Illegal Car Dealers Will Kick You to the Curb

Experts estimate 80 percent of the used cars in classified ads are not being advertised by individual owners, and that can mean trouble for buyers who aren't careful. Cars parked by the side of the road with "For Sale" signs are even more suspect. Chances are, a lot of these cars are being sold by "curbstoners," and you'd be wise to avoid them at all costs.

Curbstoners are illegal, unlicensed used car dealers who sell cars from the "curb" rather than from a dealership. They usually pretend the cars are their personal vehicles. Many curbstoner cars are salvage vehicles. Others are too dangerous to drive, and some could even be stolen. If you are duped, the curbstoner is likely to be long gone by the time you figure out you've bought a lemon.

Reese F. got two trucks for the price of one -- but this was no bargain. The Ford Truck he bought from a seller in a Taco Bell parking lot for $15,000 turned out to be two totaled trucks welded together. The seller had told him he was helping his brother sell the truck and that his brother bought it new from a Ford dealership. When Reese found out the frame was hopelessly twisted, he couldn't exactly go back to the Taco Bell to find the curbstoner. And when Reese decided to sell the truck, by law he had to disclose to the next buyer that the vehicle was a mess. Needless to say, he lost thousands of dollars on the deal.

When I've investigated curbstoning in the past, I've easily found odometer rollbacks, salt and rust damage, flooded vehicles and salvage vehicles. All my team did was scan the classifieds for duplicate phone numbers and look for cars for sale by the side of the road.

Many illegal dealers are getting more aggressive with their marketing. Some strip mall parking lots have come to look like used car dealerships. We spotted one with dozens of cars lined up, all for sale. The malls are so inundated with curbstoners that they've started posting signs that say "no car sales allowed." One day we spotted a car for sale right next to one of those signs!

If you have any doubt that curbstoning can be big business, think about this: I went undercover and found one curbstoner with a 25-car inventory. That's expensive to maintain. He had been at it for years and lived in a mansion in one of the most exclusive counties in the country.

Curbstoning is infuriating to legitimate licensed used car dealers. After all, they pay taxes and pay for the property where they display their cars. They can't compete with illegal dealers who don't follow the rules. Occasionally a licensed car salesman will cross the line and become a curbstoner, selling cars on the side and taking business away from the dealership where he's employed. Most states have laws that make it illegal to sell more than five or six cars a year without a dealer license.

To Be a Savvy Consumer:

Know the Signs:

  • Cars for sale by the side of the road, in driveways or at shopping centers often belong to curbstoners.
  • If you see the same contact phone number listed for more than one car in the paper or on the street, watch out, it could be a curbstoner selling multiple cars.
  • Tags are telltale: Be wary if there are no license tags, if they're from out of state or if they're temporary tags or dealer plates. (Sometimes curbstoners borrow license plates from unscrupulous licensed dealers.)
  • If the seller gives you only a pager or cell phone number, proceed with caution. He may be preparing to disappear after he sells you the car.
  • Curbstoners sometimes admit they sell cars for a living but claim this is their personal car. Yeah, right.
  • Beware of sellers who refuse to show you the title before you buy the car. Title paperwork lists the correct odometer reading and often reveals whether a car is considered salvage.
  • If you do see the title and it's not in the seller's name, that's a tipoff that this is not the seller's personal car. Most curbstoners never transfer the title into their own names. It could be the name of the previous owner or the name of an auction house.
  • If the seller offers to do your DMV paperwork for you, he or she may have plans to doctor that paperwork.
  • Also beware of recently issued titles. Most individual owners would not be selling a car so soon. Ask how long the seller has owned the car.
  • And finally, if the seller insists on cash instead of a bank check, you could be dealing with an unlicensed dealer.

Do Your Homework:

  • Look for a dealer's license. If it's a legitimate used car operation, the dealer is required to display it on the premises.
  • Ask the seller to show you both the title and his or her driver's license. Make sure the names match.
  • Make sure the vehicle identification number (VIN), make, model and year of the vehicle match the information on the title.
  • Check the odometer reading against the reading listed on the title to make sure they correspond. Rule of thumb: Cars usually accumulate 10,000 to 12,000 miles a year.
  • Ask if there are any service records for the vehicle. A real owner may have them. A curbstoner won't.
  • Have the vehicle checked out by a mechanic you trust. If the seller refuses, walk away from the deal.
  • Use research tools like to look up the history of any vehicle you are interested in buying.

Where to complain:

If you have already been victimized by a curbstoner, contact your state and county consumer protection agencies and the Department of Motor Vehicles to file a complaint. If you're lucky, government watchdogs will investigate, but the chances of recovering your money are slim.

Author's note:

In the wake of last year's devastating hurricanes, it's more important now than ever to look out for curbstoners. Hurricane Katrina damaged or destroyed 600,000 cars, and chances are many of them will be marketed to unsuspecting consumers by these illegal, unlicensed dealers. And a program note: Watch my segment next week on "Good Morning America," where I show you how to spot a flood-damaged vehicle -- even if the seller has gone to great lengths to hide the telltale signs.

-- EL