Second-hand car in India
Image source - https://bit.ly/2vELZBo

This article is written by Aryan Kashyap from Lloyd Law College, Greater Noida. This is an exhaustive article enlightening the reader about all they need to know before buying a second-hand car in India.

Introduction

Indians are probably the most opportunistic people in the world. We love making the most out of anything or any opportunity. The same is the case with us when it comes to used cars. The second-hand car selling industry in India is booming. We have people here looking for opportunities in this as well, the fraudsters. A lot can go on in the simple process of buying a second-hand car. Let us look at the various dimensions of it.

Where can you purchase second-hand cars?

Used cars might not be as good as new ones, but when you are running short on your budget, it can be the best option for a while. If you look patiently, you can find a plethora of options around you. You can explore these options: 

Online from classified websites

In this age of advancement, everything is just a finger tap away from our reach, we have shattered the ease of enjoying utilities. We have online services that are very convenient and reliable. There are companies which send the seller directly at our doorstep, to show us any used car we might want to purchase. We have tons of reliable websites for doing so:

  • OLX, probably the most famous website of all for buying and selling second-hand cars.
  • Mahindra First Choice, one of the most famous websites for buying second-hand vehicles from a reputed company as Mahindra.
  • Maruti True Value, coming from one of the most reputed cars company of India, considered to be a very trusted source by many.
  • Quikr, one of the most famous advertisements based websites.
  • Cars24, considered to be a good choice by many. 
  • Cartrade allows users to trade their cars in just one visit.
  • Eazyseller comes with a variety of car options to purchase from.

On a Go-to basis 

This is another option available to our more sceptic friends, who might not believe a lot in an online transaction. We have options for you as well:

  • Purchasing a car from a Broker.
  • Purchasing directly from the previous owner.

You can use conventional methods like calling your ‘know it all uncle’, or else you can just google and bookmark the physical shops nearby which might be selling second-hand cars and schedule your visit as per your ease.

This option may not be very convenient but surely might be more reliable than the online methods, as you are looking in your locality.

What are the Pros and Cons of Buying a Second-hand Car?

We love being in our comfort zones, don’t we? Well purchasing a used vehicle might put you in an uncomfortable situation. You need to have a gist of what’s coming.

The Pros of having a Used Car

  • The fact that they are cheaper: You might have the opportunity to bring home your dream car. New cars come with a big price tag, but automobiles lose their value faster than the flick of an eye. In just a year a car loses almost 10% of its original value. This is probably the biggest pro of having a used vehicle, you get it for a lesser price. 
  • The warranty is transferable: This won’t be applicable if somebody is purchasing an ancient vehicle, but as far as it goes, most modern cars come with at least five years of manufacturer’s warranty, which is easily transferred to your name.
  • Half-waivered Loans: Vehicles bought on a financial basis, when being sold, has some or all of the burdens already lifted off it.
  • Cheaper insurance: After the main price of the vehicle is reduced, the new insurance costs a lot less than usual. This, in turn, saves a lot of money for the user.
  • Worry less live more: Not that people don’t love their cars, but a dent or a scratch on an old car won’t hurt as bad as it would have if it were new.

The Cons of having a Used Car

  • It is unreliable: People generally fear using their lemon (a term for a defective car) to its max potential, fearing a breakdown. It is very generic, you don’t know why the previous owner wanted to get rid of the car.
  • The Purchase might come without a warranty: The manufacturer’s warranty might have expired and the seller might not be ready to cover the warranty on anything. This certainly is very suspicious, it might take a while for you to realize that you were defrauded.
  • The repairs: The repairs might burn a hole in your pocket, getting those worn-out tires changed, the head-lights replaced, and a servicing check might cost a heck. The possible frequent breakdown just doubles the repair costs. 
  • Higher Interest Rates: The interest rates of older car models are usually more than that of the newer car models. This is because car manufacturers try to decrease the interest rate efficiently in their favour to increase their sales.
  • Lack of Choice: You might have to settle for a certain undesired feature or even lack of features, or a colour which you don’t even like.

Must-see Documents when buying a Used Car 

The process of transferring ownership of the vehicle is a tedious one. Many documents are required in the due process and it is full of red-tapism. Speaking from my personal experience, you might have to make multiple visits and even give ‘kharcha-paani’ to the ‘Babuus’ sitting in the offices to get your job done. The documents you need to compulsorily check are:

Registration Certificate (RC)

The RC contains crucial information about the vehicle such as:

  1. The engine number.
  2. The chassis number or the Vehicle Identification Number (VIN).

The buyer must get his vehicle registered in the place where he will be using his vehicle. The buyer must make sure to obtain the original RC from the seller. As per the law, the RC must be transferred within 30 days of the sale of the vehicle. Both the buyer’s and seller’s sign is required to ratify the process.

Receipt of Car Purchase

The buyer must be provided with an invoice of the purchase of the vehicle. He must make sure to get it from either the company, from the broker or the person himself.

Insurance Papers

The buyer needs to get the insurance papers and check whether the premiums were paid on time and also the expiration date of the policy. The buyer should be lucid about the terms and conditions agreed in the policy and then get the policy transferred to their name.

If the buyer wants to buy a new insurance policy then it is recommended that it is done during the selling process in order to avoid any break on the insurance. It is difficult getting insurance on vehicles older than 15 years.

Service Book

This is the log of when and where the vehicle was serviced and repaired. The possession of this with the buyer is very important so that he/she has an idea of the vehicle’s life expectancy and when to get it serviced.

Forms 28, 29, 30, 32, and 35

These are the mandatory legal documents for buying a used car in India. These are:

  • Form 29: It is the notice of the transfer of the car’s ownership.
  • Form 28: is the No Objection Certificate (NOC) in case the transfer is to happen between two states.
  • Form 30: It is the document for the application of disclosing the transfer of car ownership,
  • Forms 32 and 35: These documents have to be signed if the seller had taken a loan to purchase the car. If the car was purchased by taking a loan then the seller has to provide a NOC from the respective financial institution to ensure that the loan was completely paid by the seller.

Road tax Receipts

The road tax is paid once during the time of registration and it varied somewhere between 2% and 18%. If this remains unpaid then this can add up and become a big number over time. The seller must provide the buyer with the road tax receipt ensuring it was paid on time.

Bi-fuel Certification

If the vehicle being sold was customised to run on two types of fuel then the seller must ideally provide the bi-fuel certificate to the buyer in addition with a NOC from the Regional Transport Office. The bi-fuel kit generally carries a guarantee of 5 years so the buyer must get the sale receipt for the same as well.

Pollution Under Control (PUC) Certificate

It is mandatory under the law for a vehicle to have a PUC certificate. The buyer must procure the same from the seller.

The Owner’s Manual

The buyer must get the owners manual from the seller as it contains important instructions and information about the vehicle.

Other Documents

Other documents required for the process are both buyer’s and seller’s ID proof containing their addresses, PAN card, Clearance Certificate (CC) from the RTO where the vehicle was registered. 

https://lawsikho.com/course/diploma-m-a-institutional-finance-investment-laws

Most Common Scams while purchasing Second-hand cars

The sellers are professionals. Not saying all of them might be committing frauds, but most of them do. They know who they can fool and who not. My dear readers, I know that you don’t want to be scammed and that’s why you are here. The most common frauds and how you can evade them:

Odometer wind-back

The previous owners would obviously like to make the most from their old investments before completely shunning it. If they can show that the car was used less than they can achieve the same. This can be done by a simple process called Odometer wind-back. The modern digital odometers, as experts say are a bit difficult to tamper, but then where there is a will, there’s a way.

How to be safe from this?

  • You can bring in an experienced driver with you and have him checked that if the odometer readings match with the wear and tear of the car. 
  • An experienced mechanic can easily tell that if the readings have been tampered. 
  • Odometer wind-backs can be very dangerous because it alters the life of a car as you won’t be servicing your car on the time it needs to be.

Stolen vehicles

This is another common scam. Most people fall prey to this. You might not be able to tell if something is fishy because, in this practice of vehicle rebirthing, fake documents are produced. These documents look very legit. The car might be customised exactly to be as it is on the papers.

How to foresee this?

  • If your seller is insisting on selling the car and the documents read anything like, terms which might be bringing all the responsibilities relating to the car on the buyer, then this might possibly be a scam.
  • The people involved in such kinds of activities are usually involved in black markets and the cars might have a criminal history, which if pulled over by the police, you will be held liable and not the previous owner.
  • Such fraudulent sellers might be purchasing the rejected models of cars illegally and might be selling it after refurbishing it. This can be life-threatening as the safety features like airbags of the car might not be working properly.

How to be safe from this?

  • The Indian Government provides an online service where you can easily check for such frauds. You can visit the Indian Parivahan service’s official website and fill the required information like the vehicle number, registration details, the chassis number, The owner’s name, taxes paid, Insurance details etc. 
  • Ask a mechanic to check that the engine number and the vehicle number match with the ones on the paper.
  • Ask your lawyer to see the paperwork, he will legally advise you against any possible potholes in the paperwork which might become a liability on you in the future.
  • Verifying it with the official Government data might be a good thing to do. You can see the list of stolen vehicles in PDF file format on the Vahan Samanvay Service. You can look up the same on the local traffic police’s websites.
  • You can contact the previous insurance company and find relevant information about the vehicle and cross-check. 

Undisclosed Financing

It is possible that at the time you are purchasing the vehicle, there might be an outstanding loan upon it. Generally, the company or the bank providing the loan use the car itself as mortgage to the loan. Thus here you stand at the risk of losing your vehicle and further legal actions might be taken against you. 

How to be safe from this?

  • The best way you can verify if all the previous loans have been paid off or not is by getting all the receipts from the owner and then approach the car outlet or the financial institution and make sure no amount is due.
  • You can also follow the police’s website for pending E-challans or any other dues.

Escrow Scams

This is another very common scam nowadays. Sellers asking for money just to see the cars or guiding the buyer to transact the money into a fake escrow account and then flee from the sight.

How to be safe from this?

  • The best way to not fall for such tricks is to make the monetary transactions in person.
  • Have the transactions in a public place, having some crowd, because you don’t know the other person and what their intentions might be.
  • It is advisable having someone with you when you are exchanging, there have been life-threatening scenarios of looting the buyer/seller.

Broker pretending to be the Real Owners

In order to maximise their profits, many a time the brokers will be pretending to be the real owners. They will be selling you the vehicle as first owners, whereas in reality, they would have purchased the vehicle from somebody else and are selling it at a higher price. This is known as Curbstoning. This effectively makes you the third owner of the vehicle without your knowledge and your resale value is decreased drastically.

How to be safe from this?

  • By checking the vehicle’s Registration Certificate. It contains the Owner Serial Number. This is indicative of the number of times a vehicle has been sold.
  • The buyer should check the seller’s driving licence number and cross-verify it with the vehicle’s title.

Warranty Scams

A vehicle still having the manufacturer’s warranty increases the sale price. Certain activities such as modifying the vehicle, accidents, commercial usage, deems the warranty void. The buyer might be purchasing the car on the security of having an active warranty and would pay a higher price than usual.

How to be safe from this?

  • The buyer should contact the vehicle company and confirm if the vehicle is still under its warranty period or not and then act accordingly.

Punishment for Auto Dealer Frauds

Auto deal frauds fall under the ambit of Consumer Redressal Commissions of the Consumer Protection Act, 1986. The Act defines a Consumer as:

  1. Any person who purchases any good for consideration.
  2. The price of the goods must be paid/promised/party paid or promised.
  3. This must be done under any system of deferred payments.
  4. The mode of deferred payment must be approved by the same person.
  5. This, however, does not include a person who obtains the good for any commercial purpose or for selling it again.

In layman’s terms, a Consumer is anybody who purchases a good or opts for service for his personal use and not any commercial gain or for resale.

The Consumer Protection Act of 1986 has set certain jurisdiction regarding various forums.

The consumers can file their complaints in any of these on the basis of these jurisdictions

Level 

Amount 

  • District Consumer Forum

Cases up to ₹20 Lakhs

  • State Consumer Redressal Commissions

Cases between ₹20 Lakhs and ₹1 Crore

  • National Consumer Redressal Commission

Cases above ₹1 Crore

Duty of the Manufacturers and Retailers

  1. This Act imposes an obligation upon the manufacturers and the retailers that their products must have a standard of proper representation.
  2. Failing to abide by this rule, they shall be held liable for Unfair Trade Practices.
  3. If the consumer feels the absence of quality, then they earn the right to raise a complaint in the Consumer Redressal Commission to avail remedy.

A Consumer Case of Auto Dealer Frauds

  • In 2017 Sijo K Philip, an IT professional from Bangalore made a purchase of a second-hand from SLV car World on the Outer Ring Road. The seller showed Sijo a Honda Civic model claiming that it was used for a mere 50,947 Kms (This was the reading as per the odometer).
  • Philip Purchased the car for ₹6.2 Lakhs. After driving it for 15 days, he visited an authorised Honda store for servicing. He was stunned after the technicians told him that his car was last serviced in 2015 (2 years ago).
  • They said that the car’s engine and other internal parts were severely damaged, after further checking it the technicians concluded that the odometer was tampered with.
  • After realising that he was served a substandard product, he raised his grievance to Keshavalu Reddy, the owner of SLV Car World, however, Reddy never replied.
  • Philip then filed a complaint in Bangalore’s second additional district Consumer Redressal forum. After the end of the litigation period, the Forum ruled in favour of Philip as he produced all the documents firmly establishing the fraud committed by Keshavalu Reddy. The forum ordered Reddy to pay a compensation sum of ₹1.50 Lakh within a timeline of 60 days.

Conclusion

There is no better feeling than buying that first car, no matter if it is a used one. But it is a risky business. Long gone are the days when business was a qualitative enterprise, now it is mostly a quantitative thing. With the second-hand car business being on fire, it invites all sorts of people and here, in India, we don’t lack in variety. There is always some degree of risk involved, but we should be as careful as we can. Following the measures stated in the article shall protect you. Rest assured, savdhan rahe! satark rahe!


LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:

https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.

LEAVE A REPLY

Please enter your comment!
Please enter your name here