Odometer Rollback: Still a Common Fraud

For those who are considering buying a used automobile, one very common scam is odometer fraud.

Let's investigate this sham and ways to avoid being victim of odometer rollback.

When I was young most speedometers were rolled back: every dealership did it along with many private sellers. Odometer tampering wasn't even a crime.

There were no electronic/digital odometers then, just the easily altered mechanical kind. These could be hooked up to a power drill and backed down, or disassembled and gears turned.

It was very easy to just disconnect the speedometer cable at the transmission and drive a few thousand miles. Unlimited mileage rent-a-cars were not as common as today, so there was an immediate financial incentive for deceit.

When leasing became popular, lessees also had a direct financial incentive to perpetrate the hoax. As warranty became an automotive institution, real money changed hands.

Builders began putting seals on the transmission, but even lease return inspections rarely included the underside of the car.

The odometers of the day often had only 5 digits. When 100K came around, all the digits would rollover and the count began again at zero.

The cable that drove the mechanical odometers would frequently bind up in its housing, jamming or breaking teeth off nylon gears. The unreliable nature of the equipment invited cheating, since many honest mileage readings were understated. So everybody, including the innocent, was in the odometer rollback game.

Automakers needed a solution to warranty fraud, so they lobbied congress for protection. Dealers were in the middle, and didn't want new paperwork or restrictions. Consumer groups shrilled for criminal sanctions.

Car makers had an interest in odometers overstating mileage. This reduced warranty claims, rolled up lease over charges, and improved perceived longevity.

Oh boy, time for Congress to act.

Defining Odometer Fraud

Odometer fraud is the now illegal technique of rolling back indicated mileage to make used vehicles seem newer.

"To protect consumers," the federal government passed a series of laws.

Violations include installation or sale of devices which alter mileage, or to manually reduce the indicated mileage on a vehicle odometer.

And how about just driving a vehicle with a disconnected odometer with intent to commit fraud? Yep, our prescient lawmakers made that a crime.

Mileage is required to be on the title at each transfer, and fraud is suspected when the subsequent mileage reading is lower. Focusing on only the rollbacks in which the fraudulent odometer reading is lower than the previous recorded one, a fraction of rollbacks, allows the government to pretend this criminal legislation has solved the problem.

I don't see a single enforceable provision in this law, other than the required paperwork.

An odometer may be rolled back and not identified as such in Carfax as long as the subsequent mileage is not lower than the previous mileage.

How hard is that? Drive 50K, rollback 48 of it.

In a 2002 study, the National Highway Traffic Safety Administration (NHTSA) estimated 452,000 vehicles are sold each year with tampered odometers. American car buyers are said to have been defrauded out of $1,000,000,000 annually. The study determined that there is a 3.47 percent chance that any given vehicle has its odometer rolled back during the first 11 years of its life.

"We estimate 1 in 10 cars has their odometer rolled back."

Jack Gillis, Consumer Federation of America

I'd put it closer to 15%. Remember that odometers can also be swapped.

Altering the mileage reading on a motor vehicle is a Federal felony.

Odometer fraud investigations by the U.S. Department of Justice for criminal prosecution resulted in convictions of 138 defendants over the last 11 years. Another 240 convictions occurred in 30 state jurisdictions. Sentences ranged from one month to eight years.

These cases typically focus on rings which sell hundreds of used cars annually. This allows a wide variety of charges to be brought, including wire fraud, conspiracy, and mail fraud.

The majority of defendants are given a laundry list of charges and, depending on their financial resources and choice of legal counsel, plea-bargained to a single lesser offense to avoid a very expensive and risky trial no sane prosecutor would touch.

Odometer Disclosure Statement

The Federal Statutes, and now most states, require a paper trail each time the vehicle is sold.

The seller is responsible for providing the correct total mileage, and putting it in writing on an official form. The law prohibits the transfer of title without full disclosure of the actual mileage.

When true mileage is unreliable, there is a provision for filling in "actual mileage unknown."

These forms are generally available to private sellers online or at tax offices where plates and titles are transferred. Buyers can ask dealers to show the incoming disclosure paperwork, but dealerships will normally not be allowed to disclose previous owners.

Titles have a mileage field, and of course there are now "Not Actual Mileage" titles.

Digital Odometers Can Be Rolled Back

Many new cars have digital odometers. These store the mileage in a flash memory chip or an EEPROM inside the vehicle's engine control module.

Many consumers believe digital odometers cannot be rolled back.

They can be.

This memory can be read using a diagnostic computer, which all car-dealership service departments, and many other mechanics have.

Speedometers and odometers must be adjusted for wheel and tire size, and final drive ratio changes. Conversion from miles to kilometers must be allowed for international sales.

Software and devices designed for recalibrating odometers have the ability to change mileage in digital odometers. The main obstacle here is compatibility. Since protocols differ between manufacturers the perpetrator needs multiple tools to fit every brand.

An electronic rollback will leave no trace of odometer misrepresentation. Some digital odometers will display an asterisk or an 'E,' when the odometer has a fault, but anyone who can reset the device can also clear this code.

Hey, physically disassembling the mechanical odometers was real work. Running them in reverse with electric drills took hours. A good operator can reprogram a chip in just a couple minutes.

The sheer number of websites offering software and odometer reprogramming devices is further evidence for the idea that the criminal law is no solution to odometer deception.

Civil Penalties

Most victims are unaware that miles have disappeared on the car they just bought. I see so many posts where buyers get "deals" on "low-milege" cars that disintegrate almost immediately.

So what are your remedies for a tampered odometer? If you can document the violation (good luck), and the statute of limitations, two years of date of purchase, has not run out, you could sue the seller. The law requires plaintiffs to prove the seller’s intent to commit fraud, a quasi-criminal requirement, beyond the standard for negligence.

Successful plaintiffs are entitled to the greater of either $1,500 or three times the amount of actual damages. And how shall actual damages be assessed? Utah's Department of Motor Vehicles calculates the average loss to consumers at $4,000. This is less than the monetary threshold of litigation for all but class actions.

There have been a couple class action lawsuits against manufacturers for odometer over-calibration. American Honda Motors, though denying wrongdoing, settled claims of over-calibrating odometers to shorten warranties, inflate fuel mileage, and generate lease over charges.

Instead of understating mileage, the Honda odometers overstated it.

Honda paid a $115 million settlement, $9.5 million went to plaintiff's counsel, who earned $800 an hour.

Not surprisingly, there are now law firms advertising for clients in odometer fraud cases.

A subsequent odometer inaccuracy class action went after Nissan.

Avoid the Odometer Hoax

Odometer fraud is so widespread because so many consumers are uninformed about it.

Often the buyer only discovers the fraudulent mileage upon offering the vehicle for sale or trade and having the other party present a Vehicle History Report. In many cases the two year statute of limitations has expired.

Since the legal remedies are so ineffectual, let's see how to protect ourselves from odometer swindlers.

To me, even the 5 or 10 miles on brand new cars is proof of nothing. Some dealerships refuse to give test drives on hot selling models, to avoid accumulating miles and having to sell them at discounts.

But what about all those current model year dealership "program cars," rental fleet and commercial fleet cast offs? These account for maybe 15% of sales. How are they re-marketed?

I once caught a ride while hitchhiking west on old route 66. The two hippies who picked me up were transporting an "as new" 1968 Dodge four door sedan from New York to Los Angeles.

We delivered the car to a gullible old woman with just those 2833 miles on the odometer. The newspaper ad she had responded to offered an unbelievable price on the near new car.

We had several problems with the car between Oklahoma and LA. The transmission slipped and made clanking noises, and the fuel pump was weak, causing the car to stall on upgrades.

That almost brand new car was a freshly repainted New York City taxi, with over 100K real hard miles.

So every odometer is presumed guilty until proven innocent.

Carfax offers a free online odometer check as a lead in to purchase the full report. You'll need the car's VIN.

Carfax Odometer Fraud Check

Buyers should purchase a full CARFAX vehicle history report on the VIN. This is why you see VIN numbers in craigslist and eBay ads. This is to establish that the seller is honest and has nothing to conceal. Do not rely on dealers or sellers to provide this critical info.

As you work down the Vehicle History Report you should see the stated mileage get higher with each entry.

This should be done before confronting the seller. Their story should check against the history. Ask the seller in the initial phone interview if the title is clean, in their name, and shows mileage.

If the vehicle was previously titled in another state, there should be a reason.

But don't take a Vehicle History as gospel. A database is only as good as the reporting that built it. There are plenty of opportunities for dealers and auctions to launder titles.

With CARFAX in hand, assemble all documents the seller provides to support the odometer claim. Low miles is inconsistent with several transfers of title.

A true low-mileage car should have a variety of service records and even the original Monroney window sticker to document options. Most oil change and state inspection stickers have mileage. Any hints of altered documents should be followed up.

Inspect the vehicle carefully. Does the physical condition match the odometer? In the old days this was easy, as soft rubber foot pedals and upholstery wore away at a predictable rate. Rolled back odometer numerals often failed to align correctly.

Today, the inspection is more subtle, with fine details, such as wear in and around the key holes, being clues to true age. Original equipment tires should last 40-60K miles, are they from the factory? New tires on a low mileage car cast suspicion on the odometer.

If you do not feel qualified, take the vehicle to a mechanic for evaluation prior to purchase.

There are companies operating internationally that inspect and certify odometers on used cars shipped between nations where odometer tampering is rampant.

Manufacturers Should Step Up

Using criminal sanctions to deter simple, easy, non-violent fraud is a waste of law enforcement resources. Police and prosecutors have plenty of violent crimes to solve.

The issue of criminal intent is easy to prove in street crime, but difficult in white collar crime.

These laws don't work. Only the bottom tier workers will be prosecuted. Profits and sophistication of the operation are increased by the criminal sanction.

What is needed is action at the manufacturer level, where the odometer problem should have been solved in the first place. Tamper-proof technology, like sealed, serial numbered engine hour meters, is available. As the Honda class action demonstrates, too many are profiting from the present "solution" to expect change.

So buyers must accept the responsibility for their actions and personally verify every aspect of all automotive transactions, and be alert for odometer frauds.