There are plenty of honest people who are willing to sell you their used car—but there's also a shady group of characters who participate in "curbstoning," which is the illegal practice of flipping used cars by representing themselves as a private owner. Here is how to avoid becoming a curbstoner's victim and why going to a used car lot is a great deal safer.

What is curbstoning and why is it illegal?

It gets its name from the practice of parking the car that's for sale by the curb—often in a busy area—with a "for sale by owner" sign prominently displayed. These days, however, the ad might be online and the car parked without a sign, in order to avoid attention from authorities. 

It's illegal because it's done by two types of people. The first is a dealer who doesn't want you to know he's a dealer so that he can try to unload a car that's got hidden damage without you bringing it back to his place of business, filing a complaint, or even knowing how to find him. The second, which is much more common, is someone who should be licensed as a dealer because they buy used vehicles at auto auctions all the time, clean them up to take care of any obvious cosmetic problems, then sell them as if they had owned the car since it rolled off the factory floor. They neatly avoid paying all of the licensing fees and taxes that legitimate used car dealers pay—and disappear quickly if there turns out to be a mechanical problem with the vehicle.

What are the signs that you're being curbstoned?

Usually, you can't really tell you're about to be curbstoned until the deal is made and the title comes out. A lot of people don't even notice the disparity in the names on the title (which are different than the name you've been given of the person standing in front of you selling the car) until after they've paid. The curbstoner may keep a tight hold on that title until you've handed over the money and are signing on the dotted line to transfer the title into your name.

If you do notice, you're bound to get a plausible-sounding story: he's selling it for his uncle, who went into a nursing home. His son is over in Iraq and doesn't want the vehicle to just sit while he's gone. If you start to hesitate, he may even offer to drop the price a little—which is designed to make you even more anxious about losing the deal.

What should you do?

The best thing to do is to walk away unless you are 100% sure that the sale is legitimate. Once you've handed over your money and signed that title, the vehicle is yours—complete with all its problems and you have little recourse to recover your money if it turns out to be a lemon.

Ideally, you can avoid the problem altogether by making sure that you search actual used car lots for the vehicle you want. While the prices might be a little higher than a vehicle that's curbstoned, there are plenty of financing options available these days that should make a car affordable. If you're worried about your credit history, go to a lot that offers guaranteed approvals for financing—they often have a "buy here/pay here" system that they can work out as long as you can show proof that you're gainfully employed.