Frugal Shoppers Beware: Cheap Used Cars Have Higher Fraud Risk
Ever come across a listing for a used car that has a suspiciously low price? Well, you’re right to trust your intuition, because a new study released by iSeeCars indicates that your suspicion is justified. Following more than two and a half years of work that involved following the sales of 50 million used cars, iSeeCars determined that when the price of a used car seems too good to be true, the chances that it is tend to go up as the price of the car itself goes down.
The study looked at cars sold by dealers that were priced below their market value — abnormally low, that is. Other variables were also taken into account, such as the dealer’s reputation and suspicious comments surrounding the listings.
As iSeeCars CEO and co-founder Phong Ly says, many times this method is employed by dealers in an attempt to lure unsuspecting customers on to their lots. “We found examples of cars being advertised for much less than their market value or what they’re worth. The dealer’s hope is to lure the potential buyer into the dealership in an attempt to sell them a different car or the same car but on an expensive financing plan. It may also be that the advertised car has some major undisclosed issue or it could be odometer fraud,” Ly said.
So what do the numbers show, exactly? The results are fairly eyebrow-raising. When it comes to used vehicles priced at more than $12,000, the odds of potential fraud are at 0.3 percent. However, the chances increase quite a bit as the asking price of the vehicle falls. Once the listing price falls below $3,000, the chances of potential fraud shoot all the way up to five percent. While 5 percent may not seem like an incredibly large number, imagine dropping $3,000 only to find out you’ve been had.
It doesn’t simply stop at the price point, either. It was found that roughly half of vehicle that could possibly be tied to fraudulent behavior are priced at less than $10,000. Also keep an eye out for cars that are more than a decade old or have 100,000 miles. The last thing? Watch out for smaller dealers, as they are more likely to engage in fraudulent behavior than their larger counterparts.
Of course, the price alone isn’t the only area where dealers will try to take advantage of customers. Insurance provider Allstate laid out several others to watch out for in a blog post. What do they list out? Well, much like the iSeeCars study says, watch out for odometer fraud, for starters. Also, and probably way less known, airbag fraud.
NPR dug into air bag fraud in a story from 2008 and brought to light some rather surprising statistics. Citing a report from the National Highway Traffic Safety Association, it was found that a review of 1146 fatal crashes revealed 255 cases in which the air bags had not been replaced after the vehicle had been in a prior accident. That’s a whopping 22 percent, or roughly every one out of five vehicles.
Allstate also says to keep an eye out for VIN cloning, title washing, and ‘curbstoning,’ which is when private citizens sell multiple vehicles. Although it may not seem like there’s anything wrong with that, it’s illegal under many state’s laws.
So how can you protect yourself from predatory behavior when it comes to car sales? First and foremost, do your research. There are so many tools littering the Internet that allow for consumers to investigate fair market prices, and it also gives you plenty of time to develop a list of pointed questions to bring to the dealership. Don’t be afraid to print off and bring a copy of what you find with you, both as a resource at the negotiation table and to compare and contrast different model variations.
The more homework you do, the better prepared you’ll be. Hiring an independent mechanic to check out any vehicle in question is a good plan, as well as doing research into the dealership you plan on visiting. Look for customer reviews, and make a note of anything that sends up a red flag in your mind. You can also purchase vehicle history reports online to get even more insight into vehicles that pique your interest.
Buying a car is a huge investment, and you can never take too many precautions to protect yourself.