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Car Buying Scams

The average sticker price for a new car, truck or SUV is close to $35,000, according to AAA. Used cars are increasingly expensive as well, selling for an average of about $27,000.

Those hefty prices make car buyers tempting targets for various types of scams.

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Shady practices include car dealers slipping hidden charges and unwanted add-ons into a buyer’s total costs and private sellers misleading a purchaser about a car’s true mileage or accident history. There are also online crooks who will sell a vehicle that doesn’t even exist, then disappear with the buyer’s money.

Although the National Automobile Dealers Association has an ethics guide for the more than 16,000 new car dealers in its membership — with principles that include “treat each customer in a fair, open and honest manner” — Americans still lose billions of dollars each year to various car buying scams. That’s based on a Federal Trade Commission (FTC) estimate that its new Combating Auto Retail Scams (CARS) Rule, which takes effect July 30, 2024, could save U.S. consumers more than $3.4 billion a year by curbing many of the unethical tactics, such as bait-and-switch schemes, dealers use to lure vehicle buyers to their lots.

Unethical practices

Car dealerships have been known to use a variety of methods to get more money from buyers. A dealer might advertise a car at what looks like an attractive price to get you in the front door. But then, after you decide to purchase the vehicle, the dealer adds a series of questionable fees to cover such things as inspections, preparing the car or, if you’re buying a used car, reconditioning. Some might even double charge you for services that were included in the advertised purchase price.

In one 2022 case, the FTC alleged that a Washington, D.C.–area dealer had jacked up the advertised price of a Nissan SUV by nearly $2,400. (The FTC eventually obtained more than $3.3 million in refunds for customers.)

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Have you seen this scam?

  • Call the AARP Fraud Watch Network Helpline at 877-908-3360 or report it with the AARP Scam Tracking Map.  
  • Get Watchdog Alerts for tips on avoiding such scams.

Shady dealerships (“stealerships,” some call them) sometimes try to boost the purchase price by pushing add-ons such as floor mats, alarm systems or anti-rust undercoating at excessive prices, as National Public Radio reported in a 2022 exposé.

Some car dealers also have been accused of targeting racial and ethnic minority group members for scams. In Wisconsin, for example, the FTC and state regulators took action in 2023 against the past and present owners and general manager of a dealer group that, among other abuses, discriminated against American Indian customers by charging them higher interest rates on their auto loans than white, non-Latino customers and by slipping more unwanted add-ons into their sales contracts. As a result, the group’s American Indian customers paid, on average, nearly $1,400 more over the life of their loans. In a settlement, the defendants agreed to change their practices and provide $1.1 million for refunds to customers.

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Used car scams

Many people opt to buy a used car instead of a new one as a cost-saving strategy. But frugal used car shoppers are also an inviting target for scammers.

One traditional trick of duplicitous used car sellers is rolling back a car’s odometer, making it appear that the car has tens of thousands fewer miles on it than it actually has. According to a recent story from a Chicago TV news station, one car shopper paid what he thought was a bargain price for a 2015 Audi A6 with just 66,000 miles, only to discover when he registered the car with the state that it actually had 185,000 miles on it.

Private sellers are sometimes less than forthcoming about accident or flood damage to the vehicle that isn’t immediately obvious.

Used car shoppers are increasingly looking for vehicles offered for sale by private owners on internet marketplaces, a trend that’s also being exploited by crooks. One of their ploys is the transport company scam. As detailed in a 2022 Better Business Bureau report, a scammer will post an ad offering a used car at an attractive price. But when a potential buyer responds, the scammer explains that they’re in another city, and offers to connect the purchaser with a transport company that will deliver the car. Just pay for the car by wire transfer or prepaid debit cards, and they’ll hold the money in escrow until the vehicle is delivered. Of course, the car never arrives and the money is gone forever.

Here are some possible red flags to alert you of a possible car buying scam, as well as measures you can take to avoid being taken advantage of.

Warning Signs

  • A car dealership that advertises the make and model you want, but then, when you arrive at the dealership, claims that it’s unavailable and tries to get you to buy a more expensive vehicle.
  • A salesperson at a dealership who asks for the keys to your car, in order to evaluate it for trade-in purposes, but then holds on to the keys while delivering a high-pressure sales pitch.
  • A used car advertised online for a price that seems too good to be true.

How to protect yourself for car buying scams

  • Know your rights. The FTC’s new CARS Rule (see above), set to take effect this summer, contains an array of new protections for car shoppers. For example, a dealership will now be required to disclose a vehicle’s full price except for government fees, such as taxes and license and registration costs. And if the dealer offers financing, they’ll be obligated to reveal how much that attractively low monthly payment will raise the total cost of the vehicle.
  • Don’t be afraid to say no. Under the new FTC rule, you also have the power to refuse any products or services that increase a vehicle’s price, such as rust-proofing, protective paint coatings and extended warranties, among others.
  • Scrutinize the paperwork. Car purchases generate a pile of paperwork, but be sure to look it all over carefully. Ask to review your final financing application to make sure that it has accurate numbers for your income and down payment and that other personal information is correct. Before you sign anything, make sure all the terms, including the price and financing, are what you agreed to.
  • Watch out for deceptive claims about car loans or leases. A seemingly low annual percentage rate (APR) may apply only to buyers with really high credit scores. And the “$0 due at lease signing” deal may actually turn out to require several thousand dollars in fees or be available only if you satisfy difficult-to-meet requirements.
  • Call a used car seller. Make sure you talk to the person actually selling the car, and ask a lot of questions. If the seller gets defensive or aggressive, or gives you vague answers, don’t pursue the deal.
  • Dig into a used car’s past. The Federal Trade Commission recommends getting a vehicle history report before you buy, which may have such information as the car’s previous owner or owners, whether it was ever in an accident, and its repair records. The federal government's has a list of approved providers who can sell you a report.
  • Check out a used car in person. These days you can buy a used car online sight unseen, but stick to the old-school approach to car shopping. Insist on an in-person inspection and a test-drive before you buy.

Report scams

If you suspect a car dealer of breaking the rules, contact the Federal Trade Commission online or call 877-FTC-HELP. You can also contact your state’s attorney general.

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Have you seen this scam?

  • Call the AARP Fraud Watch Network Helpline at 877-908-3360 or report it with the AARP Scam Tracking Map.  
  • Get Watchdog Alerts for tips on avoiding such scams.