BizAims

Two men are looking at a spiffy car in a shopping mall parking lot. One of them bends over to carefully check it. He lifts the hood, scans the engine, surveys the body, then eases into the driver’s seat and holds the steering wheel. The other man steps to the side and reassures him the car is a gem.

But it’s far from a typical scene where two auto buffs are simply admiring a car.

The man inspecting the vehicle will soon buy it from the other smiling individual in the kind of deal that will cost taxpayers several hundred dollars and jeopardize the safety of motorists, passengers and even pedestrians.

It’s not the mysterious seller’s first sale in the last month. He has unloaded three other models that came from an auction of wrecked vehicles.

That man is illegally trading in vehicles. The auto industry commonly calls him or her a “curbsider.” It’s someone who is in the business of offering a vehicle to the public for profit, but behaves like he or she is selling a private auto.

In fact, the seller is running an illegal business. He or she dodges taxes and avoids legal obligations. Selling vehicles as a business requires qualification and registration as a used car dealer who must follow operating rules that protect consumers.

There is no real accurate way of figuring out how much illegal sellers save by dodging taxes and causing other Canadians to pay more.

But some senior industry officials estimate Canada is losing more than $300 million in sales taxes annually because of the illegal practice. They note it also represents a significant portion of the country’s underground economy since each transaction involves thousands of dollars.

“We figure it could easily be in the neighborhood of $300 million for all of Canada,” says Bob Beattie, executive director of the Used Car Dealers Association of Ontario. “It may be even higher.’

Beattie, who operates the biggest used car association in the country, says he made a broad conservative calculation of the impact using sales data, average prices and periodic investigations by his group on the number of illegal sellers in the marketplace.

He describes curbsiders as “con artists,” operating in an environment where consumers are making their most expensive purchase after a house.

The extent of evasion has reached the point where the Canada Revenue Agency is taking a more aggressive role in pursuing convicted illegal sellers for unpaid taxes, according to industry sources. Agency officials won’t comment.

Beattie said curbsiders dodge taxes when they buy vehicles from someone else and don’t register them in their own name. When the curbsider unloads the car again, he or she fills in the new owner’s name.

Furthermore, the curbsider can hide the profits from the sale at the end of the year and not pay federal income tax, Beattie said.

In some cases, sellers will also reduce a vehicle’s price in a bill of sale to reduce the amount of tax a buyer pays.

The number of known illegal auto transactions in Canada is enormous. Statistics from DesRosiers Automotive Consultants show almost one million private auto sales annually in Canada.

Beattie’s association has found the percentage of known sales involving illegal vendors has remained at about 25 per cent of private transactions through its study of newspapers and online ads for clues.

In Ontario, tougher legislation in 2010 provided the regulator with better tools to screen people seeking dealership licences. Fines jumped from a few hundred dollars to a minimum of $2,500 for one count of illegal selling in efforts to deter curbsiding.

But Carl Compton, registrar for the Ontario Motor Vehicle Industry Council, which regulates dealers, says that despite the legislation, curbsiding is not dropping.

“In spite of significant efforts to combat illegal car sales, I’d say that you still run a one-in-four chance of buying from a curbsider,” said Compton in backing the dealer association’s estimate. “As we’ve stepped up our efforts, they’ve found new ways to sell junk... just like the sex trade; they appear to have turned to free online classified ad services.”

George Iny, president of the Automobile Protection Association which represents consumer interests, said his group’s research has revealed curbsiders in Toronto are more “professional” and “more clever than ever” in fooling motorists than in other major cities.

For example, his group found non-registered dealers posing as legitimate operators at a repair shop or retail site with badly damaged cars that were “sometimes reasonably” repaired.

“In all cases, they were severely misrepresented,” he said. “There’s no way, short of contacting the regulator that a private buyer could distinguish one of these bootleg retailers from a car dealer.”

In a twist, Iny said there are also licensed dealers who place classified ads masquerading as private sellers. However, he noted they are easily identifiable when a motorist talks to them on the phone or visits the location.

Victims of illegal sales also face the prospect of getting stuck with “junk” that isn’t safe to drive and higher costs eventually for repairs or demolition and the expense of buying another car, according to Carey Smith, director of investigations for the regulator.

Smith said many curbsiders will misrepresent the real condition of cars and buyers end up with former crumpled, wrecked models that have been mildly repaired and painted to hide problems.

Industry data also shows wrecked autos represent a much higher percentage of curbsider sales than from normal private sellers.

Smith noted that although recent Ontario legislation now makes it more difficult to qualify as a used auto dealer, it is also prompting unsuccessful applicants to turn into curbsiders.

“It has made used car dealers much better but now we’re also swamped with curbers,” said Smith a former detective and sergeant with Halton regional police. “

At the same time, Smith said the regulator is pressing for higher fines and jail time for repeat offenders during prosecutions. It is also putting more resources into clamping down on “blatant fraudsters,” who are repeat offenders, he noted.

 While Ontario has some of the strongest curbsiding legislation in the country, Iny blames the transportation ministry for not taking a harder line in stopping or “blocking” new registrations of obvious sellers of multiple vehicles. It can easily identify them through data bases and broad inspections of lots.

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