According to the quango: "Complaints about used car sales are consistently high and the investigation will seek to identify the most harmful issues and propose recommendations to strengthen fairness, transparency and confidence in the sector.
The probe will investigate car sales across Scotland. (Image: Newsquest)
"The investigation will examine the full range of used car transactions affecting consumers in Scotland, including those made online or at a distance from sellers elsewhere in the UK."
There were 160,000 used car transactions in Scotland between April and June this year, speaking to the importance of second hand vehicles for families across the country.
However, used cars are one of the leading causes of consumer harm in the UK, with common issues including "faults, misleading information, poor after-sales support and difficulties resolving problems".
Sam Ghibaldan, chief executive of Consumer Scotland, said: "While most transactions go smoothly, thousands each year end in frustration with consumers reporting a range of issues that are hard to resolve.
"This investigation will help us build a clear, evidence-based picture of the issues facing used car buyers in Scotland.
"We want to ensure consumers are better protected, better informed and more confident when making such a significant purchase in future."
Research released last week found that as many as one in six second hand cars available for sale have 'potentially dangerous' tyres that may not last until the vehicle's next MOT.
The investigation, which was commissioned by Halfords and carried out in cooperation with Professor Peter Wells, Director of the Centre for Automotive Research at Cardiff University, looked into 481 cars being sold in 100 locations across the UK.
The report found that around one in six vehicles (16%) were being sold with 3.6mm of tyre tread or less.
The maximum legal limit is 1.6mm of tyre tread.
Professor Wells said: "Tyres are one of, if not the most safety-critical aspect of a vehicle. Once they approach 3mm, their braking and roadholding ability has already begun deteriorating noticeably and it only gets worse from there.
"The difference in stopping distance between new tyres and ones with 1.6mm of tread is 75 metres if travelling at 70mph in wet conditions.
Thousands of second hand car transactions take place every year. (Image: Submit)
Speaking about the investigation, Andrew Bartlett, Chief Executive Officer of Advice Direct Scotland, said: "Used cars remain one of the most common issues raised with Advice Direct Scotland, with thousands of consumers seeking help each year.
"We welcome the opportunity to work with Consumer Scotland on this investigation to improve outcomes, strengthen protections and build confidence in this important market."
Alan Gal, Chief Executive Officer of the Scottish Motor Trade Association, added:
"As the voice of the automotive industry the Scottish Motor Trade Association supports Consumer Scotland's investigation as an important step toward clearer expectations, better understanding of rights and stronger trust across the market.
"Consumer confidence drives our industry and our members continually aim for excellence in how they serve customers."
In 2022, an investigation by the BBC uncovered a scam website purporting to sell second hand cars.
The fake dealership, known as Auto Promotions, defrauded victims of thousands of pounds.
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And in the first several months of last year, 20,000 people called DVLA to report fraudulent activity relating to licenses or car sales.
Similarly, Lloyds Bank recorded a 74% rise in the number of reports of vehicle scams in the first half of 2023.
Consumer Scotland has issued a call for information to advice groups, advocacy and enforcement bodies, and other useful organisations.
The groups will be able to submit evidence until 12 December.