Scams to Look Out for When Buying or Selling Your Car

New and used cars have been in short supply since the pandemic, so it's vital to be aware of and understand the types of scams that fraudsters may employ during the purchase or sale of a vehicle.

We don't want to dampen the experience of selling or buying a vehicle, but there are a couple of risks associated along the road. Here's the key scams to be aware of as you set out into the marketplace.

What to be aware of when buying a car

Fake ads

The old bait-and-switch has been commonplace for quite some time. From fake ads in magazines to websites like AutoTrader and Facebook Marketplace; that's where a scammer will post an ad for a car that they don't even own, with a "must sell now" tag.

Another red flag to pay attention to is if the fraudster uses PayPal, Western Union or Moneygram before the money is released to you. The fraudster requests that you pay upfront or face legal action. Any emails sent to you via an account posing as the company.

When you reach out to them, the scammers will demand your money upfront, and if you fall for it, the money and the car will disappear.

Untraceable payment methods

Other risky payment methods are cheques, money orders and the biggest red flag: gift cards.

Gift cards are untraceable and are commonly used in scams. Once you share a gift card code, the money is gone. Remember, legitimate sellers and buyers will accept only traceable methods of payment. The best way to pay is through the normal channels.

Title washing

Have you ever wondered about the history of your car if you've purchased one used? Ontario Motor Vehicle Industry Council (OMVIC) registered dealers must legally disclose collision damage greater than $3,000, but what if you're purchasing a vehicle through Facebook Marketplace or AutoTrader?

Private sellers don't have to disclose any history, and that's when the risk of title washing comes into play. Title washing is when a seller uses various tactics, like rolling back the odometer, fraudulently removing liens or not disclosing that the car has been calling a salvage yard its home for the past five years.

Identity theft

An additional threat that plays off fraudulent vehicle histories is the obtaining of your personal information, including credit card numbers, PINs and your social insurance number.

Fraudsters will attempt to direct you to a link through an email or text message to steal your credit card information. Once they have that information, they can spend your money, open new bank accounts, change passwords, apply for loans, and even buy a car all in your name.

Curbstoning/Curbsiding

Another scheme to keep an eye out for is the illegal act of curbstoning, a.k.a. curbsiding. This is where a fraudster will pose as a private seller and show you their vehicle on the side of a road or in a vacant lot.

They do this to avoid permits and dealer's licence requirements. Licences are put into place to protect consumers to prevent any unscrupulous behaviour. Curbstoners buy vehicles from salvage yards, auctions and private sellers. Most of the vehicles purchased are junked SUVs, trucks or used cars found partially or fully submerged in water.

Dealer addendum scams

Not to play into the used car salesperson trope, but dealer addendum scams are something to look out for when purchasing a car from a dealer.

In short, it's a markup that can be identified as an add-on sticker, created by the dealership. It will contain extra, usually overpriced, products that are appended to the Used Vehicle Information Package (UVIP), outside of the usual Manufacturer's Suggested Retail Price (MSRP).

In Ontario, car dealers are bound by all-in-price advertising rules, and hidden fees have not been acceptable practices since 2010. Only the HST and licensing can be added to your invoice unless you want extended warranties.

What to be aware of when selling a car

Buying sight unseen

If your conscience is telling you to be wary of selling your car to an individual who promises to buy it sight unseen, trust it.

Typically, that’s part of a bigger scheme that will have someone else arrive to pick it up and complete the transaction with a bad check, or to get the title of the car without paying for it.

Anyone worth their salt will want to literally kick the tires before they buy your vehicle. A good way to verify your buyer’s identity is to ask for their driver's licence before they even get their foot in your vehicle.

Also, don’t give them any personal information during the transaction. They shouldn’t require anything more than your name and phone number.

Wire transfers

Also known as another form of an escrow scam, private sellers of vehicles need to be wary of anyone wanting to pay by wire transfer.

When you, the seller, want to set up an escrow process, the buyer will try to lead you away from a legitimate website and try to get you to click on a link through another email or text message.

Then they’ll either steal your information through the website or fool you to withdraw money that isn’t there. Or, in the worst case, they’ll do both, and get the car too.

Negative equity

Most buyers and sellers are aware that as soon as you drive a car off the sales lot, it depreciates. When a car dealer tells you that your trade-in vehicle has a fair market value less than what you owe on it, always be skeptical.

You need to know how much your trade-in vehicle is worth. You can quickly find that information at your local library or through online databases like the Canadian Black Book, or the Ministry of Transportation’s website.

Push, pull or tow scams

Another trade-in scam called the “push, pull or tow” scam, which isn’t as common in Ontario, is when a dealership advertises a guaranteed price on all trade-ins.

In reality, the money is put towards your new car purchase and comes from the incentives and rebates you can put towards your purchase without a trade-in vehicle. So, you trade in your used car for free.

Research buying and selling scams

The internet is a great resource where you can find reviews from real customers, assess the online presence of a business, and track down anything that might look a little fishy. If something seems too good to be true, it probably is. One of the best ways to avoid scams is by asking friends and family – they might have dependable recommendations they can share, or maybe have heard about scams you haven’t.

Selling or buying a vehicle can be a great experience, but it is important to remain vigilant about potential fraud. Be aware of all the potential risks associated with both private and public sales.

When in doubt, err on the side of caution. Plenty of scams can lead to even bigger issues such as identity theft, compromised email accounts and loss of money.