Scam artists have been devising schemes to swindle honest people out of their money and the process of buying a car has been an attractive opportunity to defraud good people. We’ve all heard the stereotypes about yesteryear used car salesmen who tried to sell naïve buyers lemons. These days, car buyers need to be wary of digital thieves as well as dishonest dealerships. In 2022, nearly 2.37 million fraud complaints were filed with the Federal Trade Commission. If buyers are not careful when purchasing a car, they could suffer significant financial and emotional losses.
What are the Dangers of Being Scammed?
Money is not the only type of loss people suffer from a scam. Being taken advantage of intellectually leaves people feeling foolish and negatively impacts their self-confidence. That’s a very real issue that doesn't appear in government or crime data.
Hackers have also raised the stakes in recent years by targeting personal identity records. Too many consumers use weak passwords for bank accounts, debit cards, credit cards, and other financial information. During the process of buying a car from a bad actor online, that valuable data can be exposed. Car shoppers can wake up to maxed-out credit cards and drained bank accounts if they aren't careful.
It’s also possible for digital thieves to hack electronic devices and discover deeply personal information. Mental health records and other sensitive information can be used to extort otherwise good people who worry about embarrassment. These are just some of the reasons why it's wise to exercise vigilance when buying a car.
Common Car Buying Scams and How to Avoid Them
To say the schemes to deceive car buyers have expanded would be something of an understatement. These are some of the sophisticated methods criminals use every day.
When a vehicle has been damaged and does not comply with industry regulations, a dishonest dealer poses as a private party and sells the vehicle by the roadside. Buyers seem to get a good deal through an “as-is” purchase. In reality, the vehicle has serious mechanical problems that have been temporarily masked. If you're interested in buying from any private party, get a vehicle history report and double-check the VIN.
2. Buying Sight Unseen
Buying sight unseen is a digital thief’s dream scam. The buyer never sees the vehicle to test drive it or ensure the seller even possesses it. After wiring over the money, buyers find the car doesn’t look like the online pictures or needs substantial repairs. In the worst-case scenario, the buyer never receives the vehicle. That’s why it’s prudent to see the car and test drive it before sending anyone money.
3. Requesting Unsecure Payment Method or Gift Cards
Anytime a seller requests a wire transfer or unorthodox payment such as gift cards, step away. This should be a warning sign that the seller may be up to no good and is looking for a quick score. It’s crucial to negotiate car deals face-to-face.
4. Title Washing
A savings account is another tool that can help you in the process of building credit. A rainy-day fund is a fund you use for emergencies only. You will set aside a few thousand dollars in this account and use that when you face a sudden emergency car repair, appliance replacement, or similar cost.
So how does this help you build credit? These types of emergencies are inevitable as you go about your life. Having a rainy-day fund means you can cover these emergencies without adding another unexpected charge to your credit card balance. Keeping your credit card spending minimal is going to push your credit score higher. This is commonly known as “credit utilization;” 30 percent of your credit score is determined by how much debt you have in comparison to how much capacity remains unused.
5. Fake Escrow Account
Buying a car online opens the door to a wide range of hacker scams, and fake escrow accounts are one of the common ones. The scam usually involves getting a great deal on a desirable model that must be shipped from abroad. The scammer asks you to deposit the money in an account to process the sale. Unless you know the bank and account are secure, don’t take the risk.
6. The Low Credit Score Car Scam
If you don’t know your FICO score before car shopping, a dealership that provides financing can take advantage of this. The scam involves telling you your score is too low to qualify for an interest rate. That means you'll likely be given a higher rate and end up paying more over the life of the loan than necessary. The best way to prevent this scam is to know your credit score in advance and get pre-approved for a car loan.
What to Do if You Have Been Scammed
If you have been the victim of a scam, file a complaint directly with the National Consumer League’s fraud center. You can also contact the office of your state’s attorney general, the FBI’s Internet Crime Complaint Center, and the Federal Trade Commission. It’s essential to exercise caution when buying a car and stop scammers by reporting them.