How To Protect Your Business Against Fraud

Tuesday, 4 March 2025, 8:45 am
Article: Hugh Grant

If you’ve bought a car from a dealership, you’re likely all too familiar with the experience of buying a car. However, in the internet age, buying a car has changed quite a bit. In fact, 2023 saw only half of all car sales purchasing a car solely from a dealership. In the other half, 43% of car buyers used both online and physical resources and 7% purchased a vehicle entirely online. But even purchasing cars alone has seen rapid changes in the past few years.

Certain lender types lead to longer standing finance agreements, with lower rates of fraud and delinquencies. As of November 2024, financing directly with the dealer grew by 19.2%. The second-best option, financing directly with the automotive maker, grew by only 6% year over year. Financing with a bank only grew a slight 1.6%. However, many traditional methods fell in the face of the new age of banking. Monoline, a financial institution that specializes in auto loans, fell by 1.2%. Credit unions, a popular alternative to bank loans, fell by a staggering 11.8%. All other financing methods fell by a significant 11.5%. So, what do these statistics say about potential customers looking to buy a car?

On average, debt for auto loans and leases has risen 15% since 2014. Consequently, auto delinquencies, meaning loans with payments 60 days past due or more, have risen alongside it. This can likely be attributed to the types of loans being offered in the current auto loaning client. Prime and near-prime auto loans and leases have fallen year-over-year by 2.4% and 0.6%, respectively. In a stark contrast, subprime and deep-subprime auto loans rose by 4.8% year-over-year.

Worst of all, the auto loaning delinquency rate has a bleak forecast. The older generations, such as the Silent Generation and Baby Boomers, account for the lowest percentage of auto loan delinquencies. On the other hand, the youngest generations, Millennials and Generation Z, account for the highest payment delinquencies at 1.7% and 2.3%. This means moving forward there’s going to be even less customers that qualify for, or can afford, an auto loan. This is already being seen as the creation of new auto loans and leases saw a 1.6% year-over-year decrease, or a loss of $9.2 billion.

Consumer demand aside, the underlying asset of auto loans, the cars being purchased, have seen a steady and sharp increase. From 2016 to 2024, vehicles have seen a whopping 34% increase in asset price. Similarly, the average vehicle interest rates for 60-month car loans increased from 4.26% to 7.57%, marking a 56% increase in overall interest rates. However, another threat looms over the car dealership industry as a whole.

New technology is not always used for good. Recently, synthetic identities (Syn ID’s) have grown in scale and popularity. Since 2020, these synthetic identities have seen a growth of 59%, used to defraud the car dealership. In 2023 alone, Syn ID fraud rose by 98%, meaning $7.9 billion in losses to the auto industry. The risk of an auto loan credit application grew by a staggering 60% in only 4 years. The syn ID delinquency rate is much higher, between a factor of 3 to 5 times.

Fortunately, Equifax can help you take a proactive approach to help prevent fraudulent losses. By using companies like Equifax, you can get insights about your customers at the point of sale. Not only that, but they offer know your customer (KYC) tools to verify your customer’s identity while writing their application. Ultimately, to make sure your car dealership is protected against fraud, tools like Equifax help to make sure you know exactly who you’re dealing with.

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