Experian Automotive: Fraud is Top-of-Mind for Nearly Nine-in-10 Automotive Dealers

New survey highlights the growing risks that fraudulent transactions can reap on dealerships, impacting profitability and the overall customer experience

LAS VEGAS–(BUSINESS WIRE)–With fraud continuing to emerge as a growing operational challenge for the automotive industry, new research from Experian, a global data and technology leader, reveals how significant fraud is becoming. Based on a survey of automotive dealers, nearly nine-in-10 are concerned about fraud. The findings also show 70% of dealers believe fraudulent transactions are on the rise, signaling upward momentum.

A closer look at the study highlights the financial influence fraudulent transactions can have on a dealership’s bottom line. On average, over the last 12 months, dealers reported approximately four fraudulent deals were completed prior to detection. Additionally, 45% report that a single fraudulent transaction typically results in an estimated financial loss of $10,000 to $20,000, while 31% indicate their losses exceed that range. Dealers are bearing a substantial share of fraud related losses, with 64% reporting that insurance covers less than half of these costs. While some receive partial relief from lenders, 67% estimate that lenders cover under 50% of the losses and 10% say lenders provide no coverage at all.

“When one fraudulent transaction can wipe out tens of thousands of dollars in profit, it’s simply too big to ignore,” said Jim Maguire, Experian’s senior director for automotive. “These losses will eventually cut directly into a dealer’s margin and put serious strain on their operations, making it harder to stay profitable.”

Beyond direct losses, fraud is reshaping daily dealership operations and influencing customer experience. In fact, three-in-four dealers say auto-finance fraud affects their business operations. Furthermore, 53% cite balancing fraud prevention with a smooth and fast customer experience as their biggest challenge, while 46% say verification steps slow down the deal and frustrate customers.

The emerging fraud schemes fueling today’s transactions

Dealers reported automotive fraud can be classified into three primary categories: income, vehicle, and identity. The most common fraud schemes fall in the income-related category. Sixty-two percent of dealers say they encounter forged income documents and 50% see fabricated income claims.

While income-related fraud schemes are the most common, identity-related fraud has become one of the fastest growing risks dealers are facing. In fact, 44% of dealers express having to navigate synthetic identity attempts and 43% have seen both third-party and straw borrower fraud in the last 12 months.

Despite the prevalence of identity- and income-related fraud, nearly half (46%) of dealers only validate income when something seems “off”. Manual verification remains common, with 67% of dealers capturing ID via driver’s license scanners and 63% via photocopying. These methods will likely increase friction and create more vulnerabilities to sophisticated document manipulation.

“Fraud is no longer just a risk problem for dealers, it’s a profit leak and a customer experience problem all at once,” Maguire continued. “The best defense is simple: confirm identities upfront using multiple data sources, verify income and employment early, validate trade-in vehicle details so clean deals move quickly, and flag anything that doesn’t add up. Dealers who take the time to leverage advanced fraud-detection tools to assess shoppers’ incomes and identities are best positioned to avoid major losses and reduce friction during the car buying process.”

For more information, visit the Experian booth (4613W) during the National Automobile Dealers Association Show in Las Vegas, Nev. from February 3-6. To view a copy of the report, visit www.experianauto.com/dealer-fraud-report.

About Experian

Experian is a global data and technology company, powering opportunities for people and businesses around the world. We help to redefine lending practices, uncover and prevent fraud, simplify healthcare, deliver digital marketing solutions, and gain deeper insights into the automotive market, all using our unique combination of data, analytics and software. We also assist millions of people to realize their financial goals and help them to save time and money.

We operate across a range of markets, from financial services to healthcare, automotive, agrifinance, insurance, and many more industry segments.

We invest in talented people and new advanced technologies to unlock the power of data and to innovate. A FTSE 100 Index company listed on the London Stock Exchange (EXPN), we have a team of 25,200 people across 33 countries. Our corporate headquarters are in Dublin, Ireland. Learn more at experianplc.com.

Contacts

Jordan Takeyama
Experian Public Relations
1 951 733 8768
[email protected]