Dec. 3, 2003 — After buying a 2001 Nissan Maxima through eBay Motors that was advertised as being “in excellent condition inside and out,” Ron and Linda Wayden were dumbfounded when a vehicle bearing scratches, dents, rust and evidence of repairs from a serious accident was deposited in the driveway of their Alabama home. But their tale comes as no surprise to consumer fraud experts, who say that a growing number of online auto buyers are being hoodwinked by unscrupulous auto dealers and con artists who have adapted old forms of robbery to the information highway.
Car and truck buyers, particularly those in the market for used vehicles, have flocked to the Internet in recent years to search for killer deals on “pre-owned” wheels, making the sector one of e-commerce’s brightest success stories. CNW Market Research of Bandon, Ore., estimates that nearly 30 percent of the 42.6 million used cars that changed hands in the United States last year were bought using the Internet.
But while consumers and ethical auto dealers have benefited greatly from the technology, so too have crooked sellers, according to a review by MSNBC.com of nearly two dozen lawsuits springing from online auto sales, and interviews with industry insiders.
“In any town, there’s always a car dealer that everyone knows not to deal with,” said Oklahoma City attorney Louis Green, who has represented several clients who sued over what they said were misrepresented vehicles purchased online. “They know not to buy from those shady dealers in their own town, but they’re lining up on the Internet to buy from dealers in other towns where nobody will do business with them.”
Freelance scam artists
Freelance scam artists also prey on trusting buyers.
Matt Sabatini, a banker and former car dealer from Wichita, Kan., said he was conned out of a $17,400 down payment in an auction on eBay Motors, the vehicle division of the vast online marketplace, by a seller with a stellar “feedback” rating and an apparently clean title to an H2 Hummer. It turned out that the thief didn’t own the vehicle and had inflated his feedback rating through the use of false identities, he said.
"If (eBay) had reported accurate information to begin with, I never would have done business with the guy,” Sabatini said.
The National Auto Auction Association, which represents wholesale auctioneers that sell to licensed rebuilders, also has concerns about accountability in direct-to-the-public Internet sales, said Michael Hayes, the group’s chief operating officer.
“The reason we have the integrity and the process at auction is we know our buyers and we know our sellers, and I’m not sure that happens at eBay Motors,” he said. “When you’re buying a $10 item that’s fine, but when you’re spending $35,000 to $50,000 on a vehicle, I think there should be more protections for the consumers there.”
Simon Rothman, vice president and general manager of eBay Motors, counters that the fraud rate in auto auctions is very low, mirroring the 0.01 percent reported by the parent company.
“There can be discrepancies between what buyers and sellers say (was represented) ... but when that happens they typically contact each other and resolve it together,” he said. “That’s how it works online.”
Fraud not seen as major problem
EBay Motors’ competitors, including Autotrader.com, the leader in classified-ad-style vehicle sales, and Carmax.com, an Internet retailer that uses the Web to drive business to its nationwide network of 46 “used car superstores,” also say they don’t consider fraud or misrepresentation to be major problems.
“In the last few months, you can count the number of complaints on one hand,” said Autotrader.com CEO Chip Perry, noting that approximately 4.5 million vehicles pass through the company’s massive database every month, including some sold at auction. He conceded, however, that many buyers would likely take complaints directly to the sellers, since “we are very careful to position the company as an advertising medium rather than a transactional company.”
Lisa Van Riper, a spokeswoman for Carmax.com, said that used vehicles sold by the company’s stores are thoroughly inspected and guaranteed against frame and flood damage and title or odometer issues.
“If, in an extremely rare instance, a car shopper found any of these issues, we would take the car back, no questions asked,” she said.
There are no reliable figures on the number of fraudulent transactions resulting from online auto sales, but the Federal Trade Commission receives a steady stream of complaints about misrepresentation of a vehicle’s condition, as well as mix-and-match rebuild jobs, sellers auctioning stolen vehicles and fake escrow services that vanish as soon as a buyer sends them cash, said FTC attorney Delores Thompson.
Most of the complaints stem from online auctions, she said.
“With automobile sales, the problem is the very problem of all Internet auction sales,” Thompson said. “The consumer does not get the opportunity to inspect the merchandise before buying it, so they don’t find out the true condition of the vehicle until it arrives and long after they’ve turned over payment to the seller.”
Bernard Brown, a Kansas City, Mo., attorney who specializes in vehicle fraud and works with numerous consumer groups on car safety issues, said Internet auctions are “a natural venue for dishonest dealers.”
‘Distance and powerless purchasers’
“I know these people through and through,” said Brown, who has testified before Congress on the problem of “rolling wrecks” sold without disclosure. “They want distance, they want time, they want title transfers, they want things that obscure the vehicle’s identity and they ultimately want to sell it to people who are powerless and not too knowledgeable. In some respects … eBay gives them more insulation in terms of distance and powerless purchasers.”
Sabatini, the scammed Hummer buyer, received a painful lesson about geography and the law in an earlier online auction, when he bought a 1993 Toyota Camry through eBay Motors that was listed by a Florida dealer as “absolutely flawless” but turned out to have $1,500 in undisclosed damage.
Sabatini, a banker and former car dealer from Wichita, sued but was forced to abandon the case when the dealership’s lawyers filed numerous legal challenges, including whether Kansas courts had jurisdiction in the case, making it too expensive to continue. He later sold the car to a local dealer at a $2,000 loss.
“That’s the basic problem for consumers,” said his attorney, Robert Hiatt. “It’s economically unviable to pursue the litigation, so (the unscrupulous sellers) get away with it.”
Consumer safety advocates say they’re especially concerned that rebuilt cars that have been declared “total losses” by insurance companies are being resold without their troubled histories being revealed — a longstanding industry problem that they suspect may be taking root on the Internet.
Jack Gillis, a spokesman for the Consumer Federation of America and author of “The Car Book,” said such “salvage” vehicles are sometimes put back on the road by unscrupulous rebuilders who take dangerous shortcuts during repairs, such as not replacing a vehicle’s air bag or welding the rear half of a car that was in a head-on collision to the front of a car that was rear-ended. They also often “wash” the vehicle’s title by shipping it to a state with lax titling laws so a potential buyer has no clue that it has been in a catastrophic accident, he said.
‘They can literally fall apart'
“They could have substantive structural damage, which is particularly problematic with today’s unibody cars,” he said. “If a car has been in a serious wreck … in a subsequent accident, they can literally fall apart.”
Dave Snyder, a spokesman for the American Insurance Association, said the insurance industry supports efforts to tighten widely varied state titling laws, as long as they aren’t overbroad.
“Vehicles that are really unsafe or flood-damaged or otherwise significantly degraded should have the appropriate title so that everyone knows what they’re getting,” he said. “On the other hand, you can sweep so broadly that a car that is repaired is removed from the market. That’s bad for the consumers who can’t afford a new car.”
While considerable disagreement exists about the scope of the problem, all parties agree that buying a vehicle over the Internet requires that a consumer exercise due diligence. Especially important, they stress, is arranging for an inspection of the desired vehicle by a qualified mechanic.
“It’s amazing how many people don’t do that and how many problems they would avoid if they did,” said Perry.
Having a vehicle inspected can be problematic in the auction arena, however. A bidder on eBay Motors, for example, would have to have the vehicle inspected before the auction closed under a provision of the eBay user agreement that states a high bidder is “obligated to complete the purchase with the seller.”
Rothman, the eBay Motors official, said the company offers buyers several tools to protect themselves, including links where they can purchase vehicle history reports and vehicle inspections. It also stands behind consumers who buy cars that are materially misrepresented — defined by eBay as amounting to half the value of the vehicle.
Ebay Fraud protection
“If the person purchased the vehicle and it (was materially misrepresented) … we would work with them to give them back the money and take back the car,” he said. Under eBay Motors policy, the reimbursement is capped at $20,000, he said, while declining to provide figures on the number of payments made under the provision.
Ron and Linda Wayden, the Alabama couple who bought the banged up Nissan Maxima through eBay Motors, said their claim for relief was rejected because the damage didn’t amount to 50 percent of the vehicle’s value.
Like many first-time buyers, the Waydens weren’t aware of all the ins and outs of online auctions as they debated whether to bid on the car offered by Park Ave Motors of Maywood, N.J., which was described as having “no visible scratches, dents or rust” and “no known bodywork.”
Rather than put down the $50 to $100 needed for an inspection by a mechanic without knowing they would win the auction, they purchased reports on the car from both CARFAX and Autocheck. Both came back clean.
So they bid on the car and won the auction on June 9 for $17,100, agreeing to pay another $759 to have it shipped to Huntsville along with $129 in “documentary fees.”
Their elation crumpled when the car rolled off the shippers’ truck. Instead of the immaculate Maxima they thought they had purchased, they found themselves looking at a vehicle with more than two dozen dents, scratches, gouges and paint chips on the roof, hood and side panels and rust beneath the rear bumper.
The news got even worse when they took the car in to a local dealer, who quickly noticed that it had been in a serious front-end collision.
A subsequent check of an insurance database revealed the Maxima had been in a wreck in June 2001 that required replacement of the hood, front bumper, front fenders, grill and headlights and repair of the right front door shell, a claim that Liberty Mutual Insurance Co. settled for $7,027.
Gary Elias, the Park Ave dealership salesman who sold the Maxima to the Waydens, denied in a brief phone interview with MSNBC.com that the car had been misrepresented in the ad.
“The car was damaged in shipping,” he said. “…There was nothing wrong with the vehicle, it was in excellent condition. It wasn’t in any accident, not up until the point where we had the car.”
But Wade Thomas, vice president of sales and marketing for Dependable Auto Shippers, said there was no way the damage occurred in transit to Alabama, noting that the bill of lading filled out when the car was picked up in New Jersey “shows all sorts of scratches, gouges and dings.”
Elias said that when the Waydens called to complain about the condition of the car, the dealership offered to pay $750 to cover the cost of getting the cosmetic damage fixed, a deal the Waydens said they reluctantly accepted even though it would not cover the full cost of the repairs.
In the course of pressing their complaint against the Park Ave dealership, the Waydens came face to face with another troubling aspect of the online auction experience.
When they looked closely at the “feedback” for “ParkAveMotors” on eBay, they saw numerous suspicious positive ratings that appeared to have been faked, such as praise entered moments after the end of an auction by users who had registered only hours earlier in some instances. After the evidence was sent to eBay, the Park Ave Motors account was suspended.
But no sooner had Park Ave vanished than some of the same vehicles it had been trying to sell — easily confirmed by the vehicle information numbers posted on the ads — were listed by a new eBay seller, “Maywood Motors.”
The Waydens alerted eBay to the subterfuge and provided evidence that Park Ave Motors was continuing to sell its vehicles on the site under a new account, but no action was taken. Soon afterward, Park Ave Motors was restored to good standing and Maywood Motors vanished as suddenly as it appeared.
Ebay decines to discuss case
Despite their eye-opening experience, the Waydens say they would consider buying another car online, though they wouldn’t be willing to pay without seeing the vehicle and having it inspected.
“I enjoy the car,” Linda Wayden said of her Maxima. “… It’s just that it was a bad deal and an unethical deal. I paid for something that was represented one way and I got something else.”
But Sabatini, the twice-burned purchaser, said he’s had it with Internet car buying.
“I’ve got to feel them and touch them,” he said of his future purchases. “As much fraud as I’ve seen, it won’t happen again.”
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