In the fast-paced industry of car sales, fraud has emerged as a pressing issue for the majority of dealers, according to a recent study by Experian Automotive. Released during the National Automobile Dealers Association Show in Las Vegas, the research report highlights how deceptive practices are not only eroding profits but also complicating day-to-day operations and customer interactions.
The survey, which polled dealers across the industry, reveals that almost 90% view fraud as a significant worry.
A striking 70% of respondents believe that attempts at fraudulent deals are increasing, painting a picture of an escalating threat landscape.
Over the past year, dealerships have, on average, seen about four such schemes slip through undetected before being caught, underscoring the stealthy nature of these crimes.
Financial repercussions are severe. Nearly half of the dealers estimate that a single fraudulent transaction leads to losses between $10,000 and $20,000, while about a third report even higher damages.
Recovery is often limited: For 64% of those surveyed, insurance reimburses less than half of the costs, and two-thirds indicate that lenders cover under 50% of the fallout.
Alarmingly, one in ten dealers receives no support from lenders at all, leaving them to shoulder the full burden.
Beyond the bottom line, fraud is reshaping how dealerships function.
Three-quarters of participants say it disrupts their business routines, from heightened scrutiny in transactions to strained relationships with buyers.
The primary hurdle, cited by 53%, is striking a balance between anti-fraud measures and delivering a seamless, speedy purchasing process.
Close behind, at 46%, is the complaint that identity and income checks prolong deals, leading to customer dissatisfaction and potential lost sales.
The report categorizes common fraud tactics into three main areas: manipulations involving income, vehicles, and personal identities.
Income-related scams are rampant, with 62% of dealers encountering falsified pay stubs or documents, and half dealing with entirely invented earnings claims.
Identity fraud is also prevalent; 44% have faced synthetic identities—fake personas built over time to appear legitimate—and 43% have spotted cases involving unauthorized third parties or proxy buyers.
Verification practices remain inconsistent and often reactive.
Nearly half of dealerships only double-check income details when red flags appear, rather than as a standard procedure.
For identity confirmation, most rely on traditional methods: 67% use driver’s license scanners, and 63% opt for simple photocopying, which can introduce vulnerabilities and add unnecessary steps to the buying journey.
Jim Maguire, Experian‘s senior director for automotive, emphasized the urgency:
“A single bad deal can erase substantial earnings, putting immense pressure on profitability and efficiency.”
He added that fraud isn’t just a security issue but a drag on customer satisfaction, urging dealers to adopt sophisticated tools for early detection of inconsistencies in buyer profiles, earnings, and vehicle histories.
“Proactive verification with diverse data sources can safeguard against big hits while keeping the process efficient,” Maguire noted.
The research findings stem from direct input from industry professionals and aim to guide better defenses.