Fraud is a serious issue across the automotive sector. How widespread and what actions dealers can consider are questions answered by a new report from Experian. Digital Journal took the opportunity to speak with subject matter expert, John DeMarco, Senior Vice President of Experian Automotive.
Digital Journal: Experian Automotive’s new Dealer Fraud Threat Report reveals several compelling insights. What stood out and why does it matter right now?
John DeMarco: First, and foremost, fraud is not just a financial strain on dealerships but it is increasingly an operational and reputational threat to the automotive ecosystem.
Our report showed nearly nine-in-10 dealers are concerned about fraud, and 70% believe it’s only getting worse. Despite the concern, just under 50% of dealers verify a shopper’s income or employment only when there’s a reason to suspect potential risk or inaccuracy. That’s a troubling statistic when dealers reported that, on average, four fraudulent deals were completed in the past 12 months before being detected. When 45% say a single fraudulent deal typically costs between $10,000 and $20,000, that translates into meaningful annual exposure — often $60,000 or more per store.
That’s not a rounding error. That’s margin compression.
Fraud is no longer just a risk issue. It’s a profitability issue, a workflow issue, and increasingly, a reputational issue. When fraudsters identify operational gaps, they return. If a dealership becomes perceived as vulnerable, it can attract repeat attempts or organized activity.
The shift required now is from reactive cleanup to proactive prevention at the point of sale.
DJ: As fraud becomes increasingly prevalent in the automotive industry, what’s holding dealers back from taking a more effective and proactive approach to prevention?
DeMarco: Three barriers come to mind.
First, fraud is oftentimes viewed as a lender problem, leading some dealers to be inconsistent with their fraud detection processes and tools. In reality, fraud impacts every chain in the car buying journey.
Second, we’ve heard from several dealers that fraud is simply a cost of doing business. Yes, some dealers factor in potential fraud losses into their budgets; however, as fraudsters become more sophisticated, dealers should expect more advanced fraud schemes to surface. At some point, the losses can’t be absorbed into the margins. Not to mention, the impact of fraud extends far beyond finances, potentially deteriorating dealers’ relationships with manufacturers and lenders.
Third, speed pressure. Dealers operate in a high-velocity retail environment. Anything perceived to slow the deal can create hesitation around adding additional controls.
The reality is that the cost of missed fraud now outweighs the cost of proactive validation. Strong identity verification, consistent income validation, and real-time cross-checking early in the deal reduce downstream friction, lender chargebacks, and surprise losses.
DJ: What does the survey reveal about dealers’ confidence in today’s fraud prevention tools and their ability to address evolving risks?
DeMarco: Majority of dealers (69%) say they are confident in their organization’s fraud detection and prevention methods and 25% feel very confident. However, that confidence is strongest in traditional, in-person workflows.
As more transactions move through digital and remote channels, the effectiveness of legacy verification processes weakens. Fraud today increasingly involves synthetic identities, fabricated income documentation, and manipulated borrower data that can appear legitimate at the time of sale.
Synthetic identity fraud, in particular, is difficult because it often performs normally at funding and only reveals itself months later through delinquency patterns such as early payment default or 90–120 days past due.
That means confidence in current tools does not necessarily equate to preparedness for emerging tactics. Fraud prevention must evolve beyond manual document review and intuition-based escalation.
DJ: What is the most effective step dealers can take today to reduce fraud risk without hurting the customer experience?
DeMarco: The challenge is to balance a smooth customer buying process while detecting and blocking bad actors before it’s too late. Achieving that goal requires dealers to design a process that shifts from selective verification to consistent, risk-based validation at the start of the deal.
Today, many dealers validate income only when something appears suspicious. That reactive posture increases exposure. Instead, confirming identity across multiple trusted data sources and verifying income and employment early creates a cleaner pipeline.
When fraud screening happens upfront and automatically, legitimate customers experience little to no added friction. Clean deals move faster. Suspicious transactions are flagged before funding. And lenders gain greater confidence in the structure of submitted deals.
The goal is not adding friction. It’s removing uncertainty.
Fraud prevention and customer experience are not opposing forces. When implemented intelligently, proactive validation reduces rework, minimizes lender pushback, and protects both the dealership’s margin and the customer’s experience.
Fraud risk may be rising — but with earlier verification and better data, it doesn’t have to disrupt the deal.
