Curbstoning and the Private Used Car Market

Every day in America, thousands of desperate sellers take losses on cars. The key to profits in the car business is the relative desperation of the parties.

Car dealers take trade-ins and reap much of this windfall, earning more reselling trade-ins on their used car side than they do on the new vehicle side.

The lure of desperate sellers facing bankruptcy, foreclosure, divorce, death, and illness draws bargain hunters and scam artists to the private used car market.

Cars with a for-sale sign in the window, parked near busy streets, are taken for granted in America.

Many vehicles sold along the curb are marketed illegally, but critics differ in their definition of "Curbstoning", depending upon their financial interests.

To hear the dealer's associations tell it, curbstoners are unlicensed poachers, a threat to the essence of civilization, criminals spreading a broad wake of destruction.

But consumer advocates say many licensed dealers are involved, moving cars they find unsuitable for the main lot. Governments are mostly interested in tax revenue lost, and are heavily lobbied by the dealer associations for more restrictions, penalties, and prosecutions.

So where is the truth, what is the scope of curbstoning? How can automotive bargain hunters avoid getting stung?

What's a Curbstoner?

A "curbstoner", as applied to the car business, is defined as a person who appears to be a private seller, but who is flipping vehicles on a commercial scale.

There are two broad groupings of curbstoners; licensed dealers selling vehicles away from a their legal physical location, and unlicensed vendors selling cars in parking lots.

Curbstoning allows used car dealers to get rid of marginal or defective cars that can't be sold off the licensed lot. Some licensed dealers have a group of operatives working undercover, using the license to get into auctions and move cars onto the street.

The second group, flipping vehicles without a dealer license or established business location, are basically car dealers in training. Curbstoning is in fact the spring board, the training ground, the entry level position in the used car profession. Successful practitioners often advance to become licensed used car dealers.

It is common for courts to suspend sentence and fines if the offender agrees to apply for a dealer's license.

Like other professions, established legitimate dealers seek to limit entry into the business. To protect their turf they lobby for restrictions from the legislature and city hall. This is merely standard business practice, just like the medical, legal, and other professions.

Every legislative session sees the introduction of a new attempt to restrict entry:

"This bill decreases the number of vehicles (from five to three) that a person may offer to sell within a 12-month period before being considered a dealer."

This is getting dangerously close to restricting private car sales altogether. Eventually they will try to make it illegal for private citizens to buy and sell cars except through the car dealer monopoly.

"It's the Law"

These protective laws vary by state, but typically it is illegal to title more than 4 or 5 vehicles annually without a dealer license.

Private vehicle sellers in general, and curbstoners in particular, engage in massive tax evasion. This motivates regulatory agencies to side with dealer organizations trying to suppress curbstone dealing.

When a curbstoner buys a car, the title is frequently left blank or "open". The illegal dealer is skipped in the chain of title. So these street side operators prefer to remain anonymous to avoid sales and income taxes, tile fees, insurance, lawsuits, prosecution, and other costs of doing business.

Curbstoning often involves vehicles reputable dealers cannot sell directly.

Curbstoned vehicles may just be leftovers from auto auctions, but the auto body and chop shop business generates many salvage and rebuilt titled cars. These are pieced together from wrecked and stolen insurance write-offs. This does not necessarily mean the cars are mechanically defective, but this is a danger zone for the wrench-challenged.

Water damaged, odometer rollback, salvage title, mechanic-lien, out-of-state lemon, stolen, emissions test failure, wrecked-but-repaired, air-bag-defective-or-deployed, "lost title", donated-to-charity, and numerous other legally unmarketable jalopies make it to the curb.

Official estimates of curbstone sales volume vary widely, from 40% to 90% of the private market.

Despite the clamor from the dealer associations, more laws and enforcement resources will not put a dent in this problem. This under-market is not going away.

Laws like this are unenforceable. Investigations focus on target areas. These easily relocate when the heat is turned up.

Since this is the entry into the business, new curbstoners appear at a rate faster than prosecutions could ever match. There are numerous e-books, online how-to courses, forum topics, and curbing success stories on the web.

For the government, collecting fines is more fiscally responsible than paying to send non-violent offenders to jail.

The problem of physical curbstoning, the nature of which differed depending on one's business perspective, defied easy solution. But that was before Al Gore invented the internet.

Virtual Curbstoning

Online transaction volume has mushroomed, there is no way that the old legalisms of trademark, copyright, and contract can adapt. Even "crime" is blurred. The physical location has given way to the virtual location, effectively beyond the reach of law enforcement.

Online vehicle auction markets, eBay Motors in particular, exponentially increased the extent of unlicensed vehicle sales. Now everybody wants to be a car dealer. Craigslist, www.autotrader.com, and www.trucktraderonline.com add to the new market's size.

Where there is success on the web, thousands of wanna-be sites follow.

Every dealer publication urges dealers to "get it" and move online, but the car business is conservative and backward focused. While many licensed dealerships have capitalized big time, a window opened for online curbstoning.

Unlicensed online sellers have generated a storm of complaints that dwarf the old curbside dealing problem.

Online sellers can easily conceal their identity, location, and vehicle condition from buyers and regulatory agencies.

A common Craigslist scam sells virtual cars, vehicles that do not exist. Ads with pretty pictures troll the web for fools. When someone responds to the unbelievably low priced deal, the "seller" says he needs a few hundred up front to pay for shipping, funeral and estate expenses, lien payoff, or whatever.

The mark is told to wire the money via Western Union or some other untraceable financial intermediary. Suckers are assured the cash will be deducted from the tantalizingly low price.

Craigslist users will flag many of these posts for removal, but buyers should suspect any price that seems too good to be true.

The rise of these scams leaves few enforcement resources to focus on simple virtual curbstoning.

Protect Yourself

So all the parties, including the government, are pursuing self interest, what's a bargain hunter to do? Pursue your own self interest by doing your homework before entering the private used car market.

Consumers run the risk of receiving tainted title and registration, or none at all. The vehicle may be mechanically compromised or just overvalued.

The first thing I do, before undertaking any vehicle transaction, is an identity check, on both the seller and the vehicle.

Preferably on the phone rather than e-mail, I ask the seller if the title is clear, without marks or corrections, not salvage, without liens, and if the Vehicle Identification Number (VIN) is perfectly legible.

If yes, is the title in their name and current address? In Texas, the title is mailed to a legal address shown on the face. Third party titles and incorrect addresses are a first clue to a curbstoner.

Many legitimate sellers will hesitate to give their home address to a stranger on the phone. If this is the case, they must bring the title to any showing of the car or off-site meeting. If a seller cannot promise this, I don't go to see the vehicle. No title, no deal.

While I have them on the phone, I pull up Microsoft Streets and Trips on one of my screens. I have spent my whole life following maps, residential neighborhoods are easy to discern. If there is doubt, Google Earth or other satellite photo provider can provide more evidence.

"Oh, so you're at the third exit past the Tollway?" If the address is fake, answers will be awkward. To me, no address is no deal. Another computer is searching the name and address in people lookups and reverse phone number sites while I ask a few basic questions about the vehicle.

If the seller can prove he is legit, then I will probe for financial desperation, a key seller qualification for me to be a buyer. Being a white knight and making a family's overdue mortgage payments, in exchange for a top quality ride at a rock bottom price, gives me a warm feeling.

The vehicle is irrelevant until the seller is fully qualified. Now I ask for the full VIN. A few more questions about the car/bike/boat and softness of the asking price and I sign off, saying I'm interested and will call back soon.

I immediately order a CARFAX report on the VIN. These reports will show the chain of title, whether the car was leased, auctioned, and how many owners.

Wrecks, salvage titles, and movements between states will usually show up. Mileage irregularities will often identify rolled-back odometers.

The chain of title and odometer must support the seller's story. Curbstoned cars will have recent title transfers. I want the seller to have owned the car a while, and to be selling reluctantly from financial necessity.

Next I take a ride past the address, where I can learn a great deal about the seller. The neighborhood tells me the income. The condition of real estate, number and type of child and adult toys, and home curb appeal relative to the block give me a picture of a legitimate private seller. Any other vehicles being fixed up for sale?

Only when everything is in order, and I'm sure the seller is not curbstoning and is motivated, do I dare glance lovingly at the object of my pursuit, the actual vehicle.

An exhaustive examination ensues, including plates (out of state, temp or missing?), VIN on dash and door jamb, safety inspection performed locally, and all supporting paperwork. The more documentation the better, maintenance receipts from local dealers or service providers can substantiate chain-of-title and odometer claims.

I will never buy any vehicle sight unseen, regardless of the sellers online "reputation." These reputations are often built up and sold to virtual curbstoners. A seller could also deliver 100 cars at normal profits to set up one $10K sting. He'd still have a 99% rating.

This does not preclude using EBay to buy regionally. The eBay listing has a convenient miles-from-your-zipcode feature. I will go inspect the machine and ID the seller before serious bidding, no exceptions.

There are so many problems with these virtual deals. A family member, who routinely does the opposite of my advice, bought a low mileage Harley. Yep, out-of-state seller on eBay. He never received the paperwork on his super bargain. At least they did ship the bike.

It is usual for an internet buyer to be asked to pay for a vehicle before delivery.

I would never front any money for any reason without transferring the title and possession. Those who buy a car online, sight unseen, and then pay upfront, are asking for trouble. Of course many legitimate dealers are selling on the web, but these are extremely easy to document.

Local deals must be pursued with the same due diligence.

If you get curbstoned, buyers remedies are limited. A private transaction, with an anonymous party, and almost without documentation gives prosecutors, regulators, and plaintiff's attorneys no cause of action.