Police are on the verge of cracking an ingenious motor scam that has cost insurers hundreds of thousands of pounds and been described as a “nightmare” by drivers involved.

A police source at the Organised Crime Group's Stolen Vehicle Unit said the scam had been run by the same gang for about three years.

It involves stealing a car, then finding a car of the same make and model in a car-trading magazine.

A gang member views the car on sale and takes down the chassis number. The criminals then use the number and the name of the legitimate owner of the sale car to obtain a DVLA logbook for their stolen car.

They ring the stolen car to match the log book, sell it or part-exchange it, then, having kept a spare set of keys, steal it back and start again.

The police source said some cars had been sold up to four times. The estimated 300 cars involved range from Ford Fiestas to Porsches and have an average sale price of £10,000 to £20,000, although some have been as high as £60,000.

He said most insurance companies paid out to customers who had their “new” car stolen. “Some of the people we talk to are devastated,” the officer said.

“Generally the big insurers have been pretty good once the client is found to be genuine.”

Claims Management & Adjusting (CMA) boss Philip Swift discovered several cases he had been referred by insurers were part of the scam.

Swift said insurers were the biggest victims because there was no chance of them recovering the car on which they had paid out.

He said CMA was now seeking the cars handed over as part-exchanges to the scammers, who sold them back into the used car market, with the hope of recovering them.

“We're making enquiries and trying to prevent the person in possession of the vehicle disposing of it and causing someone else a headache,” Swift said.

“We're working to bring insurers together and liaise with police

to create a uniform approach.”

Jason Wells is one of the few drivers who, despite being an innocent dupe, will not be paid out by his insurer Privilege Insurance.

Wells had advertised his Mitsubishi Shogun for £10,000. He was contacted by a man who offered him a Vauxhall Calibra in exchange, which Wells accepted. Three days later, the Vauxhall was stolen from outside his house.

Wells said his experience had been a nightmare, particularly as Privilege demanded his entire £750 premium before it would consider the claim then took six months to tell him he would not be paid.

“I did an HPI check, I did everything I could,” he said. “There was nothing, absolutely nothing, about the guy with the Vauxhall, he was just an average person.”

A Privilege spokeswoman said Wells' policy did not cover loss by deception or fraud, but admitted that there had been significant delays in handling his case.

HPI spokesman Martin Brassell said the nature of the scam meant it had not been picked up by Wells' check, but said Wells may find some comfort in HPI's guarantee.

“The information we provided was correct, but the vehicle was bent,” Brassell said.

“We may well be able to do something to help Mr Wells.”