Daibes bought it for around US$180,000 ($227,600) - but when he saw the unusual four-door convertible, he assumed it must be a fake.
But Mercedes-Benz confirmed that the bizarre car was genuine, and was one of eight made for Nazi officials.
The best-known of the modified Mercedes 320s was the one driven by Gestapo chief Reinhard Heydrich, which was written off after being struck by a bomb during a failed assassination attempt.
Heydrich was later killed by Czech patriots in Prague.
An expert from Mercedes-Benz headquarters in Germany said that the car would almost certainly not have been used by Hitler, who drove a "top of the line" model 770.
But Tuncer found signs of the vehicle's dark past - - a patch on the mudguard was apparently left when the aerial that flew the Nazi flag was removed from the car.
The Mercedes-Benz made its way to New Jersey via Chicago thanks to an enterprising American sailor, according to Daibes.
The Navy veteran apparently painted the car black to enable him to smuggle it across the Atlantic.
He then kept it in his basement for decades before his grandson sold it to Daibes.
The vehicle still runs well, though its engine generates only 60kW, giving it a top speed of 130km/h.
Its new owner has turned down an offer of US$1.5 million ($1.8m) for it - and says he plans to hang on to it.