Used Cars: Spot a Dealer-Scammer Posing as a Private Seller

A used car for sale.

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There's a Craiglist scam in the used car world that may catch you by surprise. Dealers are selling cars as private individuals so they don't have to comply with used car rules established by the Federal Trade Commission.

You won't know that you're buying from a used car dealer until the sale is complete.

How the Scam Works

It generally goes something like this:

  • You see an ad on Craigslist and call to see the vehicle.
  • You meet at a private residence. The seller weaves a song and dance about why the car is for sale, never mentioning that he or she is a dealer.
  • A used car history report will be shown to assuage any suspicions about the car.
  • You're a savvy used car buyer and plan an independent inspection anyway. That's fine with the dealer because the inspection does nothing to report who the current owner is.
  • The used car history report isn't fraudulent per se. It's most likely pulled from before the dealer bought the car — so the sales transaction to the dealer will not be reported.
  • If you like the car after inspection, you make the deal and this overly helpful private seller agrees to get the car registered for you. When you get the final paperwork, it reveals that the seller was actually "Bill's Used Cars" or something similar.

What the Scammers Are Thinking

Why does the dealer do this? The FTC's Used Car Rule requires dealers to post a Buyers Guide in every used car they offer for sale.

The Buyers Guide gives a great deal of information, including:

  • Whether the vehicle is being sold "as is" or with a warranty;
  • What percentage of the repair costs a dealer will pay under the warranty;
  • The fact that spoken promises are difficult to enforce; and
  • The major mechanical and electrical systems on the car, including some of the major problems you should look out for.

The Buyers Guide also tells you to:

  • Get all promises in writing;
  • Keep the Buyers Guide for reference after the sale; and
  • Ask to have the car inspected by an independent mechanic before the purchase.

As the FTC points out, "Buying a car from a private individual is different from buying from a dealer. That's because private sales generally aren't covered by the Used Car Rule, or by "implied warranties" of state law. A private sale probably will be "as is" — you'll have to pay for anything that goes wrong after the sale."

As you have guessed by now, a used car dealer can avoid a lot of headaches and costs by posing as a private seller. It's also impossible to track Better Business Bureau complaints against the dealer.

This scam is not limited to just Craigslist, as there are many other avenues for finding a used car online.

What You Can Do

Some advice would be to run your own vehicle history report on any used car before you buy it. Consider using two or three websites to ensure the full history is revealed. Never trust a used car history report given to you by a seller (not even a franchised dealer, frankly) because it's not hard to create a false report that looks real.

It's also smart to ask to see the driver's license or other official identification from the seller before buying a used car. Search the name online along with the words "used car." See if anything comes up, and walk away from the deal if something suspicious appears. Used car scammers like to move from state to state after being convicted, but they leave a trail online.

Make sure the driver's license matches the name and address on the bill of sale. It would stop problems like those listed above. Plus, remember not to allow the seller, unless it is a registered dealership, to handle the registration paperwork for you. That's how you ended up getting caught up in swindles like this one on Craigslist.

If you discover a dealer selling cars as a private individual, report him or her to your appropriate state agency.