5 red flags of used-car scams

As posted on May 21, 2012 on money.msn.com

The big advantage to buying a used car from a private party, rather than a dealer, is you'll most likely save money on your purchase. The disadvantage is you could lose $1,000 or more in a car-buying scam.

While most used-car sales conducted by individuals are perfectly legitimate, there are used car-buying scams out there, and they are on the rise -- even for so-called local sales. This is because so much of the business has an online component. In fact, consumer complaints for car sales scams increased 25% last year, according to the Internet Crime Complaint Center, a U.S. government agency.

Here are five tips to avoid a used car-buying scam if you are shopping for a used car locally and considering a private-party sale:

1. Prices that seem too good to be true

Research a car on one of the many vehicle-pricing sites, such as Edmunds.com, Kelley Blue Book or NADAGuides.com, to determine the private-party price for that car. If you are seeing an ad for substantially less than the typical private-party value, it's probably a scam, no matter what sob story you are told.

2. Sales in which the seller and the car are not in the same place

A common story is that of a member of the military stationed elsewhere or someone who recently relocated who needs to sell his or her car. While this can be legitimate, most people who relocate make decisions about selling their vehicles beforehand. After all, there is plenty of hassle involved. A car is expensive, so you want to be able to inspect the used car in person and meet the seller before any money changes hands, or you want purchase through a reputable third party, such as eBay Motors, that has a buyer-protection plan in place.

3. Sellers who offer you third-party protection plans

One way scammers bilk unsuspecting buyers is by offering them a protection plan through a well-known third party. Many of the companies cited don't even offer buyer-protection plans, and those that do offer them only for cars sold through their websites. Companies that offer them do so only for cars sold through their websites. Some scammers are so savvy they've set up online chat functions to reassure the buyers the protection plan is secure, but this is simply an elaborate ruse. If a seller offers you a protection plan and the used car is not being sold through the company mentioned, then it is a used car-buying scam.

4. Sellers who switch gears in the middle of negotiations

If you face a changing story, a sudden shift in the terms of the sale or a request to move the transaction from one website to another, beware. These are common scammer tactics, but they're rare among legitimate sellers.

5. Sellers who ask for money upfront or want to use a wire-transfer service

Buying a used car locally is just like buying any other product. The money should change hands when the buyer can leave with the product. The only instance in which a buyer should make any payments in advance of purchase is when the transaction started and ended via a well-known third-party service that uses an escrow system for transactions. Sellers who request money in advance or those who want to use a wire-transfer service are likely running a scam.

Car buyers who believe they've witnessed a scam, whether or not they've fallen victim, should report it to their local authorities. If the scam involved anything Internet-based, the Internet Crime Complaint Center should also be contacted.