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Mileage fraud : a huge problem in Europe. Time do deal with it !

Mileage fraud : a huge problem in Europe. Time do deal with it !. EReg Annual Conference Warsaw 12-13 May 2011. Content. A few statements about mileage fraud Consequences of mileage fraud How big is the problem? What is the cost of mileage fraud? Possible solutions

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Mileage fraud : a huge problem in Europe. Time do deal with it !

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  1. Mileage fraud : a huge problem in Europe.Time do deal with it ! EReg Annual Conference Warsaw 12-13 May 2011

  2. Content • A few statements about mileage fraud • Consequences of mileage fraud • How big is the problem? • What is the cost of mileage fraud? • Possible solutions • The Belgian CAR-PASS system • An EU wide approach is urgently needed • Conclusions

  3. A few statements about mileage fraud • It is technically very easy to roll back an odometer • Devices are freely sold on the internet (200 – 400 €) • Applicable to almost all models • Access via OBD interface • Done in a few minutes

  4. A few statements about mileage fraud • If you don’t want to do it yourself, you’ll find plenty of people to “help” you at a very moderate cost ( a few 100 euro’s) • “mileage correction services” : 348.000 hits on Google

  5. A few statements about mileage fraud • Mileage fraud is very difficult to recognize for consumers as there is no obvious manifestation of a 'clocked' odometer for the untrained eye. For cross border trade the situation is even worse J. Grill - Director Consumer Protection & Public Policy ADAC (D) “Today, there is no reliable method for discovering odometer tampering.” (Brussels, Conference CARS2010 – 18.11.2010) • The probability of being caught is therefore very low. • The profits of mileage fraud are huge. Residual value of a Mercedes E220 CDI (2008) - source: Federauto (B) 75.000 km : 17.338,80€ 150.000 km : 12.838,80€ -> Profit : 4.500 €

  6. Consequences of mileage fraud • Negative impact on road safety • Creates unfair competition and distorts the used car business • But most of all: it costs a lot of money to the consumers • Pays too much when purchasing the car • Faced with higher maintenance & repair costs (costs of ownership) • Also important costs for other stakeholders • Honest car dealers • Insurance companies • Leasing companies • Public finances

  7. How big is the problem? Average number of manipulated used cars per year • Belgium (source: CAR-PASS) • Before introduction of CAR-PASS: at least 60.000 cases a year (8.6%) • Exported cars to France: 43,3% were manipulated (2008) • Netherlands (source: Nationale Autopas ) • 5% of national car park might be manipulated (down from 20% in 1991) • 12% of all odometers are suspected • Germany (source : Munich police) • At least 30% of all second-hand cars sold in Germany have a manipulated mileage reading (2011) • United Kingdom (source: Office of Fair Trading) • 5-12.5% have a mileage discrepancy (2010) • Interview of 69 stakeholders (source: CAR-PASS study) • 30-40% of all imported used cars are manipulated

  8. What is the cost of mileage fraud? • Germany (source : Munich police) • The total damage amounts up to € 5,4 billion a year (2011) • United Kingdom (source: Office of Fair Trading) • € 750 million a year (2010) • According to the study “The economical impact of mileage fraud and the cost benefit analysis of the Car-Pass system” performed by CRM used car management (2010): • Total cost of mileage fraud in Benelux, F and D: €1,4 - €2,8 billion/ year • Extrapolation to the entire EU : €5,6 – €9,6 billion/year

  9. Assumptions CAR-PASS study • Average number of manipulated used cars per year • Low mileage fraud scenario: 5% of all yearly used car domestic transactions • High mileage fraud scenario: 12% of all yearly used car domestic transactions • 30% of all imported used cars have been manipulated • Domestic vs. imported used cars: the amount of the fraud • Domestic odometer tampering: 30.000 km • Cross border odometer tampering: 60.000 km • The calculated costs of mileage fraud : • Accelerated depreciation in € per car Domestic Imported • Small (€ 15.000) € 800 € 1.220 • Medium (€ 30.000) €1.233 € 2.500 • Executive (€ 60.000) €1.800 € 4.800 • Additional maintenance & repair costs in € per car Domestic Imported • Small € 300 € 375 • Medium € 750 € 1.050 • Executive € 900 € 1.350

  10. Possible solutions • Technical solutions • Non existent today • Wide access to technical information (wanted by EU legislator) • Odometer fraud = hacking software • Very doubtful if technical solutions will ever be conclusive • Law & order approach • Mileage fraud is not considered as a crime in every member state of the EU • Mileage fraud is difficult to prove, especially when the car has been imported • Mileage fraud is difficult to trace -> car has often been sold several times -> who did it? • Central registration of mileages accessible to consumers • Adding transparency to the market • Dissuasive for fraud

  11. The Belgian CAR-PASS system • Legal framework (federal law of 11.6.2004) • Mileage fraud is considered as a serious crime sanctioned with severe penalties (up to 1y imprisonment) • Creation of a central database containing the odometer readings of all vehicles registered in Belgium • All professional car dealers and repair shops are mandated to transfer VIN number, mileage and date when repairing or maintaining a vehicle or replacing parts (ex. tyres, wind shields,…) • The seller of a second hand vehicle is obliged by law to deliver a certificate showing the mileage history of the vehicle to the buyer. If he fails to do so the transaction is void. • Building on the existing practice of recording mileages in the automotive sector • Supported by all stakeholders: consumers, automotive sector and government

  12. The Belgian CAR-PASS system: in practice • CAR-PASS is a non-profit organisation authorized by Royal Decree, to manage the central database with the mileage recordings • All stakeholders are represented in the CAR-PASS board: • Association of the car importers (FEBIAC) • Association of the dealers, repair shops, … (FEDERAUTO) • Association of the companies performing the technical inspection (GOCA) • Associations of motor car users (Touring, VAB) • Ministry of Economic Affairs • Ministry of Transport • Cars and LCV’s fall under the legislation (code: M1, N1) • Mileage certificates are issued by the Periodical Technical Inspection (from 77 locations in Belgium) • Cost efficient and self supporting . Sale of this mileage certificate is the only revenue for CAR-PASS. No public funding.

  13. MoT : Ministry of Transport PTI : Periodical Technical Inspection MoT First registrations Professionals 77 stations PTI VIN + km + date ftp CAR-PASS certificates web CAR-PASS requests fax/mail New companies Min.Economy

  14. Unique ID General data about the vehicle Mileage history In bold: date of issue and actual mileage

  15. The Belgian CAR-PASS system: results • The system has proven to be very effective. In 2010 only 1393 new cases of mileage fraud took place (< 0,20% of used cars registered in B). Before the introduction of the CAR-PASS system, 60.000 cases were observed (conservative estimation) • Low operating costs: € 3 million a year. Indirect costs of the automotive sector: € 2.845.500 a year • Cost benefit ratio: 0,028 • But the system cannot deal with imported cars

  16. An EU wide approach is urgently needed • Final declaration of the conference CARS 2010 (18.11.2010): • “The participants of the international conference CARS2010 reaffirm that mileage fraud must be tackled and appeal to the European Commission and European Parliament to take appropriate action to stamp out this criminal practice, strengthen consumer trust in used car sales, guarantee the proper functioning of the EU's internal market in this area and protect the safety as well as the economic interests of Europe's citizens.”

  17. An EU wide approach is urgently needed • Minimum requirements for an efficient system • Mileage fraud should be considered as a crime in every EU member state • Creation of a central database with mileage recordings in all EU member states • Comprehensive i.e. the entire car park has to be included • Fed by a maximum of independent sources (reduces the risks of corruption) • Fed with a high frequency in time (keeps time gaps low) • Accessible to the consumer when intending to buy a used car • Exchange of mileage history between member states when a vehicle is exported

  18. Conclusions • Mileage fraud is a common fact in the national & international car trade, but not much talked about • The costs of mileage fraud costs for the consumers in the EU are huge : billions of euros a year • The Belgian CAR-PASS system has proven it’s efficiency based on • A legal framework • Consensus between all stakeholders • Central database making mileage history transparent for consumers • To solve the problem of international trade an European approach and cross border exchange of mileage information is needed so that every consumer in Europe can trust the used car he or she is buying • Therefore we need to raise awareness in the member states and within the European Commission • EReg and it’s members should seriously consider to include this topic on the list of working topics

  19. More info: Michel Peelman CEO CAR-PASS asbl +32 27 73 50 59 mp@car-pass.be www.car-pass.be Boulevard de la Woluwe 46/2 BE- 1200 Brussels BELGIUM

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