Wisconsin state transportation officials announced a large uptick in unlawful activities by out-of-state used-car wholesalers, ranging from falsifying vehicle title information to rolling back odometers, according to a report by the Wisconsin State Journal.
Wisconsin, unique in its licensing of vehicle wholesale companies, has recently seen these entities exploit their positions. These wholesalers, which supply vehicles to various sectors of the automotive industry, are barred from direct sales to consumers and are mandated to maintain a physical presence within the state. However, the Department of Transportation (DOT) has observed a worrying trend where these regulations are flouted.
According to a DOT statement, there has been "a dramatic increase in the number of wholesale dealer licenses and consumer complaints." This surge in malpractice has led to the revocation of 32 wholesale dealer licenses in just the past two months due to the absence of state business facilities.
Some wholesalers have been discovered selling vehicles directly to the public and manipulating odometer readings to deceive buyers. In two cases, wholesalers collectively dialed back more than 6 million miles on 64 vehicles, averaging a rollback of more than 93,000 miles per vehicle. Techniques for such fraud include replacing the odometer's instrument cluster with one displaying lower mileage and tampering with the vehicle's computer systems.
From July 2019 to January 2024, investigations unveiled wholesalers had reduced odometer readings by more than 161 million miles across various vehicles, resulting in an estimated consumer loss of around $9.7 million. More than 1,873 vehicles were identified with altered odometers, with these malpractices stretching across at least 15 states.
"Wisconsin DMV's Dealer and Agent Section is committed to protecting consumers by investigating complaints, verifying business practices and taking corrective action," Tommy Winkler, administrator of the Wisconsin DMV, said in a statement. “However, the tremendous growth in the number wholesale dealers, many of whom are out-of-state dealer owners, puts consumers at risk from unscrupulous businesses who abuse their wholesale license. Not only are consumers hurt, Wisconsin dealers who do business the right way are getting a bad name from those who abuse their wholesale license.”
Central to this fraudulent scheme are centralized dealer operations (CDOs), large warehouse spaces that serve as nominal business fronts for numerous wholesale dealers. These facilities, often devoid of actual business operations, have been instrumental in the proliferation of fraudulent activities. Since their emergence in 2018, the number of wholesale licenses in Wisconsin has skyrocketed by 1,194%, with more than 90% of these dealers operating from outside the state.
The Wisconsin DMV encourages individuals to report any suspicious activities or complaints through their online portal.
