Car Buying Securely: Using Reputable Escrow and Shipping Services Can Make The Transaction Safe

Introduction

The headlines and locations may change, but sadly, the stories – and outcomes – are often the same. Namely, the outcome is that by trying to find a good deal on a car online, well-intentioned individuals risk losing thousands of dollars!

Take for instance this story from Brooklyn, New York. A federal court found an individual named David Ojo, 32, guilty of numerous charges involving conspiracy, wire fraud and identification document fraud. What did Mr. Ojo do? According to reporting on the trial in the North Country Gazette, Mr. Ojo belonged to an international organized crime conspiracy, based in Romania, Bulgaria, and the United States, that defrauded victims of tens of thousands of dollars through an Internet scam. Mr. Ojo and the conspirators listed used cars for sale on websites like Craigslist and eBay. Typically, interested car buyers who inquired about the vehicles were told stories along the lines that the seller had been called to active duty in the military overseas and thus were wanting to dispose of their vehicles quickly – and of course, often at a below market price (a warning sign of a deal “too good to be true”). According to trial testimony, “The victims were promised that their purchases would be handled by an eBay or Google checkout agent, who would hold their payments in escrow until they had received the car. Once the victims agreed to buy the cars and wired payments through Western Union, they never received any cars or heard from the purported sellers again.” The conspirators had created fake driver’s licenses in at least two states that were good enough to let them claim cash at Western Union locations more than thirty times. In all, Mr. Ojo and his cronies defrauded these wanna-be car bargain hunters out of over $80,000.

* Source: “Internet Scammer Guilty Of Selling Cars Online,” North Country Gazette, August 9, 2013. http://www.northcountrygazette.org/2013/08/09/internet_scammer/

Car Buying Online

A car is typically the second largest purchase an individual or family can make – and with the recent trends in home ownership, for more and more of us, it is our largest single purchase. However, today, while the Internet has transformed the car buying experience, enabling car buyers to have more information than ever on vehicle histories, maintenance, costs, etc., criminals have also made buying and selling cars online a proposition fraught with potential peril. For individual car buyers and sellers, as well as online auction and classified sites where autos are bought and sold, it is critical that buying and selling a car be made as secure as possible.

Yet, when many people turn to the Internet to buy a car, the first place they turn is where they go for many other needs – craigslist. Craigslist has been an innovative site, revolutionizing how people interact and hook-up (sometimes quite literally!) on the Internet and facilitating transactions of all types. In many cases, craigslist has served as a platform for people to create businesses for themselves to provide services and market goods of countless varieties to both a local and now, a global audience. Indeed, the statistics on craigslist are amazing, as the site’s statistics state:

• craigslist users post well over 100 million classified ads each month (including reposts and renewals)
• craigslist has More than 700 local sites in 70 countries
• craigslist generates more than 50 billion page views per month, with more than 60 million each month in the US alone.

Source: craigslist Fact Sheet.

Yet, the open environment fostered by Craig Newmark on craigslist has also spawned a great deal of fraud on the site with the “hands-off” approach taken by the company. craigslist does not provide any protection against being defrauded as a buyer or seller on the site. Instead, craigslist addresses the fraud issue with only a warning to consumers on scams run on site. craigslist warns users that they “can sidestep would-be scammers by following these common-sense rules whenever using craigslist:”

• DEAL LOCALLY WITH FOLKS YOU CAN MEET IN PERSON – follow this one rule and avoid 99% of scam attempts.
• NEVER WIRE FUNDS VIA WESTERN UNION, MONEYGRAM or any other wire service – anyone who asks you to do so is likely a scammer.
• FAKE CASHIER CHECKS & MONEY ORDERS ARE COMMON, and BANKS WILL CASH THEM AND THEN HOLD YOU RESPONSIBLE when the fake is discovered weeks later.
• CRAIGSLIST IS NOT INVOLVED IN ANY TRANSACTION, and does not handle payments, guarantee transactions, provide escrow services, or offer “buyer protection” or “seller certification”
• NEVER GIVE OUT FINANCIAL INFORMATION (bank account number, social security number, eBay/PayPal info, etc.)
• AVOID DEALS INVOLVING SHIPPING OR ESCROW SERVICES and know that ONLY A SCAMMER WILL “GUARANTEE” YOUR TRANSACTION.
• DO NOT RENT HOUSING WITHOUT SEEING THE INTERIOR, OR PURCHASE EXPENSIVE ITEMS SIGHT-UNSEEN – in all likelihood that housing unit is not actually for rent and that cheap item does not exist.
• DO NOT SUBMIT TO CREDIT CHECKS OR BACKGROUND CHECKS FOR A JOB OR FOR HOUSING UNTIL YOU HAVE MET THE INTERVIEWER OR LANDLORD/AGENT IN PERSON.

Source: craigslist – about: scams

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According to Suzanne Kearns, a writer for the site, MoneyCrashers.com, scams involving buying and selling cars are unfortunately one of the most prevalent types of fraud being facilitated by craigslist. Specifically, Ms. Kearns warns both sides of an auto transaction on craigslist to be wary of the following four scams run on craigslist involving vehicle sales:

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Car Buying and Selling Scams

It’s possible to save hundreds and sometimes thousands of dollars by buying a car from an individual rather than from a car dealership or car lot, and many people have turned to craigslist to find one. But anytime there’s a large marketplace, the scammers aren’t far behind, and car sales are no exception. Here’s an overview of how these scams are carried out and hints on how you can avoid falling for them.

1. Fake Funds

Con artists are experts at producing fraudulent checks, money orders, and cashier’s checks. Some car owners have found out the hard way that after they release their car to such a buyer, the check bounces or comes back as a fraud. The seller is out a car with no real way to trace the buyer’s identity or location.

2. The Accidental Check

Just like in the housing scams, buyers will pay the seller with a cashier’s check or money order that looks real and then suddenly “realize” they paid too much. This usually happens with buyers who are overseas or otherwise unable to meet with the seller in person. The buyer will then ask the seller to just wire them the overage. Then the seller will arrange to have the car picked up by a middleman, or pick-up agent. By the time the seller realizes the check was a fake, they’ve lost the money they wired to the buyer as well as their car.

3. The Out-of-Town Seller

Some sellers will list a car at an unbelievable price and then tell the buyer a sob story to go with it. It may be they are going through a divorce, or have been transferred overseas and can’t afford to have the car shipped or registered to the new locale. Whatever the story, it justifies the low price and the buyer thinks he’s getting a great deal. But because the seller is out of the country, the buyer will have to wire funds to them in order to take possession of the car. You can imagine what happens next – the seller disappears with the money and the car is nowhere to be found.

4. The Safe Deal

If a con artist senses a buyer’s hesitation about wiring money before they have possession of the car, many times they will offer to do a “safe” transaction utilizing a company like Escrow.com or another online escrow service. They will tell the buyer to send funds via Western Union to the escrow account where they will be held until the buyer picks up the car.

Sounds good, doesn’t it? The problem comes when a spoof email (one that mimics a legitimate site) is sent to the buyer from the supposedly secure escrow site. The funds then aren’t routed to a legitimate escrow account, but rather a fake one. The seller is never heard from again and the buyer is left with no money and no car.

Source: 7 Types of Common craigslist Scams to Watch Out for

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And so, if anyone would be brave enough to go on craigslist in hopes of selling their current car or finding a good deal on a used automobile after reading material such as this, one would think that the use of online escrow services is just as risky as using craigslist itself. However, that is simply not the case! For craigslist to specifically highlight escrow fraud in its warnings “AVOID DEALS INVOLVING SHIPPING OR ESCROW SERVICES and know that ONLY A SCAMMER WILL “GUARANTEE” YOUR TRANSACTION” and for MoneyCrashers to pinpoint fraudulent use of legitimate escrow services belies the fact that Escrow.com plays a vital role in protecting both buyers and sellers during a vehicle transaction – both online AND offline sales – worldwide. According to the Kelley Blue Book, the most noted resource for setting car values and a trusted resource for auto buyers and sellers for decades, their firm’s number one tip for avoiding online vehicle fraud is “Execute the transaction using a reputable escrow service that you’ve researched on your own” (Source: http://www.kbb.com/car-advice/articles/protecting-yourself-from-online-fraud/).

Reputable third-party escrow services thus have a great role to play in making auto transactions happen. This is especially true when sales are made across the miles, as distant buyers and sellers have to make the transaction “work,” often necessitating the involvement of shipping services, such as market leader uShip.com and its network of customer-reviewed and verified auto transporters.

The Three Parts of an Online Auto Transaction

In the end, there are really three parts to an online auto transaction:

1. Where the car is advertised?
2. How the car is to be transferred between the buyer and seller?
3. How payment for the car is to be settled?

The reach and scope of the Web means that today’s auto sales are not confined to the local car dealerships and sellers in town. In the Web-enabled world, buyers and sellers can be connected across cities, states and even countries – making for a far more vibrant and active marketplace, which benefits buyers and sellers alike. Craigslist and various auto sales sites connect people across the world as a service offering — but sites like Escrow.com, cars.com, and uShip.com go the extra mile to verify the credibility of the person on the “other side” of the equation, making the process far easier for auto buyers making purchases at a distance.

Where the car is advertised?

While it’s important that car shoppers take steps on their end to avoid fraud, there are ways for online sites to take some preventative measures.  Cars.com, an online automotive marketplace for buying and selling new and used cars that sees over 24 million visits per month on average, has a dedicated, full-time fraud prevention team of 7 professionals who review new vehicle listings for red flags, supported by automated review software that is continuously updated to stay current with a complex and constantly changing fraud landscape.  The site’s reported cases of fraud, as well as its attack rates (the percentage of fraudulent listings of the site’s more than 4 million), are both well below average.

“Our goal isn’t to scare people away from using the internet, but we do want to make them better informed about the type of fraud they may encounter while online,” said Jeramie Driessen, manager of fraud prevention at Cars.com.  “Whether you are dealing locally or long-distance, I always recommend using a legitimate escrow service, like Escrow.com, that equally protects both the buyer and seller during the transaction.”

Even with these protections in place, Driessen shared that the type of fraud seen in the auto advertisement industry is high tech and highly organized, making shoppers’ own vigilance of utmost importance.  To help educate its customers with knowledge on how to spot potential fraud, the site launched the Cars.com Safe Blog.

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Fraud Prevention Tips from Cars.com

• If an ad is too good to be true it probably is.
• Never purchase a vehicle without seeing it first.
• Do not wire money domestically or internationally. Once you send a wire you will not be able to recall that wire.
• Beware of sellers who refuse to meet in person or don’t allow the seller and buyer to meet in person.
• If a seller requires the buyer to wire the money to a Western Union or any another financial institution, walk away from the deal.
• If a seller promises you eBay Protection Programs walk away. eBay Protection Programs do not cover vehicle purchases made on websites such as Cars.com.
• If a seller wants the buyer to use Google Checkout, walk away from the deal. This is another attempt of the fraudster to get the seller to wire them money for a vehicle.
• Cars.com does not offer a Vehicle Protection Program (VPP) or any type of insurance on the sale of a vehicle.
• Cars.com does not have vehicle inventory.
• Cars.com does not send out Payment Invoice Transactions.
• Cars.com is not an esrow service.
• Sometimes fraudsters use email addresses that look similar to one that Cars.com might use to look more legitimate. Here is an example of a fraudulent email address, transactions@cars.com
• If a seller pushes for a speedy completion of a transaction because they are being deployed, moving to another country, transferring for work, or getting a divorce exercise extreme caution.
• Even though an ad lists a VIN, always check the VIN on the vehicle to make sure it matches the VIN on the ad before purchasing the vehicle.
• If a buyer wants to send a check or cashier’s check for more than the amount of the vehicle and wants you to send them the difference do not accept the payment. The check or cashier’s check is probably counterfeit. 

(Source: http://blogs.cars.com/safe/2012/04/fraud-prevention-tips.html)

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How the car is to be transferred between the buyer and seller?

Auto sales sites in general offer enormously attractive savings for auto buyers at a distance, as do sites like uShip.com, which pairs those same buyers up with independent auto transporters to make the purchase as affordable as possible. uShip’s activity metrics demonstrate the size and scope of today’s “across the miles” automobile marketplace. According to the company’s internal statistics:

• Over the past year, 205,000 cars and light trucks have been listed on uShip — nearly 25 per hour.
• Car shipments on uShip jumped by 67% over last year.
• Vehicle shipments on uShip are transported an average of 1,250 miles across the country.

Source: uShip.com

In an interview for this article, Dean Xeros General Manager/Vice President, uShip Motors and Relocation commented on this point, stating:

“The new ‘normal’ in car buying is online and out-of-area purchases. That’s what makes uShip such a critical part of the equation for buyers as they look for a secure, affordable way to get that new vehicle in their driveway,” said Dean Xeros, GM/VP, uShip Motors and Relocation. “We see buyers from every possible source — eBay Motors, Craigslist, Cars.com, auto dealers, classifieds and more — tapping into into uShip’s vast network of feedback-rated transporters and saving a bunch of money in the process.”

How payment for the car is to be settled?

With the veritable minefield that online car buyers and sellers must navigate, it would appear that this is an area that is ripe for reinvention. One suggested solution is the increased role that trusted, third-party escrow services could play in facilitating and securing automobile sales initiated and/or executed online. Yet, this is complicated by the fact that online escrow scams are indeed one of the most common methods scammers use to defraud Internet auto buyers (See: Common Scams Found in Online Auto Sales). Thus, it is vitally important that car buyers and sellers trust the third-party escrow site they would use in the transaction (See: The IC3 on Escrow Fraud).  

Escrow.com, based in Rancho Santa Margarita, California, is the leader in providing such secure services for online auto buyers and sellers. Escrow.com has helped facilitate over 10,000 auto transactions over the past decade, with a value of close to $100,000,000. “We work diligently with many of the top online vehicle sites to prevent this type of fraud,” said Brandon Abbey, President of Escrow.com, “unfortunately, there are still some sites out there that continue to avoid the issue and until they do, consumers will be at risk.”   The firm is presently the only escrow company recommended by many of the largest online vehicle marketplaces, including  Cars.com, Autotrader.com, and eBay Motors. However, no matter where the auto sale originates – an online classified ad, an Internet auto auction, a vehicle sales website, etc. – Escrow.com can ensure a safe transaction, overseeing the transfer of the money and delivery of the vehicle. In fact, Escrow.com can and is being utilized by offline buyers and sellers as well due to the security the system provides to both ends of the transaction.  

Both Buyers and Sellers benefit from the use of Escrow.com, a neutral third party, to monitor and transact the exchange of the money and vehicle. Escrow.com facilitates a secure transaction between buyers and sellers of goods of all types – and even services – through a five-step process. A summary of the Escrow.com five-stage process as it applies specifically to vehicle transactions is shown in Table 1 below. the Buyer sends the money to Escrow.com, and the company then alerts the Seller to send the vehicle to the Buyer. This gives the Seller peace of mind, as the Seller does not ship the vehicle until the full payment is verified, so he is protected from fraudulent checks and money order scams. Escrow.com does not release the money to the Seller until the vehicle has been received and approved by the Buyer. This provides online car buyers the same security that off-line car buyers have, and the Buyer reviews the vehicle before the money is sent by Escrow.com to the Seller.  

Table 1 – How the Escrow.com Process Works for Auto Sales

In addition, Escrow.com offers a range of additional services to both the buyers and sellers, including:      

• Title transfer and collection service
• Lien-payoff service
• Vehicle transport
• Vehicle history reports.

Conclusion

Auto buyers and sellers today increasingly turn to online resources to aid them in buying and selling a car. This has had a tremendous impact on the used vehicle market, expanding the scope of the auto marketplace from a local to a national – and even international – reach. However, with that has come opportunity for scammers to prey on auto buyers, and the “benign neglect” of sites like craigslist and the misinformation out there concerning the use of legitimate auto shipping and escrow services only serves to confuse consumers. When I asked Brandon Abbey of Escrow.com to comment on the current “caveat emptor” approach craigslist is taking to transactions on its site, he responded: “We would certainly like to see every marketplace be proactive about educating their customers on how to safely transact using the Internet and I think craigslist could do a better job.  It really is in everyone’s best interest, except of course the fraudsters.”    

For auto buyers and sellers alike then, the best advice is to use trusted, experienced partner services “on demand” like UShip and Escrow.com to facilitate their vehicle sale/purchases. As

Dean Xeros, General Manager/Vice President, uShip Motors and Relocation framed the matter:

“uShip has grown right alongside commerce on the internet: as people buy and sell large things online, we’re here to set them up with the right transportation from point A to point B in the safest way possible. While tools like ours make online vehicle purchases at a distance a great option for anyone, the basic tenets of common sense are the same: do your homework, know the car you’re buying, ask lots of questions and pay close attention when communicating with the seller. The final steps of the transaction are critical: use a verified payment solution like Escrow.com, and use uShip.com or another site to verify the reputation and standing of auto transporters.”

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About the Author

David C. Wyld (dwyld@selu.edu) is the C.E. Laborde Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a consultant, researcher/writer, renowned speaker and executive educator.