How to Avoid the Unlicensed Car Dealer

Category: News. Written by Grant 

The internet has all but revolutionized the process of buying a used car, as buyers have access to a seemingly unlimited supply of vehicle listings online. Unfortunately, one of the criminal elements that is becoming more popular due to the internet are unlicensed car dealers. To help you identify and avoid these shady dealers, we’ve asked the experts for help.

“There’s a name for these individuals who sell without a license,” begins Lewis Dennie, “they’re called curbstoners.” Dennie is the regional manager of the Washington Department of Licensing Fraud and Complaint Investigations Unit, whose job is to look into complaints filed by consumers and legitimate car dealers about unlicensed dealers operating outside the law. In Washington, any individual that sells more than four cars per year or sells a car that they don’t own is required to obtain a dealer’s permit.

“A high percentage of unlicensed dealers buy insurance destroyed vehicles,” says Dennie. “The dealers buy these cars for a few hundred dollars, do a few cosmetic repairs and then sell them on a vacant lot. There is a high chance of structural damage and odometer rollback. The car may have a deployed airbag with a disabled sensor so the airbag warning doesn’t show up.” In addition to vehicles unfit to drive, Dennie says that some of the vehicles may not even have a title, which means there are situations where a buyer can purchase a vehicle and end up with a vehicle that cannot be registered.

One particular horror story along these lines involved a dealer in the Tri-Cities that was buying abandoned vehicles from Oregon and selling them to unwitting consumers for $1,500 to $2,000 after some purely cosmetic repairs. The warning sensors on these cars were then disabled to trick customers into thinking the cars were in running condition. Buyers soon realized that their newly purchased cars were not as advertised, with some dying the very next day or falling apart weeks later. Luckily, nobody was hurt and the dealer was caught, prosecuted and fined to the tune of $24,000.

In order to avoid these unscrupulous dealers, it’s important to know where they hand out. In our feature series on Buying a Used Car For Under $1,000, we encountered what we suspected was an unlicensed dealer when searching for a car on Craigslist. We mentioned this to Dennie and he confirmed that many of the unlicensed dealers moved to the electronic world and onto places like Craigslist, which is a frequent source of complaints. In addition to the internet, these illegal dealers frequently display their inventory on the side of the road or in public parking lots.

The good news that is that it’s relatively easy to tell whether or not a dealer is licensed or not. Here are the important Washington state requirements that Dennie says all licensed dealers must have or follow:

  • A permanent office and place of business
  • A sign of business name and nature of business must be visible
  • Inventory of vehicles
  • Maintain normal business hours (such as 10am – 4pm on weekdays)
  • Full time dealership (no part time dealers)
  • Minimum $30,000 insurance bond

By making sure the dealer you are working with meets the above criteria, you will have done a big part in reducing the risk faced when purchasing a used vehicle.

We would like to thank Lewis Dennie and the Fraud and Complaints Unit for their help on this article and the work that they do. For more buying tips, please visit the Washington State Department of Licensing website for tips on buying a car.

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