The "Rebuilt Title Used Car Dealer Scam" is also known as the "Salvage Title" or "Branded Title Scam." This dealer manipulation may end up costing you thousands of dollars and can be financially devastating if you're unaware of how to protect yourself from it.
This used car dealer scam is very common among big and small dealerships alike. Car dealers are required by law to inform you if a vehicle has a branded title before you buy it. The problem is, it is very difficult to prove they didn't disclose it to you. Especially if you sign something that discloses the branded title and you chose not to read the document first.
The scam happens when a car dealership knowingly sells you a vehicle that's been seriously damaged by flood, fire or accident. The vehicle has been salvaged, rebuilt and the title has been branded as such.
The dealer does not disclose the title issues to you and also has you sign an "As-is, Where-is, No Warranty" document stating you're buying the car and assuming all responsibilities, risks and defects the vehicle may already have.
Sometimes a dealer or the car salesman is unaware a vehicle has been previously wrecked or the title's been branded. It is ultimately your responsibility to protect yourself and your finances when purchasing a quality used car.
What are Rebuilt Title Used Cars?
Rebuilt title or branded title cars are vehicles that have been theft recovered, in an accident or damaged in a way to where an insurance company decided to replace the vehicle for the customer because repairing the car would be too costly. The car then receives a salvage or branded title.
Car dealers may sell branded title vehicles as long as they disclose to you up front the vehicle has a branded title. This becomes a scam when a car dealer does not disclose to you the car has a branded title.
Some dealer's will wait to tell you the vehicle has a rebuilt or salvage title right before you're signing the contract for the vehicle they do this in hopes you're hooked on car and it won't matter to you.
There are companies out there that seek out and purchase branded title used cars, make the necessary repairs using cheap substandard parts and then wholesale them to a dealership. These vehicles end up back in the system for sale to the general public.
Why are Branded Title Vehicles Substandard?
When a used car has a salvaged or rebuilt title, the vehicle has previously been in a major accident, most likely totaling the car. An outside company will buy the car, perform the needed repairs, clean or "wash" the title and will sell then run the vehicle through an auction.
Not all rebuilt used cars are bad vehicles, but we strongly encourage you to avoid branded titles of any kind. The problem with rebuilt titled used cars is you don't know who made the repairs on the vehicle. They may have used cheap aftermarket parts or cut corners to save money?
Previously flooded vehicles are the worse. There are a huge amount of these vehicles in circulation today with the influx of hurricanes, floods and natural disasters.
You may be able to get a rebuilt used car much cheaper than a normal car but you may also have to keep dumping money into it for repairs in the future. Also, you will never get close to retail value for your vehicle when you're ready to sell it.
Most dealers will not buy a branded title vehicle from a wholesaler or at the auction. If they do they will appraise a branded title vehicle by taking the "rough" black book value, which is well below wholesale value, and cut it in half.
Buying a vehicle with a rebuilt title is really not worth the savings you believe you're getting. Most credit unions and banks will not loan money on a vehicle that has been previously totaled or has a branded title.
How does the Rebuilt Title Scam Work?
The scam is when a dealer is intentionally trying to sell you a vehicle they're aware has been previously damaged by flood, fire or in a previous major accident and do not disclose it to you up front at the beginning of the car buying process.
If you ask the salesman about the vehicle he may tell you the vehicle has never been in an accident and it's in great shape. He may even tell you he's drove the car himself and not had any problems with it. Fact is, he'll tell you anything you want to hear to get you to buy the car today.
It's federal law a dealer must post a used car "Buyer's Guide" sticker in the window of each used car for sale on the lot. This sticker must have the words "As-is, No Warranty" somewhere on it.
You'll be asked to sign this form when you do your paperwork and take delivery of the car. This means when you buy the vehicle you're assuming all risk, accepting any previous damage or discrepancies with the vehicle and cannot return the vehicle because of such.
You decide to buy the vehicle, sign all the paperwork and drive your car home. About 2 months later you hear a weird sound and decide to take it in for service. This is normally how people find out the vehicle has previously been in an accident.
You go back to the dealer you bought the vehicle from and tell the manager you were told by the salesperson that the car was never wrecked. The manager reverts to the "As-is, Where-is" form you signed when buying the car and explains to you that you have no recourse. It's your word against the salespersons word and you signed a form accepting the car "As-is."
Sometimes a car dealer or its salespeople will be unaware of a vehicle having been in a previous accident. This is when it becomes your ultimate responsibility to protect yourself and your financial well being.
Branded title vehicles can even show up in a dealers "Certified Used Car Program." I've seen several vehicles slip though a dealers used car inspection process unintentionally (and some intentionally).
Car salesman will tell you in casual conversation they vehicle you're looking at has never been in a wreck and you will take it as gospel. Truth is the salesperson may or may not have a clue about the history of vehicle. He said, she said is very difficult to prove in court. Don't take a salesperson's word and always protect yourself when buying a used car.
Can You Trade-in A Branded Title Vehicle?
You can trade-in a vehicle with a branded title at most dealerships, the only problem you may have is they're going to give you a lot less money than what the actual cash value is if the vehicle did not have a branded title.
The unwritten rule for assigning a value to a vehicle with a rebuilt or salvaged title, no matter how well they're put back together, is you take "rough black book and cut it in half."
What this means is you take the lowest category of market value, which is rough, cut the value in half and that's the starting point before any reconditioning deductions. This is another reason why you don't want to get stuck paying full retail of a branded title vehicle.
You can sell the vehicle on your own and get more money than what a car dealer will give you for it but make sure you let the buyer know the vehicle does have a rebuilt or salvaged title.
Some people actually do not care if a vehicle has a branded title as long as the vehicle is safe, reliable and you're selling it at a fair price.
How to avoid the Rebuilt Title Used Car Scam
- No matter who you buy a vehicle from you should always have the vehicle inspected by an independent certified mechanic before purchasing the vehicle. A mechanic can tell you if a used car has been in a previous accident in a matter of minutes. This should be done in conjunction with inspecting the vehicles used car history report.
- The number one key to not being ripped off when buying a new or used car is to take your time and do your homework before contacting a car dealership.
- The best way to shop for a used car and get the lowest price is to get dealer's to send you used car competitive price quotes to your inbox. The online companies we recommend are CarClearanceDeals and CarsDirect.
- Take someone with you before car shopping. This will help keep you from making a bad car buying decision.
- Before buying a used car or while shopping for used cars online, acquire a used car history report. If shopping online you can use the VIN to get a report and save yourself a trip if it comes back as a bad vehicle. The company we recommend is AutoCheck®, they provide you with unlimited reports for 30 days. If you'd like to know more about how to find a used cars history, read my section on vehicle histroy reports here.
- Never sign an "As-Is-Where-Is, No Warranty" agreement when buying a used car from a dealership without some kind of added protection. If you must sign an "As-Is-Where-Is, No Warranty" make absolutely sure you have the vehicle independently inspected by a certified mechanic, and you have personally acquired a used car history report on the vehicle you're looking to buy.
- Ask if you can see the used car's inspection sheet. They should not have a problem showing you this checklist. If they're not willing to let you see it, there most likely something wrong with the vehicle. The inspection checklist will show you the points of the car that were inspected when the vehicle was brought to the dealership and any discrepancies the technician found to be wrong with the vehicle.
Now that you know how to recognize and avoid the "Rebuilt Title Scam," familiarize yourself with other common car buying scams committed in dealerships nationwide.
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