How to Recognize When an Online Auto Deal is Bogus

November 08, 2011

By Randy Hutchinson, Special to The Commercial Appeal

Friday, November 4, 2011

Would you like to buy a 2009 Mini-Cooper worth more than $20,000 for just $10,300? My guess is that many of you would jump at the chance to get such a great deal.

Would you wire $5,000 as a down payment to an auto dealer you found on the Internet to hold the Mini-Cooper, with the balance to be paid when it's delivered or you pick it up? My hope is that most of you would know better. But not everyone does.

The FBI issued an alert in August about online auto scams. From 2008 to 2010, the FBI's Internet Crime Complaint Center received nearly 14,000 complaints from consumers who were victimized or at least targeted by these scams. Total dollar losses were nearly $44.5 million.

There are two variations of online auto scams that we see most often. I'll describe the one that the FBI's alert warned about and then relay an example of an even more sophisticated version that happened in Memphis last year.

The first variation of the scam involves autos advertised at below market prices on legitimate websites. The buyer contacts the seller, usually by email, and usually hears a hard-luck story about why the car is being sold at such a low price.

In some cases, the phony seller moves the transaction from the original website to another one and offers a buyer protection plan in the name of a company like eBay to add legitimacy to the deal. The seller is instructed to wire the funds somewhere, after which delivery or pick-up will be arranged. The buyer loses the money wired and never gets the car.

The creative scam that we received calls about last year has been perpetrated in many states across the country. The crooks steal the identity and good name of real auto dealers, setting up bogus websites that advertise repossessed cars at cheap prices. The websites even contain certification seals that link to a phony certification agency to lend more credibility to the scam. Buyers are instructed to wire a deposit to hold a car and then directed to the address of the real dealer to pay the balance and pick up the car. Again, money wired is lost.

The local auto dealer that was victimized received about 300 calls from people wanting more information on cars listed on the bogus website. Some actually showed up at the car lot with receipts showing they had paid for cars. We received calls and complaints from people all over the country.

We always encourage people to check out companies with the Better Business Bureau, but that wouldn't have been sufficient due diligence in this case. The dealer involved is a longtime BBB Accredited Business, so someone reading our Business Review might have thought everything was on the up and up.

Watch out for these red flags of an online scam:

Prices that are too good to be true.

Sellers who only communicate by email or live chat over the Internet.

Sellers who want to move a transaction off a well-known website to another one and who claim that a buyer protection program offered by a major Internet retailer covers the transaction.

Sellers who only accept payment via wire transfer, particularly to an address in Canada or overseas.

Reprinted with permission by The Commercial Appeal.