Most Common Scams when Buying Trade in Cars

January 27, 2012

There are a lot of benefits to purchasing a dealer trade-in car, but uncertain car history - if left unchecked - can cause a great deal to turn into a nightmare. The good news is that there a few things you can do to protect yourself when purchasing a dealer trade in, and by looking out for the following scams you can make sure you're getting exactly what you pay for.

Existing Lien Holders

The most common and potentially troublesome scam when it comes to purchasing a dealer trade-in car is finding one with a title that is still owned by the lien holder. This is more common at smaller or struggling dealerships, as it is a quick way to make a profit off of an unsuspecting customer.

It starts when a buyer comes in with a trade in that isn’t fully paid off. The dealer will agree to pay off their prior loan and add the difference to their new purchase, but for whatever reason (either intentional or accidental), the trade in never ends up getting paid off. The previous owner is then still responsible for this car, and depending on how long it's been, may already have been transferred to a collections agency. When an unsuspecting buyer finds the car and agrees to purchase it, the dealer may make excuses as to why they don't have the title available. This should be an immediate red flag. A reputable dealer should be able and willing to produce the title for you to look over, before you sign anything or agree to purchase. If they aren’t, then something is likely amiss.  

If a car is still owned by the lien holder, then what you're paying for is a car that isn’t actually for sale. Aside from registration issues, should the lien holder decide to repossess the car, you may have little to no legal recourse. To avoid this problem, always make sure to ask to see the title before signing a contract. 

Checking vehicle history

Always run a vehicle history check from your local Department of Motor Vehicles before purchasing a used car. Salvage title cars or vehicles that have sustained flood damage may look like they're in good shape, even to the point of being accepted as a trade in. Underneath that fresh paint there may be frame damage or extensive electrical faults that won't be covered when sold as-is. Depending on the local laws, you may not even be able to register a salvage title vehicle. Should you require more information about a particular car, such as would be the case with a rare or expensive car, websites like the National Motor Vehicle Title Information System found at http://www.nmvtis.gov can provide even more in-depth information about your car, to ensure the car you’re getting is every bit as good as you hope.

There is no reason why purchasing a dealer trade in can't be every bit as rewarding as a new car. The key to success is making sure to verify everything before purchasing. A few hours before can save you thousands of dollars and headaches after.