Frugal Shoppers Beware: Cheap Used Cars Have Higher Fraud Risk
Ever come across a listing for a used car that has a suspiciously low price? Well, you’re right to trust your intuition, because a new study released by iSeeCars indicates that your suspicion is justified. Following more than two and a half years of work that involved following the sales of 50 million used cars, iSeeCars determined that when the price of a used car seems too good to be true, the chances that it is tend to go up as the price of the car itself goes down.
The study looked at cars sold by dealers that were priced below their market value — abnormally low, that is. Other variables were also taken into account, such as the dealer’s reputation and suspicious comments surrounding the listings.
As iSeeCars CEO and co-founder Phong Ly says, many times this method is employed by dealers in an attempt to lure unsuspecting customers on to their lots. “We found examples of cars being advertised for much less than their market value or what they’re worth. The dealer’s hope is to lure the potential buyer into the dealership in an attempt to sell them a different car or the same car but on an expensive financing plan. It may also be that the advertised car has some major undisclosed issue or it could be odometer fraud,” Ly said.
So what do the numbers show, exactly? The results are fairly eyebrow-raising. When it comes to used vehicles priced at more than $12,000, the odds of potential fraud are at 0.3 percent. However, the chances increase quite a bit as the asking price of the vehicle falls. Once the listing price falls below $3,000, the chances of potential fraud shoot all the way up to five percent. While 5 percent may not seem like an incredibly large number, imagine dropping $3,000 only to find out you’ve been had.
It doesn’t simply stop at the price point, either. It was found that roughly half of vehicle that could possibly be tied to fraudulent behavior are priced at less than $10,000. Also keep an eye out for cars that are more than a decade old or have 100,000 miles. The last thing? Watch out for smaller dealers, as they are more likely to engage in fraudulent behavior than their larger counterparts.