Manipulated Mileage

Protecting Used-Car Buyers

  • Why it matters

    Why it matters

    In Germany, odometer fraud is estimated to cost between €6 and €7 billion in annual damages. However competing interests and tight privacy laws have meant that nobody can agree on a solution.

  • Facts

    Facts

    • Digitalization is making tampering with mileage that much easier. Fraudsters can download an app from the Internet.
    • After Belgium instituted its Car-Pass system, where mileage histories are collected in a central database, the number of manipulated odometers fell from 60,000 to 1,239.
    • Up until now German auto dealers and potential data bank owners haven’t been able to find common ground on the matter, although one German state may soon pass new legislation.
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abendlicher  Blick ueber das Armaturenbrett eines auf der Autobahn fahrenden PKWs durch die schlechte Sicht bietende regennasse Windschutzscheibe, evening view over the dashboard of a passenger car on a motorway through the rain-wet windshield with poor v
Digital duplicity: Computerized systems make it easier for fraudsters to tamper with mileage. Source: DPA

Even the police are sometimes surprised by how brazen the perpetrators can be. In internal documents obtained by Handelsblatt, they describe the case of a Mercedes E-Class sedan that was taken off the road in 2013. Overnight the swindlers reduced the 687,000 kilometers already traveled by the used car down to 88,000 kilometers. The fraud jacked up the value of the used car from around €1,000 to €17,100.

Tampering with odometers is both lucrative and illegal and attracts organized crime. It is difficult to attain reliable statistics as to how high the number of manipulated odometers actually is. This is mainly due to a large number of unreported cases. Nevertheless, various random samples present a picture that should give used car dealers cause to worry. In internal studies, a few insurance companies reckon that almost every third used car has an odometer that has been tampered with.

Lawmakers can seldom do something against this organized deception. At the beginning of 2011, a nationwide raid by the Munich police against odometer tampering made the headlines. But the special unit was disbanded in 2013. The German motorists’ association ADAC protested, but to no avail. Insurers estimate annual damages through tampering with odometers at between €6 and €7 billion in Germany alone.

Odometer tampering is rarer in the U.S. than in Germany. In California, only an estimated 200,000 out of close to 30 million vehicles have been tampered with.

It’s an open secret in the auto industry that in this country, manipulators are finding it increasingly easy to falsify mileage. “Digitalization has made it even simpler to alter mileage,” says Torsten Brämer, department head at the TÜV auto inspection authority in the Rhineland region. It used to require a screwdriver and an electric drill but now an app downloaded from the internet is enough. This can be purchased for several hundred euros and is “basically foolproof,” says Mr. Brämer; mileages can be changed in a matter of minutes.

In a statement, the German Association of the Automotive Industry points out that protective measures against tampering are improving continuously: “With each new generation of vehicles, manufacturers integrate the most modern systems.” But even the representatives of the auto industry admit they’re in a race for time with the swindlers.

It’s a race that will be difficult to win. But there is one way the cheaters could be caught: Through the use of a data bank that collects and stores mileages, as recorded by auto insurers, inspection agencies and repair shops. This sort of seamless documentation would make manipulation much more difficult.

However up until now, German privacy protection prevents the implementation such a system. Because mileage information and the so-called Vehicle Identification Number are considered to be “personal data” they can’t be registered without permission from the car owner.

But other countries can serve as models. Belgian law requires sellers to give buyers a so-called Car-Pass, a document showing the odometer history of a vehicle. In 2015 alone, the number of manipulated vehicles fell from 60,000 to 1,239.

The pressure is mounting to institute such measures. An E.U. decree requires member countries to register odometer data centrally. Establishing a data bank remains difficult in Germany. Since personal data must be handled with special sensitivity, accessible sources of data – for example, from participating repair shops and inspection agencies – can only be accessed upon request.

 

If used car customers were able to get better data about mileage online, they might be tempted to bypass German car dealers.

 

In fact, odometer tampering is rarer in the U.S. than in Germany. According to the California Department of Motor Vehicles, there are only 200,000 manipulated vehicles among the close to 30 million vehicles in the state. The reason for this is the company Carfax company, at whose website anyone can inquire about mileage with the help of a vehicle identification number. Today the U.S. databank has 14 billion entries provided by 35,000 inspection agencies, dealerships and repair shops.

“If it were also possible to access mileage histories in Germany, manipulation would be much more difficult,” says Björn Hinrichs, chief executive of Informa Insurance Risk and Fraud Prevention. His firm is tasked by insurance companies with operating a system that helps to bring insurance fraud to light. Cases are identified where damage is reported to two insurance companies in order to cash in twice. Arvato is now seeking to register data and prevent odometer fraud as well.

But the auto industry, which is sitting on a huge amount of data, is skeptical. In response to a Handelsblatt inquiry, the German Association of the Automotive Industry said it had “legal reservations regarding privacy protection.” Mr. Hinrichs suspects other motives, namely that the industry doesn’t want to tread on the toes of its own members’ car dealerships, which are seen as more trustworthy than any online platform, and therefore able to attract more customers. If the customers were able to get trustworthy information online, they might be tempted to bypass the car dealers.

However Mr. Hinrichs is optimistic that the major legal issues around privacy protection will soon be resolved and that his databank can get underway next year. The goal is a voluntary seal that assures buyers the mileages are correct. He says the costs are reasonable when measured against the value of a vehicle; the seal will be offered for a double-digit sum in euros.

German MP Mechthild Heil, who is responsible for the consumer protection file for the Christian Democratic Union and Christian social Union in the German parliament, is paying close attention to the debate about odometer manipulations. She is well aware of the legal obstacles. Two years ago, she invited responsible figures in the field to discuss countermeasures. But the auto industry and potential data banks couldn’t find common ground there either.  “We would be pleased if everyone would agree to a solution voluntarily,” Ms. Heil has said.

Of course, things would move faster if registration were required by law. Thanks to the state of Lower Saxony’s local government, the ruling Social Democratic and Green parties there, the state of Lower Saxony is seriously considering a Car-Pass system like the Belgians have, something that might see at least one state’s odometer manipulators running for the hills.

 

Thomas Jahn is Handelsblatt’s New York bureau chief. Lukas Bay is an editor with Handelsblatt’s companies and markets desk. To contact the authors: bay@handelsblatt.comjahn@handelsblatt.com

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