Used car scams prevalent for online buyers

TORONTO – The online market for used cars is growing in popularity – for both consumers and fraudsters.

According to a new survey, one in five Canadians who use the Internet to buy or sell a used car have encountered at least one instance of fraud.

The Angus Reid survey was conducted on behalf of the Automobile Consumer Coalition, a not-for-profit organization founded in 1999 that works to educate consumers of issues in the auto industry.

Of the 3 million used cars bought and sold by Canadians annually, nearly 600,000 trade hands via online classified websites, such as Kijiji, AutoTrader and Craigslist, according to survey data.

The survey found that one of the most common scams online involves fraudsters offering to buy a used car and overpaying the seller with a fake cheque. The scammer then asks the buyer to refund the difference usually through a money order. In these cases, the scammer is hoping the eager seller will wire funds to the buyer before waiting to see if the initial cheque clears. When the fake cheque bounces, the wired funds are already gone.

Story continues below advertisement

Other scams include offering to sell a car below market price on a listing the scammer doesn’t actually own. Interested buyers send a down payment using a money transfer, and the fraudster takes the money and bolts.

Experts also warn consumers about “curbsiders” – fraudsters that sell multiple vehicles, posing as private sellers to get around provincial regulations and taxes, or selling cars with concealed damage.

The Used Car Dealers Association of Ontario (UCDA) said online classified sites are a hotbed for curbsiders. A 2012 study conducted by the UCDA found nearly one in three “private sellers” actually had multiple vehicles for sale.

Recently, several Canadians who believed they were purchasing luxury cars online soon discovered the U.S. company they thought they had bought it through didn’t actually exist.

Investigators believe the sophisticated scam targeted Canadian buyers because the international and multi-jurisdictional nature of the crime would make it costly and difficult for investigators on both sides of the border to pursue.

The phony car dealerships would advertise luxury cars online at “too good to be true” prices.

Despite the prevalence of online fraud on used car forums, 64 per cent of survey respondents said they did little to no research into potential scams before starting to shop online for a used car.

Story continues below advertisement

While online classified sites frequently run anti-fraud awareness campaigns and also work with police to track down and prosecute fraudsters, thousands of Canadian auto consumers are scammed every year. In 2012, the RCMP’s Canadian Anti-Fraud Centre listed more than 1,300 online car scams.

Officials warned though that due to the social stigma attached to falling for online scams, many cases of fraud could have gone unreported.

Based on the survey results, the ACC is urging online classified websites and regulators to work together to adopt new technologies that detect would-be scam artists. The organization is also recommending all levels of government consider instating an inter-provincial authority to tackle online car fraud across Canada.

The survey was completed by 1,006 Canadian adults who had purchased or sold a vehicle online via a classifieds website within the past year. The margin of error was +/- 3.1 per cent, 19 times out of 20.

Sponsored content