Mileage fraud - A huge problem in Europe. Time do deal with it!
FIA Region I Joint Publication 2012
When Tom Van Aerschot bought a five-year-old Mercedes ML280CDI in Belgium for €25,000, with 94,000 km on the clock, it seemed like a good deal. Although the seller wasn’t an authorised Mercedes dealer, he was a professional car salesman, and the Mercedes itself – a German import - seemed in good condition. There was little reason to be suspicious.
However, just a few weeks after purchase, things started to go wrong: the car ran into serious technical problems and Mr Van Aerschot was faced with a €5,000 bill. Assuming something was amiss, he took the car to a specialist in Germany who performed some tests and found the car’s real mileage to be at least 237,000 km.
Rolling back the clock
This story may seem surprising given the technological sophistication of today’s cars. In reality, given that modern car instrumentation is largely electronic instead of mechanical, rolling back an odometer is a question of software hacking, and can be performed in a matter of minutes. Anyone can go straight to one of the many specialist companies openly touting their “correction” services for as little as fifty euros on the internet: the search phrase “mileage correction services” turns up 348,000 hits on Google.
The incentives for mileage fraud are clear. Manipulated odometers are difficult to detect on first sight, and so the probability of being caught is very low. At the same time, the potential benefits are huge: it’s a cheap, easy, almost risk-free way for dishonest dealers (as well as consumers) to sharply boost their revenue. In Germany, as many as 30% of all used cars sold have a manipulated mileage reading, according to Munich Police.
The consequences of this are huge. First and foremost, European consumers are regularly being cheated out of significant sums of money. Not only do they overpay when buying a car, but they also face higher maintenance and repair costs.
But motorists are not the only victims: honest car dealers suffer from unfair competition; insurance companies receive more claims; and the state obtains less money from taxes. More broadly, mileage fraud has road safety and environmental implications, as cars with inaccurate mileage readings could miss out on vital servicing and safety tests or pollute more than they should.
In simple economic terms, the cost is tremendous. A study carried out by the Dutch organisation CRM used car management in 2010, based on conservative assumptions, found that in the Benelux, France and Germany, mileage fraud amounts to €1.4 - €2.8 billion annually, with 30-40% of all imported cars manipulated. Applying that figure to the entire EU puts it at a staggering €5.6 – €9.6 billion per year.
Estimated loss: Nearly €10 billion
Source: CRM presentation on 18 October 2010 in Brussels
While finding a technical solution is seen as the ideal option for many, the problem of hackers seeking ways around safeguards which prevent odometer manipulation is likely to continue. However, there is broad agreement that more should be done, at the very least, to find technical solutions which would make manipulation much more difficult than is currently the case.
Similarly, the law enforcement angle offers no easy answers. Mileage fraud is not considered a crime in every member state of the EU, which means prosecution is sometimes not even an option. Even so, when a vehicle’s odometer is found to be inaccurate, it is extremely difficult to establish when, and where, the manipulation happened - particularly if that vehicle has been imported. Since used cars often go through multiple owners, finding the person responsible for tampering with the odometer, and then accumulating the necessary evidence to take them to court, is often unrealistic.
As a first step towards solving the problem, Belgium has tested a system of prevention which removes the incentive for “clocking” and the possibility to do so undetected. This can be achieved through a central database into which mileage readings are fed regularly, when a car goes in for repairs, maintenance or checks. The room for manoeuvre in terms of odometer manipulation is drastically reduced, as suspicious readings show up quite blatantly in the car’s mileage history. In short, a central database gives certainty to buyers and adds transparency to the market.
Belgium has been one of the first in Europe to test such a system with impressive results. The number of fraud cases has fallen from 60,000 in 2005 to a mere 1,400 in 2010, with incidents amounting to just 0.2% of the total of mileage certificates in 2010.
An EU approach
A similar effort, with comparable impact, is underway in the Netherlands. However, where both these systems come unstuck is in cross-border trade. Mileage fraud in neighbouring countries still leaks into the Belgian car market with clocked imports, while fraudulent sellers in Belgium take their clocked vehicles abroad. Fraud, just like the trade in second-hand cars itself, is a cross-border phenomenon: when the German police uncovered a gang of fraudsters last spring, it involved accomplices and cars from Italy, Austria and other European countries.
The issue has already found traction in the European Parliament, with MEPs pushing the European Commission for action at the EU-level. Frank Engel, a conservative MEP from Luxembourg who spearheaded the push for action in Brussels, stresses that it should be possible to track a car’s mileage history throughout the internal market. “Manipulations such as odometer tampering harm consumers as much as they damage the reputation and credibility of the motor sector as a whole. National approaches alone will not solve the problem,” he told a meeting of MEPs, commission officials and stakeholders in November 2011.
However, there has been little action from the European Commission so far, and the Directorate-General that deals with consumer affairs is yet to pick up the issue. Gesine Meissner, a German Liberal politician, has called for decisiveness from the top: “It is time for European policy makers to realise that this is a very real and serious consumer issue that requires a clear-cut response. The current pass-the-parcel attitude among Commission departments should not be allowed to continue.”
At the European level, Jacob Bangsgaard, Director General of the FIA Region I office, says that while the Belgian model does not necessarily have to be copied everywhere (and cannot be due to different member state data protections laws which in some case block the exchange of VIN numbers, e.g. Germany), other countries may be able to learn from Belgium’s experience. “It shows that there are economical, straightforward and effective ways of shoring up motorists’ rights to fairness and safety when they purchase a vehicle. We will be monitoring closely the development of the EU Periodical Technical Inspection directive this year with the aim to have regular recordings of mileage for European vehicles”, he said.
Belgium and the Netherlands have pioneered a new approach to combating mileage fraud. If other country were to follow suit, it could help other European motorists to avoid the nasty shock, and accompanying bill, that Mr Van Aerschot experienced.
 ADAC Motorwelt 4/2011
 CRM Used Car Management - Impact study of mileage fraud with used cars (October 2010)