Escrow scams target thousands of private car buyers and sellers every year. Fraudsters create convincing fake companies to rob victims of their money or cars.
We’ll show you how to identify scams and verify legitimate escrow services. Then, we’ll introduce DealNow, a secure transaction platform that provides escrow-like protection without delays, high fees, or fraud risks.
In private used vehicle transactions, buyers and sellers face a trust problem: the buyer doesn’t want to pay until receiving the vehicle and title, and the seller doesn’t want to release the car until getting paid. Both parties want the same thing but neither want to make the first move. Escrow services solve this catch-22.
Legitimate escrow companies act as neutral third parties that hold the buyer’s payment in escrow accounts, verify when the transaction conditions are met, and release funds to the seller after confirmation from both parties. This creates a trust bridge that protects both parties—when the escrow is legitimate.
Unfortunately, smart criminals have learned that they can use the trustworthy reputation of escrow services to defraud private-party car sellers and buyers. Let’s look at how they do it.
This is the most prevalent escrow account scam in private car sales. A “prospective buyer” contacts a private seller about their vehicle listing and suggests using a specific escrow service. This escrow company is fake; it’s owned by the buyer and perhaps some accomplices.
After agreeing to use the suggested service, the seller receives a convincing but fraudulent payment confirmation email or phone call. Believing the money is safely in escrow, the seller transfers the vehicle and title to the buyer, who leaves with the car. Eventually, the seller discovers the escrow company was fake and no payment was ever made.
This common scam works because sellers don’t verify the escrow company before proceeding with the transaction. Keep reading to learn why sellers don’t need escrow to safely transact.
In this less common but equally devastating scam, a fraudulent seller advertises a vehicle at an attractive price on online marketplaces and recommends a specific escrow service for the online purchase. The trusting buyer sends payment to the fake escrow service, often via wire transfer.
The seller claims they’re waiting for payment confirmation to continue. The seller and the bogus escrow company disappear, leaving the buyer without their money.
This scam typically targets long-distance purchases where potential buyers cannot physically inspect the vehicle or meet the seller in person. In local transactions, the seller might recommend taking a lunch break or finishing the transaction the next day to create an opportunity to leave. Keep reading to learn why buyers don’t need escrow to safely transact.
In this scam, the buyer and seller are innocent. A buyer finds a legitimate vehicle listing. While researching escrow options, either party might stumble upon a professional-looking fake escrow website. Both parties agree to use this seemingly legitimate online escrow service.
The buyer pays the fake escrow, which promptly disappears with the funds. If the seller recommended the service, they would end up in the subsequent fraud investigation.
Escrow scams are easy to avoid if you verify the company before transacting. Real escrow companies have reputations and proper credentials that fake escrow services can’t match.
Start with well-established, reputable escrow companies, like Escrow.com. Never click links from potential buyers or private sellers. Instead, type the escrow company’s web address directly into your browser.
Legitimate escrow services maintain proper licensing with state financial institutions and have verifiable physical addresses, not just P.O. boxes. Call the escrow company using a phone number you find independently, and check the Better Business Bureau for complaints about suspicious activity.
Watch for these red flags that signal fake escrow websites:
Your common sense provides the best defense against escrow scams in private-party used vehicle transactions. If something feels wrong about the escrow company or the deal, walk away. There will always be other cars and legitimate buyers.
Even legitimate escrow services carry some drawbacks for private car transactions. While they provide security, they’re far from convenient.
The time and complexity required can test anyone’s patience. Escrow can add days to weeks to the transaction. You’ll need to submit detailed personal information, wait for identity verification, coordinate bank transfers, endure inspection periods, and finally arrange the vehicle handover. This extended timeline kills the possibility of completing a deal on the spot.
Escrow is also expensive. Most companies charge percentage-based fees ranging from 1% to 3% of the transaction amount. For a $40,000 vehicle, you’re looking at hundreds or even thousands of dollars in fees. Whether the buyer, seller, or both pay the escrow fees, they hurt.
The coordination challenges create another layer of frustration and include:
Unlike physical cash, which at least offers immediacy, escrow services trade convenience for security. They solve the trust problem only to replace it with hassle, expense, and delay.
Fortunately, you have another option.
A bill of sale is a legally binding document that records the terms of a vehicle transaction. It typically includes:
While many states require bills of sale, they are a smart idea in any state. This document can provide legal recourse if either party fails to meet their obligations. By recording the transaction, the buyer can confidently pay the seller knowing they have some protection.
It’s easy enough to search your state’s motor vehicle authority and print two paper bills of sale. But paper bills of sale also have a few drawbacks.
A digital bill of sale eliminates these problems. That’s where we step in.
DealNow delivers the security of escrow without the hassle, delays, or high fees. We use ID and funds verification as well as state-specific digital bills of sale to detract scammers and streamline private-party car transactions.
Enjoy a guided dealflow that lets you transact anytime, anywhere, from your mobile device. Here’s what you can expect:
The best part? Unlike escrow, DealNow uses a simple flat-fee structure. This means completing transactions on your schedule without watching thousands of dollars disappear as transaction fees.
We combine digital documentation, identity verification, and instant payments in one platform to build the trust bridge private car buyers and sellers need. Enjoy car transactions without the hassle and cost of escrow. Transact with DealNow.
Watch for these warning signs to dodge scams:
Be suspicious of online sellers offering vehicles sight unseen at prices significantly below the advertised price or market value. Legitimate sellers won’t ask for your Social Security number, credit history, or personal info beyond what’s needed for the bill of sale.
PayPal doesn’t offer a true escrow service. While PayPal provides some purchase protection for buyers using credit cards through their platform, it’s not designed for high-value transactions, like vehicles.
Escrow fees are typically negotiable between buyers and sellers. While the buyer often covers these costs, many private car sellers agree to split the fees or build them into the selling price. These transfer fees usually range from 1–3% of the vehicle’s sale price.
Some sophisticated car-buying scams involve collecting your personal info for identity theft purposes. Fraudulent sellers or fake escrow companies may request your Social Security number, credit history details, or banking credentials, claiming they need it for “verification.” This data can be used to open accounts in your name.
When financing through a credit union or bank, extra layers of protection come into play. Most lenders verify the vehicle’s value through AutoCheck or similar services before approving monthly payments. This provides an extra layer of security against common auto scams.
Several online platforms provide integrated purchase protection for car transactions. eBay Motors offers protection for online car-buying scams up to certain limits. Other marketplaces partner with established escrow companies for larger transactions. Always verify that these services are legitimate.
If you’ve fallen victim to an escrow scam, report it to your local police, the FBI’s Internet Crime Complaint Center, and the Federal Trade Commission. Document all communications, including email addresses, website details, and payment information. Some victims have recovered millions of dollars through coordinated law enforcement actions. Also, notify any financial institution involved in the transaction to attempt to freeze the transferred funds.
Military-targeted scams often involve fake vehicle listings claiming to be from deployed service members needing to sell quickly. They typically request escrow payments through entities they control. Military buyers are also targeted with “special military discounts” requiring advance payment to “hold” vehicles.
DealNow is the easiest way to close your own vehicle deal, anytime. It’s the safe and simple way to avoid fraud, sign documents, and instantly transact, all in one app.
