Fraud has been a hot topic in the auto industry in 2024– and for good reason. As the result of advancements in fraud technology and increasing affordability risk, fraudsters have posed a growing threat to dealers and lenders in recent years.
Point Predictive’s 2024 Auto Lending Fraud Trends Report estimates fraud loss exposure of $7.9 billion within the auto lending industry. But if you’re lucky enough to not be part of the 79% of dealers who lost a vehicle to fraud, you might wonder where these losses come from.
Let’s get into the top auto fraud stories from the past year, and how you can avoid making the list in 2025.
1. 19-Year-Old Charged in Artificial Paydown Scheme
January 10, 2024
Payment fraud is a major concern for businesses in recent years, and this first story demonstrates why. In January of 2024, a 19-year-old pled guilty to multiple artificial paydown schemes against Oklahoma car dealerships.
In this series of crimes, the teenager got the dealerships to cut him multiple checks at vehicle trade-ins on the basis that the loans were mostly paid down. In one case, Bailey convinced an auto group he had paid off most of a $48,000 Acura MDX, leading them to pay him $46,272.97 for the vehicle.
When the dealership later tried to sell the car, they discovered the loan was never actually paid down. Rather, Bailey had made a phony electronic funds transfer to the finance company– which they didn’t discover until he’d made off with the check.
Houston Police warned that this scam is becoming more common, affecting both dealers and lenders. To avoid being caught in the crosshairs, authorities recommend that dealerships wait until the lender has transferred the title before issuing a check to the customer selling the vehicle.
2. Texas Dealership Loses Customer’s $90K Mustang in a Fraudulent Consignment Deal
July 5, 2024
In some cases, security vulnerabilities don’t just hurt the business– they can also impact consumers. This is what happened in a news story from Boerne, Texas in which a car dealership lost a customer’s Mustang in a fraudulent sale.
The customer had found themselves in a tough financial spot in late 2023, leading them to sign an agreement with the dealership to sell their dream car, which they’d bought from a Las Vegas dealership in 2022 for $90,000.
The dealership then sold the car to a buyer who made a $10,000 down payment, purchased auto insurance, and was approved for a loan. However, just days after, they found out that the payment was made with a stolen credit card, alerting them that they’d be scammed.
To make matters worse, the dealership’s insurance didn’t cover the incident since the vehicle didn’t belong to the business. Instead, they advised the customer to make a claim with their own insurance. Although the customer had signed a contract confirming that they had “full coverage” insurance, this type of policy typically doesn’t cover consignment and therefore would not cover the loss.
As a result, some legal experts speculate that the customer could sue the dealership to recoup their losses. If negligence is found on the part of the dealer, they may face legal trouble.
3. Tennessee Man Arrested for Using Dead Person’s ID to Buy Two Cars
August 10, 2024
Many consumers find it hard enough to protect their data as it is. Now imagine fighting identity theft from beyond the grave. In a recent case in Memphis, TN, a 63-year-old man attempted to purchase two Kia Tellurides using a deceased person’s identity– a scheme known as “ghosting.”
If the attempt had been successful, the dealership would have been set to lose $158,885, the combined value of the vehicles. Luckily, Memphis Police showed up to arrest the suspect right after he completed the paperwork for the sale.
This story falls under the $1 billion in risk exposure from true name identity fraud each year. Fortunately, experts say that as long as there’s documentation of the victim’s death, ghosting is relatively simple for authorities to catch.
4. Crime Ring Busted in $850K Auto Fraud Scheme Using Fake Bank Drafts
October 23, 2024
US dealerships aren’t the only targets of fraud. In October, three suspects in British Columbia’s Lower Mainland face 30 criminal charges for allegedly using forged bank drafts and fake IDs to purchase luxury vehicles from private sellers. They targeted multiple high-end vehicles including BMW, Porsche, Mercedes, and Lexus models worth up to $103,000 each– resulting in losses exceeding $850,000.
After searching the suspects’ properties with a warrant, police seized counterfeit identity documents and electronic devices used to manufacture forgeries. This evidence suggests the work of an organized crime group. Without a quick detection and response from authorities, these sophisticated syndicates could wreak havoc on many businesses in a short period of time.
5. St. Louis Trio Pleads Guilty in $350K Auto Loan Fraud
November 14, 2024
If you think it’s hard getting a customer to pay off one auto loan, try chasing payments for nine. In St. Louis, three people pleaded guilty to fraudulently obtaining nine auto loans totaling nearly $350,000.
The main offender, aided by a married couple, applied for auto loans within a one-week stint between July and August 2018 using fraudulent purchase and loan documents. He didn’t own or plan to buy the vehicles as represented in the loan applications but claimed they were being sold by City Limits Auto Sales, a business name registered to one of his accomplices. Upon receiving loan checks, he passed them onto the couple to deposit.
To top it all off, the accomplices purchased and mailed money orders from Florida to the lenders in Missouri to convince the financial institutions that the automobile purchases were legitimate and delay the fraud report.
Bonus: Modives Launches CheckMy ID
July 26, 2024
With fraud risk mounting in the auto industry, experts recommend adopting safeguards to protect your business from modern threats. That’s why Modives released CheckMy ID, an add-on to the CheckMy Driver insurance verification solution that enables dealers and lenders to quickly perform secure ID checks.
By simply scanning the customer’s ID card, they can perform more than 100 algorithmic checks on the ID’s barcode. Combined with a thorough insurance verification process, this flags most would-be fraudsters before the deal is signed.
Want to learn more about how CheckMy ID can help you eliminate fraud within your business? Schedule a demo with our team to see it in action.
