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Title Washing: Sneaky Used Car Scam Could Cost You Thousands

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Used car lot - California USA
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Used cars and scams go together like old bread and mold: You have to be vigilant to avoid problems.

That's why most buyers take test drives, and smart ones ask a mechanic to give their potential purchase a once-over to be sure the vehicle is what they're expecting. However, the usual precautions won't catch a title washing scam. "It is a paper scam that has physical consequences," said Chris Basso, public relations manager of Carfax.com, in an interview with DailyFinance. "Con men are altering vehicle documents and taking advantage of state laws that differ when it comes to branded titles."

You Say 'Salvage'; I Say 'Rebuilt'

At the heart of the issue are cars that have taken major damage, like being flooded or rebuilt after a major accident. When a car has such significant issues, its value drops, often to half of what an unharmed vehicle of the same mileage, age, model and apparent condition would be worth. To clue buyers in, states have created so-called "branded title" documents that include on them terms such as "salvage," "flood" or "rebuilt." When you buy a car, look at the title for such a status.

Title washing works like this. First, the con artists either physically alter the first title (i.e., good old fashioned forgery), use stolen blank titles to forge a non-branded title (more forgery) or simply move the car to another state that does not use the same branding language.

Next, the cons, often using false identities, register the car in the second state. The new registry either doesn't know about the problem as reported in the first state, or it literally can't use the same branding language (because of differing state regulations) and so leaves it off the new title.

Voila! A car that was clearly branded as damaged goods in one state is taint-free in another.

The Damage Is Hidden

"[States] process so many [titles] in one day that some of these can easily sneak through," Basso said. "[The crooks are] able to get a clear title, and they're selling those cars to buyers [who are] are unaware the vehicle had major damage in the past."

By changing the apparent status of the car, the fraudsters effectively double its value. Some unsuspecting victim then pays too much. And there are a lot of potential dupes. As Edmunds.com notes, 18,722,399 used cars were sold in this country the first half of 2014 alone.

Carfax traces the history of titles by vehicle Identification number, so its reports can register the transition from a branded to a clear title. About 800,000 vehicles -- found in every state -- have titles that have likely been washed, mostly by individuals, according to the company. Although some people may have washed titles unintentionally, the "overwhelming majority" are the result of someone trying to fool a buyer.

To avoid a title wash scam, insist on looking at the physical title. "You want to see if the seller's name on the title matches the [name of the person] selling it to you," Basso said. "Oftentimes these people aren't the registered owners of the car." By creating false identities, crooks make it impossible to trace the transaction back to them. Basso also suggested using a used car information service (Carfax charges $39.99 for one version) to discover any indications that a title has been washed.

 

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