Buying a used car can save you thousands of dollars when compared to buying a new car. When you buy used, the original owner has already endured the loss in value that new cars take in their first couple years of service. If you buy right, you can get a great deal on a car that still has plenty of life left in it.
However, if you don’t buy smart, getting a used car can be a financial disaster that reaches deep into your wallet. Fortunately, just as the internet has provided scammers new ways to take advantage of buyers, it has given consumers a number of resources to identify and avoid used car buying scams.
Most sellers are honest, and they’re just looking to get the most money out of the sale, just like you’re looking to pay as little as possible for the new-to-you ride. Some sellers, however, don’t have the same moral compass, and you need to be your own advocate to avoid being scammed.
There are a number of steps you can take to avoid getting taken advantage of, but they boil down to do the research, know the car, know the seller, and safely finalize the transaction. Your intuition plays a huge role in used car buying. If something doesn’t look or feel right, it needs to be questioned.
Do the Research
Knowing what you want and how much it should cost helps you avoid the trap of being directed to what a dealer wants to sell you. You’ll want to find a car that fits both your needs and wants, while also fitting into your budget. You can use our affordability calculator to get an idea of the price that you want to be paying.
Buyers should always arrange financing early in their car buying process. Many of the most expensive car-buying scams happen when you're trying to finance a car through an unscrupulous seller. By having a financing deal in hand, you'll reduce the chance that you’ll be taken advantage of with financing arrangements that have high-interest rates, untenable payments, or extremely long loan terms.
A common scam goes by a number of names, including spot financing and the yo-yo scam. You fall in love with a vehicle, and the seller presents a financing offer. You sign the paperwork without reading all of the fine print, or the dealer says you can take the car home and finish signing all of the paperwork later. Turns out that either you never qualified for the offer in the first place, or it was never actually approved by any lender.
After a few days pass, you’ll get a call from the dealership saying that the financing fell through, and you need to come back to sign new papers. The new offer will be completely different, and more expensive than the initial one. By now you’ve been driving the car, and they know you’ll probably sign anything to keep it. If you traded a car in, it’s probably long gone, or they will tell you it is. If the yo-yo scam ever happens, you should walk away, but the dealer knows that few customers will do so.
A red flag that this scam is happening is if you see a document in the initial paperwork called a borrowed vehicle agreement. If there’s anything in the paperwork that you don’t understand, ask questions. If you don’t get a satisfactory answer, then call the deal off – it’s your greatest power, and their greatest fear.
Know the Car
Whether you are buying a used car from a franchised new car dealer, an independent used car dealer, or a private party, you need to know everything you can about the car before you even think about buying it.
For one thing, you'll want to know if the car really exists and if the person selling it truly owns it. With the advent of Craigslist, it’s easy for criminals to copy photos and information from other ads and present it as their own. The scammer tries to make it so attractive that you will buy the car sight-unseen or so that they can garner some of your personal information for identity theft before you get wise to the scam. You can do a Google image search to see if the same photo shows up on multiple vehicle sales, or search for the same model car on Craigslist in a number of cities, looking for the same photo.
You’ll want to get the car’s vehicle identification number (VIN) as soon as you can in the process. If you have access to the car, write the VIN down yourself so that you are certain to be researching the right vehicle. If you don’t have immediate access to the car, ask for a photo of the VIN, and then check it again as soon as you do have access to the vehicle. Once you have the VIN, you can then check the National Motor Vehicle Title Information System and run a vehicle history report from a company such as Carfax.
A title report and vehicle history report can identify a number of things that should raise a red flag for you. Does the mileage shown on the report match the mileage on the odometer? If not, does the seller have a documented reason why it does not? Look for title branding, which is an indication of a major accident or other damage during the car’s life. If a car has been frequently moved from state to state, its title may have been “washed,” which is slang for moving a car to clear negative information from its title.
Beware of bait and switch. Call the dealer before you head to the lot to ensure that the car advertised (and you have researched) is still available. If you just show up at the dealership, it’s not an uncommon tactic to tell you that the car has been sold, but they have this other car that meets your needs, though it is more expensive. Like many other aspects of the used car buying process, if your intuition tells you something isn’t right, it’s time to step back, ask questions, and demand satisfactory answers.
You should always have the vehicle inspected by an independent third-party, even if it is a certified pre-owned car sold by a reputable new-car dealer. An experienced mechanic can identify collision damage, and assess the condition of the car and the quality of any repairs that have been done.
Unless the vehicle is a certified used car or has very few miles on it, you should always assume that it has no warranty. Most used cars are sold “as-is” with no warranty coverage after you sign the paperwork.
Know the Seller
Just as you want to know everything you can find out about the car, you also want to research the seller. Check with your state’s consumer affairs division, attorney general, or the local Better Business Bureau to find out whether there have been any complaints, and see how they were handled.
Whether you’re dealing with a dealership or a private party, you’ll want to scour the internet to see if there are any complaints on review sites or any news stories that involve the seller. If you see the seller’s name show up with a number of ads, but they are purporting to sell their own vehicle, it should raise a red flag.
There’s an unlawful practice known as curbstoning. It’s where a seller presents himself as a private-party seller, but in fact is an illegal dealer. Although the specific number varies by state, if a seller deals more than a few cars in a year's time, they are considered to be a dealer and must abide by a plethora of rules designed to protect consumers. Ask to see the seller's driver's license. If it doesn't match the name on the title, and they don't have a plausible reason why it does not, you might be dealing with a curbstoner, and you should walk away.
In fact, if the seller’s name doesn’t match the name on the title, you may be looking at a stolen car, as some car owners thoughtlessly leave their car title in the vehicle’s glovebox.
Safely Finalize the Transaction
You’ll want to choose a safe place, away from your home, to finalize the transaction. If there’s a lot of money involved, you may want to meet at your lender, because you don’t want to carry a lot of cash to the transaction and many sellers are wary of scams involving cashier's checks. Worried about properly completing the title transfer paperwork? You can meet at your local DMV, where a representative can help make sure that everything is done correctly. It’s not a bad idea to have a friend along when you complete the transaction.
If you have any concerns about the legitimacy of the seller, offer to meet in the parking lot of a local police station. Most scammers won’t want to get anywhere near the police. If the seller recommends that you use an escrow service, do your due diligence and make sure that the service is legitimate and is not the subject of consumer complaints.
There's a blizzard of paperwork involved in any car-buying transaction, but you need to read and understand each document. It is critical that you not only verify the proper VIN number on each document, but also any loan terms that you have agreed to. You should never focus on the monthly payment, but if you did, you should check the rest of the loan terms to make sure that they are fair and agreeable.
A sure sign that you are being scammed is if the seller starts applying time pressure. If they are trying to rush you through the process, it’s often because they want to hide something in the documentation, or they don’t want to allow you the time to properly research and inspect the vehicle.
If you are buying at a dealer, the finance manager will almost always try to pack a number of extras onto the transaction. Additional insurance, extended warranties, and protection products should almost never be purchased from the dealer. They are generally available from third-parties, such as your lender or insurance agent for much less money.
More Used Car Buying Tools From U.S. News & World Report
You can see how different used cars compare using our used car rankings and search for cars in your area that match your desires and budget using our used car search tool. If you are interested in certified pre-owned models, there are frequently financing incentives available, and we track them on our used car deal page.