Fraudsters have already stolen 80,000 cars this year, according to the Federal Trade Commission. Auto lenders estimate that the financial aftermath of a single fraud incident is around $100,000 — and anecdotal evidence backs that up. While this data relates to fraud specifically, it underscores how all types of theft affect dealerships. Let’s examine three incidents that have cost dealers upwards of $100,000 for insight into how you can prevent financial setbacks in your own dealership.
Police in a D.C. suburb have warned that financial crimes are on the rise, and thieves are increasingly targeting dealerships. At one dealership, criminals broke in and made off with all the vehicle keys. Remarkably, the business was able to replace the keys and continue selling vehicles within 24 hours — but at a hefty price tag of $100,000.
The dealership’s ability to recover and continue selling vehicles within 24 hours highlights the importance of being prepared for theft. Acting quickly can minimize disruptions and financial losses.
However, keys can’t always be replaced with such a quick turnaround time, so it’s important for your dealership to invest in secure electronic key control systems to prevent unauthorized access. Maintain an accurate and up-to-date inventory of vehicle keys so you can quickly identify and replace any missing ones.
A 19-year-old man was arrested for allegedly impersonating a physician and illegally acquiring expensive housing, vehicles, jewelry, and electronics — a string of crimes reminiscent of Frank Abagnale Jr., the infamous con artist whose life inspired the movie “Catch Me If You Can.”
The scheme that ultimately led to the teen’s arrest involved fraudulently selling two vehicles to a dealership on two separate occasions. The day before selling each vehicle, he manipulated the loan payoff amounts by initiating fraudulent ACH transfers to pay down the loans. Although dealership employees were suspicious of the criminal because of how young he was, the business issued him two checks totaling over $110,500. The teen then reversed the ACH payments, causing the loan balances to appear as unpaid and resulting in complications for the dealership.
As it turns out, the dealership employees’ suspicions about the teen were spot on. They recognized something wasn’t right about the fraudulent transactions, but unfortunately still fell victim to the scam.
To protect your business against financial crimes, focus on building a strong security culture by educating dealership employees about common fraud schemes and warning signs. Train them to heed red flags, trust their instincts, and contact the authorities when necessary.
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Joined by a male companion, a woman appeared at an upscale dealership and purchased a $100,000 luxury vehicle. The problem? She used a stolen ID. The dealership has been scammed — for the sixth time in three weeks. Dealership employees told authorities that the woman’s companion had previously visited the dealership with five different people, who were all part of the same identity theft ring. They purchased six vehicles under fake identities, costing the business over $569,000.
The dealership deserves credit for reporting the suspected financial crimes to the authorities, which played a crucial role in apprehending the individuals involved. However, it’s unclear what additional identity checks, if any, the dealership performed before completing the transactions.
To enhance your dealership’s fraud prevention measures, it’s important to have a reliable way to verify that someone is who they claim to be. One practical step is to add a license scanner to your key control system so sales reps can scan a buyer’s driver’s license when retrieving the keys for a test drive. This step is a starting point in validating someone’s identity and starting a documentation trail. When combined with other identity verification tools built into the sales and F&I process, you’ll reduce the risk of fraudulent transactions.
These stories illustrate the significant financial toll theft and fraud can take on dealerships. To protect your business and its assets, consider a well-rounded approach consisting of physical security measures (including key control systems), fraud prevention technology, and employee training.
With these measures in place, you can defend your business against financial crimes. For example, at one dealership, employees’ vigilance paid off when they notified police during a suspicious transaction, stopping an identity theft ring from completing a fraudulent $100,000 purchase. Avoid a six-figure setback in your own business by proactively fighting theft and fraud.