Classic car fraud runs rampant - here's how to avoid it

A 1968 Chevrolet Corvette can be extremely valuable

A 1968 Chevrolet Corvette can be extremely valuable -- provided the paperwork is authentic. Photo Credit: AP

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As collector cars become more valuable, the temptation for some sellers to misrepresent a car's title status seems to become overwhelming. Even when they know they’re going to get caught.

I recently had occasion to purchase a 1982 Collector’s Edition Corvette. This is not a car that would normally interest me, but it was a “survivor” and these cars do interest me. It was 100% original and had only covered 27,000 miles since new. It was immaculate - and it had a clear New York State title in the sellers name. I paid a fair price for the car and immediately proceeded to the DMV to transfer the title into my name.

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After waiting in line for almost three hours I finally made it to the teller’s window. It’s never a good sign when the teller behind the counter quietly gets up in the middle of your transaction, walks to the supervisors glass enclosed office, closes the door, and begins waiving your title at the supervisor. It’s even worse when the supervisor, carrying your title in her hand, walks back with the teller to deliver the inevitable bad news.

“Mr. Linden. You can’t title this vehicle.”

After a short discussion (I use that term loosely), she explained to me that the seller of the Corvette was supposed to have taken the car in for a salvage inspection since it had been declared a “total loss” in 1991. He had been notified of this on an annual basis and had chosen to ignore these notices. How could this be? The car was flawless. Several experts had looked at the car prior to my purchase and all had agreed that the car was 100% original - and had never been damaged.

Suffolk County’s law enforcement community agreed on the likely explanation provided by a friend who has been in the collision business for a long time. Without getting into great detail, the scenario probably included insurance fraud decades earlier, with the owner retaining an undamaged car, along with the title, which he was supposed to convert to a salvage title, but never did.

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I called the seller with the bad news, which he obviously knew was coming. His response was “Sorry for the inconvenience.” I heard a click, and then a dial tone. When I pleaded my case to law enforcement, they were kind enough to call the seller with the instructions to “Settle with Mr. Linden within 24 hours, or turn yourself in and face felony charges.” He settled with me within 24 minutes of that telephone call. I was very lucky. It’s not always that clear, or that simple. This story exemplifies the risks associated with buying a collector car. Even one with a title. 

Most cars that are considered collectible were manufactured prior to 1973, and the risks associated with ownership transfer in New York are even greater with these cars, since cars that were manufactured prior to 1973 do not receive a title. They receive a “Transferable Registration” with no provisions to record a lien, or note any “brands” such as Salvage or Flood. Plenty of these “pre-1973” cars that were severely damaged by Hurricane Sandy pop up on the market, with the seller handing over a “Transferable Registration,” and the buyer going merrily on their way, none the wiser as to the damage the car sustained.

Outstanding loans for which the collector car was pledged as collateral, bankruptcy, and divorce are other common problems that arise with the sale of a “pre-1973” car. 

A bank that has loaned money against one of these cars has no way to let a prospective buyer know that they have an interest in the car. A husband or wife going through a divorce may sell their collector car only to have a court order that the sale be un-done. The same can happen if the seller is going through a bankruptcy, and the court feels that the car was sold below fair market value. These problems can, and do, arise.

Ninety-nine percent of the transactions that I’m aware of go smoothly. But considering the thousands of transactions that take place daily, even one percent still adds up to a significant number, particularly if you are part of that one percent, as I was with the Corvette. The fact is that there is very little that a buyer can do to protect against all of these foreseeable (and unforeseeable) possibilities.

But there is one thing that a buyer can do that will shift responsibility to the seller in the event a problem should arise.

A simple statement should always be included on the Bill Of Sale stating that the seller owns the vehicle free and clear of any liens or any other encumbrances other than those that may be indicated on the title (if applicable), and that they have the legal right and authority to transfer ownership. This will stop many sellers dead in their tracks if they feel they may be held accountable for problems down the road.  

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