay Motors is cited since it does offer buyer’s protection, albeit only for transactions conducted through eBay, according to an IC3 intelligence report.
Separating fact from fiction
Determining fact from fiction isn’t always easy with online car-buying scams since they are often quite elaborate. Often, the escrow services that the bogus seller suggests use variations on the reputable companies’ names. The scams also use website designs that look similar to the legitimate companies’ websites, sometimes even carrying the legitimate companies’ logos, according to the IC3 consumer bulletin.
Recently, the used-car scams have become even more sophisticated. “Scammers added 800 numbers and live chat with potential buyers to try to ease their concerns and provide more detailed information on the fraudulent buyer protection programs,” says Shayne Brown, associate general counsel for Kelley Blue Book.
Even with these scams, “buying a car is still generally a very safe practice, and the majority of transactions go off without a hitch,” says Phil Reed, senior consumer advice editor for the auto site Edmunds.com. Still, Reed advises that online car shoppers use caution when buying a car.
Start by looking for the warning signs that are common elements of a scam. Those include cars priced below market value as well as sellers who want to do business only online or try to shift the transaction from one website to another, according to IC3.
Do your due diligence
When it comes to escrow companies, Reed suggests that buyers do their due diligence if the seller has requested a specific escrow company. “Verify that the escrow company is properly licensed. Find its contact information on your own, not by following a link the seller sends, and call them and speak to a representative,” he says.
“Find the website through an Internet search engine and send them an email question. If you don’t receive a response, don’t do business with them. If the site displays logos from the Better Business Bureau, VerSign, TRUSTe or any similar organization, verify that they are really endorsed by these groups,” Reed says.
Other warning signs of an online car-buying scam include when the seller refuses to speak over the telephone, meet in person or allow the buyer to inspect the car ahead of time, according to IC3. For details on the warning signs read “5 red flags to bust a used car-buying scam” on the Bankrate site.
If you are the victim of a scam, file a complaint at IC3.gov, and if any reputable automotive websites are cited, contact them so their legal departments can add the case to their files.