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Internet auto scams: When a good deal isn’t really real

Tuesday, 5 Nov 2013 | 7:23 AM ET
Buyer Beware: Online auto scams
Monday, 4 Nov 2013 | 3:00 PM ET
Most people buy and sell cars online without a second thought, but the Internet is a scammer's playground. Flat 12 Gallery's Jeff Allen, star of CNBC's "The Car Chasers," and his father Tom Souter offer advice to help you avoid auto scams.

It's one of the oldest tricks in a scam artist's playbook—selling a customer something that does not exist. It's the same maneuver an international organized crime unit used to net more than $3 million, when it allegedly sold American consumers mostly fake vehicles through automobile websites, according to federal authorities.

Now, the alleged leader, Romanian fugitive Nicolae Popescu and six others who are named as co-conspirators, are listed on the FBI's Most Wanted list for Criminal Enterprise Investigations.

"Using forged documents and phony websites, for years Popescu and his criminal syndicate reached across the ocean to pick the pockets of hard working Americans looking to purchase cars," United States Attorney Lynch said in a statement.

Popescu and his co-conspirators were "masters of illusion," according to FBI Assistant Director in Charge George Venizelos.

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"They siphoned funds from victims to fuel their greedy desires and created false identities, fake websites, and counterfeit certificates of title in order to make the scheme more convincing," Venizelos said in a statement.

And these alleged fraudsters are just a few of many.

Last year, victims of online car-buying scams lost more than $64 million, and more than 17,000 auto fraud complaints were made, according to the National White Collar Crime Center.

Buyers want good deals; but beware

KirbusEdvard | E+ | Getty Images

The number one reason why a shopper is willing to buy a car online versus physically going to a dealership is price, according to a Capgemini annual report that examines consumer car buying globally.

Even professionals in the automotive industry look for deals online and are not immune to fraud. Tom Souter, who runs Classic Motor Cars in Lubbock, Texas, and who also appears on CNBC Prime's "The Car Chasers," had an incident back in 2005 that could have cost him thousands of dollars when he bought a 1957 Chevy Bel Air Coupe online that did not exist.

(Read more: Hustling for a bargain at an auto auction)

Souter said the advertisement for the car looked great and he even researched the vehicle identification number (VIN) the seller provided. But since the car was pre-1980, the time when VINs became standardized as 17 digits and which are necessary to run a more comprehensive history report, Souter was not able to locate the car's previous owner or its exact location.

Still, the VIN did check out as belonging to a 2-door, hardtop Chevy coupe. Souter talked with the seller a few times and everything seemed to check out, so he bought the car for $22,000.

"Turned out the guy stole an ad that had been a previous listing on eBay. He never owned the car, never had the car, so eBay paid me back $20,000 on the car," he said.

Souter was reimbursed through the site's vehicle buyers protection plan, which covers certain losses of up to $50,000 for some types of fraud when a shopper buys a car and pays for it through its website.

Buying on free websites versus paid websites

Tom England | E+ | Getty Images

But most sites do not offer such protection, especially sites where sellers can list ads for free. Since the advent of these free sites, the marketplace has become a tougher place to find a good deal, according to Souter's son, Jeff Allen, who buys and sells cars as the owner of Flat 12 Gallery and who also appears on "The Car Chasers."

"Back when people had to pay for ads and there wasn't all these free listing sites," Allen said, "I had a ratio of one for every four cars I went out to look at. Meaning, I'd go look at four cars and I'd end up buying one."

But now, he said he has to look at 10 cars before he actually buys one because too many sellers are dishonest in the description of the vehicle's actual condition.

(Read more: The most anticipated cars of 2014)

"With all these free listing sites, it's like people don't care what they write," he said.

"Half the time if they say, 'It runs good but hasn't been driven in awhile.' It does not run at all," Allen said.

Allen's number one rule for online vehicle shoppers, especially if new at this type of buying, is to purchase a car that is close enough to physically inspect. Or be ready to hop on a plane to check it out before paying for it, he said, because it's the only way to avoid being burned.

Tune in tonight, and every Tuesday, for all-new episodes of "The Car Chasers" on CNBC Prime at 10p ET/PT.

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