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3 Common Car Scams and How to Avoid ThemBuying or selling a car can be a little bit stressful, particularly if you've never done it before. Here's how to protect yourself from a few common scams.
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There are a few scams that unknowing buyers or sellers should keep an eye out for.
“ Title 'washing' removes the 'salvage' stamp on the title by transferring the title to a state that doesn’t recognize the salvage status.”
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Buying or selling a car is a big transaction—so scammers and thieves have come up with elaborate ways to exploit the process. Here are some of the most common schemes and techniques to watch out for, and the best ways to protect yourself.
Title Washing
You may have heard the phrase "clean title" when referring to buying a used car. It’s a good thing—by clean, it means the car doesn’t have a "salvage title," which in most states has a stamp indicating salvage status.
A salvage title means a car has been deemed a total loss, due to severe damage from a wreck, flood, or other massive damage.
Title "washing" removes the "salvage" stamp on the title by transferring the title to a state that doesn’t recognize the salvage status. (States differ on their definition of things like "total loss," and the dollar amount that constitutes salvage status—which provides a loophole that can be exploited.)
How to avoid it:
It’s important to always make sure you know who you’re dealing with—confirm it’s a reputable dealer. (If you’re buying directly from an individual seller, it’s a little harder to know. However, making sure the name on the title matches the name on their ID is a good start.)
Get a title report from a reputable company like CARFAX. Regardless of how the paper title has been manipulated, or which states the car has been titled in, a CARFAX report contains the car’s complete history, documenting any major damage.
Complicated Situations, Stories
This category is broad, and there are a lot of ways it can manifest. If you’re selling your car, maybe there’s someone from another state who wants to buy it—often right away, without asking many (or any questions), and usually at full asking price. Think about that:
1. If you were buying a car without seeing it in person, you’d probably ask a lot of questions first, right? And likely have it inspected by a third party local to the car/seller.
2. Why is someone from far away trying to buy your car? Unless it’s something extremely rare, a legitimate buyer should—and most likely would—buy somewhere closer to them, where they can see and drive the car first.
3. Would you just pay full asking price, without making an offer or asking if the seller had any flexibility on price?
These scams often include a complicated story; the scammer might volunteer a detailed explanation of why they’re buying the car at a distance, and why they need to pay via Western Union, or a reason they need to overpay and then have you give them the extra amount back in cash.
Often they’ll say they’re buying the car for someone else—their son who’s deployed overseas, for example—as a gift. It’s a surprise, so that person can’t know. But someone will come pick up the car from you, to give to them.
How to avoid it:
Simply offer your car for sale to local buyers only. If someone from out of the area contacts you, let them know that they’ll need to come see the car in person, and if they buy it they’ll need to conduct the transaction in person. Also, follow payment guidelines in the next section.
Fraud, Counterfeit Payment or Theft
This is always a tough call; when you’re selling your car on your own, on Craigslist or any classified site, and you’re meeting a totally unknown buyer, you’re always taking a risk. You simply don’t know who you’re dealing with. They might pay you with a falsified bank check or counterfeit cash. Or, they might flat out steal the car, while test driving it.
How to avoid it:
There’s no 100% certain way to protect yourself, but here are some things to do and think about to minimize your risk:
Only allow a test drive if someone seems very serious about buying your car. It’s up to you to decide whether you want to go with them on the test drive. There are pros and cons—they could damage the car and you wouldn’t necessarily know it right away. Or, they could take off and never return. But for your own safety, it’s probably best not to go on a test drive with a stranger.
In either case, ask to see proof of insurance, and their license before they drive your car.—you also might want to take a picture of both, with your phone. If you don’t go on the test drive, ask to hold their car keys while they’re on the test drive.
If someone wants to buy your car, insist on going, together, to their bank to get a bank check (preferably) or cash. Do not accept any type of certified check or cash unless you’ve actually seen them withdraw it at their bank. A bank check is obviously safest, as technically they could steal the cash from you after you leave the bank.
Always keep the title on you (not in the car), and don’t produce it until they’ve paid you.
Once the buyer has paid you, the safest thing to do is to go to the DMV or AAA (if you or they are a member) to complete the sale and title transfer. In most states, you don’t need to both go, and usually you have a few days after the sale in which to do this, but the safest way is to go together and do it before you hand over the keys. (A legitimate buyer should welcome this, as it protects them, too.)
Safety First: Protect Yourself Above All Else
Ultimately, remember that it’s just a car—whether you’re buying or selling, don’t put yourself at risk unnecessarily. The safest ways to sell a car is to trade in to a dealer (this is convenient, but you’ll end up getting less money for your car, as dealers have a lot of overhead to cover), or to work with a service like TRED, which takes away the risky parts of selling your car, while still allowing you to get the best price—those are also the safest ways to buy a car, for the same reason!
Grant Feek is the founder of TRED. He started TRED on a simple premise: it should be easy to buy and sell cars. He's had the fortune of incubating TRED at General Assembly in New York and TechStars in Seattle. Prior to TRED, Grant worked in private equity and automotives at Lehman Brothers, Lowe Enterprises and BMW.
Title Washing
You may have heard the phrase "clean title" when referring to buying a used car. It’s a good thing—by clean, it means the car doesn’t have a "salvage title," which in most states has a stamp indicating salvage status.
A salvage title means a car has been deemed a total loss, due to severe damage from a wreck, flood, or other massive damage.
Title "washing" removes the "salvage" stamp on the title by transferring the title to a state that doesn’t recognize the salvage status. (States differ on their definition of things like "total loss," and the dollar amount that constitutes salvage status—which provides a loophole that can be exploited.)
How to avoid it:
It’s important to always make sure you know who you’re dealing with—confirm it’s a reputable dealer. (If you’re buying directly from an individual seller, it’s a little harder to know. However, making sure the name on the title matches the name on their ID is a good start.)
Get a title report from a reputable company like CARFAX. Regardless of how the paper title has been manipulated, or which states the car has been titled in, a CARFAX report contains the car’s complete history, documenting any major damage.
Complicated Situations, Stories
This category is broad, and there are a lot of ways it can manifest. If you’re selling your car, maybe there’s someone from another state who wants to buy it—often right away, without asking many (or any questions), and usually at full asking price. Think about that:
1. If you were buying a car without seeing it in person, you’d probably ask a lot of questions first, right? And likely have it inspected by a third party local to the car/seller.
2. Why is someone from far away trying to buy your car? Unless it’s something extremely rare, a legitimate buyer should—and most likely would—buy somewhere closer to them, where they can see and drive the car first.
3. Would you just pay full asking price, without making an offer or asking if the seller had any flexibility on price?
These scams often include a complicated story; the scammer might volunteer a detailed explanation of why they’re buying the car at a distance, and why they need to pay via Western Union, or a reason they need to overpay and then have you give them the extra amount back in cash.
Often they’ll say they’re buying the car for someone else—their son who’s deployed overseas, for example—as a gift. It’s a surprise, so that person can’t know. But someone will come pick up the car from you, to give to them.
How to avoid it:
Simply offer your car for sale to local buyers only. If someone from out of the area contacts you, let them know that they’ll need to come see the car in person, and if they buy it they’ll need to conduct the transaction in person. Also, follow payment guidelines in the next section.
Fraud, Counterfeit Payment or Theft
This is always a tough call; when you’re selling your car on your own, on Craigslist or any classified site, and you’re meeting a totally unknown buyer, you’re always taking a risk. You simply don’t know who you’re dealing with. They might pay you with a falsified bank check or counterfeit cash. Or, they might flat out steal the car, while test driving it.
How to avoid it:
There’s no 100% certain way to protect yourself, but here are some things to do and think about to minimize your risk:
Only allow a test drive if someone seems very serious about buying your car. It’s up to you to decide whether you want to go with them on the test drive. There are pros and cons—they could damage the car and you wouldn’t necessarily know it right away. Or, they could take off and never return. But for your own safety, it’s probably best not to go on a test drive with a stranger.
In either case, ask to see proof of insurance, and their license before they drive your car.—you also might want to take a picture of both, with your phone. If you don’t go on the test drive, ask to hold their car keys while they’re on the test drive.
If someone wants to buy your car, insist on going, together, to their bank to get a bank check (preferably) or cash. Do not accept any type of certified check or cash unless you’ve actually seen them withdraw it at their bank. A bank check is obviously safest, as technically they could steal the cash from you after you leave the bank.
Always keep the title on you (not in the car), and don’t produce it until they’ve paid you.
Once the buyer has paid you, the safest thing to do is to go to the DMV or AAA (if you or they are a member) to complete the sale and title transfer. In most states, you don’t need to both go, and usually you have a few days after the sale in which to do this, but the safest way is to go together and do it before you hand over the keys. (A legitimate buyer should welcome this, as it protects them, too.)
Safety First: Protect Yourself Above All Else
Ultimately, remember that it’s just a car—whether you’re buying or selling, don’t put yourself at risk unnecessarily. The safest ways to sell a car is to trade in to a dealer (this is convenient, but you’ll end up getting less money for your car, as dealers have a lot of overhead to cover), or to work with a service like TRED, which takes away the risky parts of selling your car, while still allowing you to get the best price—those are also the safest ways to buy a car, for the same reason!
Grant Feek is the founder of TRED. He started TRED on a simple premise: it should be easy to buy and sell cars. He's had the fortune of incubating TRED at General Assembly in New York and TechStars in Seattle. Prior to TRED, Grant worked in private equity and automotives at Lehman Brothers, Lowe Enterprises and BMW.
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