Car owners who have had their vehicles stolen are paying up to $50,000 to the thieves who phone up and offer to return them.
A police source said a number of car thefts now go unreported because owners agree to the deals to avoid the hassle of reporting their vehicles stolen.
The number of vehicles reported stolen in Hong Kong has dropped from 2,804 in 2000 to 2,412 last year.
The thieves usually target cars worth at least $200,000.
'The crooks will try their luck and contact the car owner once they are able to find the owner's contact number,' the source said.
'They demand between $30,000 and $50,000 to sell a car back to the owner. Once they receive the money, they abandon the car in the street. Its owner would never reveal to police that he has paid the money because he could face criminal liability for assisting offenders to commit a crime.'
The source said some owners chose to pay because they knew their insurance would not cover the full cost of their cars.
'Through such illegal channels, car owners lose less money and it is a quicker way to get back their vehicles. In addition, they do not have to face hefty car insurance charges the next year,' the source said.
Car thieves usually smuggle vehicles abroad or dismantle them to sell for parts in underground markets in Hong Kong.
Police figures show that about 90 per cent of vehicles are stolen between 7pm and 7am, with more than 70 per cent of the thefts occurring on the streets, open areas and car parks that have not installed security devices.
In a written reply from the Secretary for Security, Regina Ip Lau Suk-yee, to legislator Lau Kong-wah in the Legislative Council on Wednesday, she said police would step up patrols at black spots for vehicle thefts and intercept suspicious vehicles at boundary control points.