The owner of a Toyota Avensis met with a female buyer, travelling in a black Nissan Primera car,
at Hill Street in the city on Wednesday.
The Avensis was exchanged for a sum of cash, which was later discovered to be counterfeit.
Police recovered both vehicles on Thursday at locations in Newry and Loughgilly, Co Armagh.
A 42-year-old man was arrested on suspicion of fraud by false representation, possessing counterfeit currency, tendering counterfeit currency, theft of a vehicle and possession of drugs.
A 30-year-old man was arrested on suspicion of handling stolen goods.
Both men were released on bail pending further enquiries.
There are no further details.