Online dealer Webuyanycar.com has been rapped by the consumer watchdog over concerns that it misled customers by valuing their vehicles at a higher price than it eventually paid.
The Office of Fair Trading (OFT) has taken enforcement action against the group after finding nearly 96% of people who sold their car through the website received less for their vehicle than the initial valuation suggested, with some prices being knocked down by hundreds of pounds.
Customers were given the impression that they would be paid the online valuation price as long as their car matched the condition they had claimed, but other factors - including market conditions - were found to lead to a reduction in the money they received.
The OFT also found that the Rochdale-based firm's vehicle inspectors were sometimes given targets to reduce the valuation by as much as 25%.
The OFT was concerned that once customers had driven their car to the company's premises, they might accept a reduced valuation even if they were unhappy with it because of the time and expense they had already incurred or because they needed a quick sale due to personal circumstances.
The car dealer gave sellers the impression that the online valuation they received was only valid for seven days, which encouraged people to make an appointment quickly, it added.
The OFT findings come after it analysed data provided by the company for the year to June 30 2010.
Webuyanycar.com, which claims to be the UK's largest buyer of second-hand cars and is known for its TV adverts, said it had made changes over the past year to improve its customer service.
It has signed a series of undertakings with the OFT to improve the way it treats customers.
The group has changed its website to make it more clear to consumers that they might not receive the initial valuation price.
It has also agreed it will not set targets for vehicle inspectors which could encourage them to reduce the valuation and agreed not to deduct any road tax refund due on the car from the final price.
And it told the OFT it would also make it clear to customers that its next working day payment service, which includes a charge of £24.75, is optional.
Cavendish Elithorn, senior director of the OFT's consumer group, said: "Selling personal possessions through the internet is increasingly popular, especially in these tough economic times.
"But it's important that the headline figure isn't chipped away at by the buyer, because it makes it very difficult for consumers to shop around and find the best deal."
Richard Harrison, chief operating officer of Webuyanycar.com, said the the OFT findings did not reflect current practice.
He added: "In the early days, we were operating a new business and defining a new market sector and we didn't get it right for every single customer. This was a long time ago and isn't reflective of the business we are today."
The company has launched a new website with clearer explanations about its service and the choice of a more in-depth and accurate valuation, he said.
It is also investing £300,000 in a new Buyer Training Academy to make sure its staff can accurately assess the valuation of a vehicle and its customers experience consistent service at every branch.
Webuyanycar.com purchases thousands of cars every month and receives complaints from an average of just 0.2% of customers, Mr Harrison said.