Federal exemption allows auto dealers to roll back odometers - WMC Action News 5 - Memphis, Tennessee

Federal exemption allows auto dealers to roll back odometers

(Source: WMC Action News 5) (Source: WMC Action News 5)
MEMPHIS, TN (WMC) -

Private sellers and small-time auto dealers in Northeast Mississippi are hiding behind federal regulations passed in the 1980s to roll back the odometers on older vehicles, according to vehicle history reports, auto industry sources and government safety regulators.

The National Highway Traffic Safety Administration (NHTSA) said the federal odometer law (49 U.S.C. Chapter 327, Public Law 103-272) requires sellers and dealers to provide written disclosure of a vehicle's mileage to prospective buyers. "However, vehicles ten years old and older are exempt from the written disclosure requirements," according to NHTSA's Odometer Information Overview about the nearly 40-year-old regulation.

"In those days, vehicles didn't last as long as they do today, and there was little odometer fraud involving older vehicles," said NHTSA spokesperson Kathryn Henry. "NHTSA recognizes that today's vehicles last much longer and are increasingly becoming the target of odometer fraudsters."

The WMC Action News 5 Investigators followed a paper trail that revealed how some dealers use the 10-year exemption to roll-back odometers. We answered a Craigslist ad out of Tupelo, Mississippi, for a 2006 Ford F-150. The ad priced the pickup at $7,750 and said it had "only 129,000 miles." 

With Chris Basso, communications director of the used car value and vehicle history company CARFAX, we met "Jeff," the man who posted the truck's ad, in a Tupelo vacant lot to see the truck. The dashboard odometer gauge showed the truck's mileage as 128,763 miles. Jeff, who would not provide his last name, said he was selling the vehicle for a dealer. 

Using the truck's vehicle identification number (VIN), we ran its history through CARFAX. It indicated the F-150 had logged 188,698 miles. "We've witnessed an alleged odometer rollback of more than 60,000 miles on this truck," Basso said. "Somebody's selling this vehicle and potentially ripping somebody off."

When we confronted Jeff with the mileage discrepancy, he replied, "That, I have no idea because it's exempt from mileage (reporting)."

"They'll hide behind that," said Randy Paton, a Southaven, Mississippi, auto dealer who is a member of the Greater Memphis Auto Dealers Association. He said a network of Mississippi licensed and unlicensed dealers, using independent salespeople to place ads or front the vehicles, is adopting the federal reporting exemption on older vehicles to roll back their odometers and artificially inflate their sales values.

"They'll roll them back, and they'll take that exemption of 10 years or older, and they can turn around and retail the car and get a full value for it," Paton said. "It cuts the value in half of what the car's really worth."

For example, that F-150, priced at $7,750 and with an odometer rolled back some 60,000 miles, is actually worth about $4,750, according to Kelley Blue Book and CARFAX calculations. "With this truck, the difference is at least $3,000. So rolling back that mileage artificially inflates the value of this truck," said Basso. "Vehicles 10-years-old or older may be exempt from mileage reporting, but that doesn't mean you can roll back the odometer."

We pressed Jeff on the tampered odometer, on the truck's inflated value, and for the name of his dealer. "We're done," he said and fled in his car, leaving us behind with the truck.

The trail that eventually led to the dealer and owner of the truck revealed just how far the federal regulations fail consumers.

Because of the 10-year exemption, the Carfax report's mileage history on the F-150 ends in August 2016, the truck's tenth anniversary. On that date, the truck's mileage -- reported after an oil change in Greenwood, Mississippi -- was listed at 188,698 miles. After that anniversary date, all mileage reporting regarding the truck to CARFAX ceased.

Starting with a dealer brand plate on the back of the truck -- and on the condition that we would not name the auto dealers and their general managers in exchange for their sales information -- the WMC Action News 5 Investigators filled in the gap between August 2016 and the truck's current owner, used car dealer Danny Coker.

In the course of our investigation, we determined the truck's odometer was likely tampered with at least once before Coker's purchase and again after he bought it: 

* 2006: truck started in the inventory of a Grenada, Mississippi auto dealer.

* 2008: sold to an individual from Cruger, Mississippi. Mileage listed at 22,059.

* Oct. 2016 (two months after the August oil change reported to CARFAX): the individual traded the truck back to the Grenada dealership with the odometer showing 170,000 miles. That's 18,698 fewer miles than reported two months earlier. This is the indicator of the first odometer roll-back.

* Dec. 2016: sold to an Oxford, Mississippi, dealership. Odometer still showed 170,000 miles.

* Feb. 2017: sold to Coker, with odometer reading 170,000 miles. Mississippi Department of Revenue records listed him as the licensed dealer and owner of Bonanza Motors,1018 Country Road 250, Blue Springs, Mississippi. It's Coker's home address.

"Yes, Jeff is selling that truck for me," Coker acknowledged at his front door. "I don't have any idea if anybody (rolled the odometer). I don't know. But it's exempt is what I have to say."

When we explained to him that the federal regulation exempts mileage reporting, but it's not a license to tamper with odometers, he answered, "I don't have an explanation. I don't know anything about it. I haven't seen the vehicle in, I don't know, we bought it six or seven months ago."

We shared our concerns about how this practice is artificially inflating the value of vehicles and is deceptive to consumers. "Then you're a Good Samaritan," Coker replied. "When I got (the truck), you couldn't see the miles. Maybe they made a mistake when they wrote it down."

Even though he denied knowledge of any odometer tampering on the truck, Coker said its bill of sale -- if he sells it -- will include the notation TMU, for true mileage unknown. "If you buy it TMU, you have to sell it TMU, or you are in violation of the law," Coker insisted. "I'm not uneasy about selling the truck. I'm sleeping fine."

Dealers' abuse of the exemption has become so prevalent, NHTSA has proposed a rule to either eliminate it or extend it back to 25 years. "We anticipate issuing a final rule in the future," Henry said. Comments to NHTSA about the proposed rule change can be viewed here.

For now, a consumer's only defense is to pull a vehicle's history report from either CARFAX, AutoCheck or VehicleHistory.gov and compare its mileage with what's on record. "Shop at reputable dealerships. Check the CARFAX report. Take it for a test drive and have a mechanic inspect the vehicle before you buy it," said Basso.

Basso said according to CARFAX records, as many as 8,000 with rolled back odometers are on the road or for sale in Mississippi. In Arkansas, they number 5,000. In Tennessee, 20,000 vehicles are on the road or for sale with altered odometers.

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