Mexico's Used Car Market Hit by Fraud and Weak Regulations

The sale of used cars in Mexico faces mounting risks due to fraud and regulatory gaps that have allowed irregular practices to infiltrate even formal dealerships. Independent intermediaries, known as “coyotes,” contribute to the sale of vehicles with legal issues, outstanding debts, or theft reports, creating significant uncertainty for buyers.

One notable case involved Arquitectonic, a company that purchased a Nissan Urvan 15 from a dealership in Cuautitlan, State of Mexico. During the registration process, the vehicle was found to have been reported stolen.

“We have noticed that dealerships work with coyotes who are not official employees but operate within their premises as if they were part of the business. This is not the only case we have encountered,” said Miguel Ángel Hernández, legal representative, Arquitectonic, in an interview with El Financiero.

Arquitectonic sought resolution directly with the dealership but faced resistance and evasive responses, ultimately filing a formal complaint with authorities. Despite an ongoing investigation, no penalties or suspensions have been imposed on those involved.

“This informality facilitates the sale of vehicles with legal problems, from unpaid taxes to criminal matters such as stolen cars with altered documentation. These individuals often offer lower prices than official dealership sales, which, beyond being disloyal competition, creates additional risks,” said Guillermo Rosales, President, Mexican Association of Automotive Distributors (AMDA).

Industry experts cite the lack of a reliable, publicly accessible vehicle registry and weak regulations as key factors fostering fraudulent practices in the used car market.

“The used car market has enormous potential, but the risks involved make it highly cautious. We should have at least ten times the size of the formal used car market we currently have,” said Eric Ramírez, regional director for Latin America, Urban Science, in an interview with El Financiero.

Ramírez highlighted that Mexico’s used car market lags behind more developed markets like the United States, where ten used cars are sold for every new car. In Mexico, the ratio is closer to one-to-one. Industry data estimates the used car market at roughly six million vehicles annually, with about half sold directly between private parties. Of the remaining vehicles, approximately 40% are managed by independent sellers, or “loteros,” while only 20% are sold through dealerships.