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Craigslist Used Car Scam - Dealers Posing as Private Sellers

They Do It To Avoid Federal, State Laws

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Craigslist Used Car Scam - Dealers Posing as Private Sellers

"Great used car for sale. Only driven to church by an elderly lady."

Photo © Getty Images

There's a Craiglist scam going on 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 for used car dealers.

You are not going to know you're buying from a used car dealer until the sale is complete. Basically it works like this (and it has happened twice to a friend of mine in the last two years from different dealers in Connecticut and it almost happened to a third in Florida!):

  • 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 they're a dealer.
  • A used car history report will be shown to assuage any suspicions about the used car.
  • However, you're a savvy used car buyer so you 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 isn't going to 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.

Why does the dealer want to do this? As reported on the Federal Trade Commission's website 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 them.

By the way, this isn't limited to just Craigslist, I'm sure, but I mention that site because in all three instances I am aware of the transaction started on the popular free ad site.

My advice? Run your own vehicle history on any used car before you buy it. Consider using two or three sites because no one site is going to catch everything. Never trust a used car history report given to you by a seller (even a franchised dealer frankly). Give me 30 minutes and I could create you an authentic looking vehicle history report that shows no accidents and ownership by a little old lady from Pasadena who only drove the car to church on Sundays.

UPDATED ADVICE: Since first writing this article in May 2009, I have come to the conclusion that you need to demand a driver's license or other official identification from your seller before buying a used car. Google the person's name along with the words "used car." See if anything comes up. Walk away from the deal if it does. Used car scammers like to move from state to state after being convicted but online articles usually follow them.

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 them to your appropriate state agency. They're obviously fraudulent business owners who are playing the system.

Related Video
How to Prepare Your Used Car Before Selling
How to Buy a Used Car
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