Car Buying and Personal Loan Scams

Scammers know that people get excited when they’re offered an amazing deal. They’re banking on the fact that the excitement over the deal of a lifetime on a new car or a personal loan might stop you from thinking about whether it’s legitimate. Here are some ways to protect yourself if a car price or loan offer seem too good to be true. 

Car-Buying Scams

There are a number of car-buying scams out there, like sellers offering non-existent cars, bogus payment protection plans, lemons or salvaged cars being promoted as good cars, financing problems, and even sellers trying to sell cars they don’t own. Let’s break down some of the more common scams, dissect their red flags and brainstorm ways to remain skeptical. 

Vehicles for Sale Online

You see an advertisement for a car that’s such a good deal, you can’t help but consider buying it. Take a closer look though— the car may not even exist. Scammers often justify their great bargain prices with explanations like they need to sell quickly, they’re getting divorced or the car belonged to a dead relative. To keep you interested, they may even mention using a legitimate company, like eBay. But here’s where you may start to see things that don’t add up.

Red Flags

• They won’t meet in person or allow you to test drive the car and have it inspected.
• They ask for prepaid gift cards or the codes for prepaid gift cards as payment. 

Before You Act, Be Skeptical

Check online for estimated vehicle prices. If the asking price is dramatically lower than the average price for a similar car, there’s reason for concern. The FBI suggests asking for the car’s Vehicle Identification Number (VIN), the license plate number and the name of the person to whom the car is currently registered. You can get a report on its history with a CARFAX Vehicle History  Report™ using the VIN. It will tell you if the car has been reported as being salvaged or in an accident and more.^{Footnote 2} The FBI also recommends researching the seller or their company’s contact information and shipping and payment policies if they offer to use a third party. Beyond that advice, the Federal Trade Commission warns consumers to be suspicious of any demands for payment with untraceable currency, like a gift card. 

Bogus Purchase Protection or Escrow Accounts

A scammer’s number-one goal is to earn your trust. They’ll tell you what they think you want to hear. They may even offer to create an escrow account covered by purchase protection by a company with a legitimate-sounding name (like eBay Motors Purchase Protection) to seem more credible. They’re hoping you’ll think that a reputable third party will be looking out for you when you make the purchase. 

Red Flags

• The seller suggests you put the money in an escrow account instead of paying them directly.
• The seller offers payment protection by a company you’ve never heard of.

Before You Act, Be Skeptical

Research third-party contact information on your own and don’t use links or phone numbers provided by the seller. Keep yourself safe by refusing to pay for the car until you’ve driven it, had it inspected, seen the title and have the keys. 

Curbstoning

Not sure what that means? Here’s how it works. A scammer will offer to meet you on the side of a road, in front of a house or in a vacant lot to make the sale. Quite often, the “dream cars” they offer for sale have been salvaged from a junk yard or are cars that were previously wrecked or flooded. Sometimes they’ll even tamper with the title and the odometer to make it look like the car has lower mileage or to hide the fact that it’s a lemon. Once they get you to buy, you’re left without contact information and have no way to get your money back when you realize what you bought wasn’t what was advertised. 

Red Flags

• When you call, the seller asks which vehicle you’re calling about.
• The car’s mileage is lower than expected for a car that age.
• They ask to meet at an obscure or isolated location.

Before You Act, Be Skeptical

Ask the seller why they’re selling the vehicle and how long they’ve owned it. Make sure you ask to see the maintenance records and the title. It’s also a good idea to check the VIN online to see the vehicle’s accident history, mileage and other important details. And, research any suggested sale location to make sure it’s safe, well-lit and that other people are likely to be nearby.

Car Kiting

There are some dishonest dealers who will accept a trade-in car with outstanding loans on it and not pay them off. Instead, they resell the car to unsuspecting buyers and pocket the money. Not only is it dishonest, but the lender who has a lien against the car for the original loan can repossess it, even if the new buyer pays their own loan on time. And, the repossession will show on the new buyer’s credit reports. 

Red Flag

• The salesman gives excuses for why you can’t see the title.
• You do see the title, but the space for Lien Holder is filled out and there’s no paper to show the lien has been paid off (a lien termination statement).

Before You Act, Be Skeptical

Honest dealers will be happy to show you the title before you buy. If your dealer gives you an excuse and fails to show you the title, be skeptical. And, keep in mind, you can check the title’s legitimacy and whether it has a lien against it with the agency in charge of motor vehicles in your state.

Financing Irregularities

Most dealers are honest and can arrange competitive financing on the spot. However, there are some who may tell you your credit score is lower than it actually is or contact you days or weeks later to say that your financing didn’t go through, and your auto loan will now have a hefty APR—even if you’ve already signed a contract. 

Before You Act, Be Skeptical

Protect yourself from scams like this by getting preapproved for an auto loan from a trusted lender like Navy Federal Credit Union. 

Personal Loan Scams

Personal loan scams are more widespread these days, even popping up on social media. Scammers offer rates and terms for loans that seem like a stroke of good luck. They may tell you there’s a fee for processing your application (or other fees) and ask you to pay for them before you ever get the loan. Sometimes they’ll ask for the payment in gift cards or Bitcoin. The bad news is that if you pay the fees, your money can disappear and there will be no loan. 

Another common personal loan scam making the rounds is making fake offers to consolidate your debt. The scammers request your personal information (even account credentials). Once these fraudsters have that information, they have access to more personal information and your money—which puts you at risk for identity theft. 

One thing that’s common with most of these scams is the pressure to “act now.” That’s because the bad guys don’t want you to have enough time to think about whether what they’re telling you makes sense or is true.

Red Flags

• The lender calls you on the phone and offers you a great deal before you’ve even applied. 
• The loan’s terms and conditions are confusing, or the lender refuses to provide clear answers on what the fees cover. 
• The lender pressures you to “act fast.” Legitimate lenders won’t urge you to borrow money in a hurry. 
• The lender has no physical address or isn’t registered in your state. Even online lending companies have an address, and they must be registered in your state to do business. 
• You get a loan advertisement that looks like it came from your financial institution but offers “money for nothing” or solicits your personal information.

Scammers sometimes set up fake websites to look like they’re legitimate financial institutions, then ask for private information like your account number and sign in credentials to gain access to your account or steal your identity.

Before You Act, Be Skeptical

Check to make sure the website URL is secure for any lender you plan to do business with. Secure sites will have a padlock symbol and begin with “https”. If you notice any of the red flags about, stop communicating with the lender. 

Report a Scammer Impersonating Navy Federal

As your partner in security, Navy Federal will never ask for your personal information over the phone, through social media or by email. If you receive a suspicious message or personal loan offer that appears to be from us, you can alert us by sending an email to reportabuse@navyfederal.org. Don’t include any personal account information in the email. You can learn how to protect yourself from other threats by visiting our Navy Federal Security Center.