Fraud and Repos Hit Dealers’ Bottom Lines Hard

Automotive dealers have struggled with fraud for years, but as technology has made our lives easier, the commonplace use of artificial intelligence has resulted in a surge in sophisticated schemes that put dealerships, finance companies, and their customers at risk. At the same time, repossessions are on the rise again after pandemic-era lows, creating another costly hurdle for dealers. Together, these challenges are forcing stores to rethink their operations, adopt new tools, and strengthen their defenses.

Fraud on the Rise
Point Predictive, an AI-driven fraud prevention firm, recently estimated $9.2 billion in auto loan fraud exposure for 2025—the highest ever. Nearly 43% of that—about $3.9 billion—is tied to income and employment misrepresentation. The rise of synthetic IDs and fake paystubs, often powered by AI tools like deepfakes, is making it harder for F&I managers to catch fraud at the desk.

The tactics are both clever and organized, and according to Point Predictive, discussions of AI and deepfake fraud in online chatroom such as Telegram rose 644% from 2023 to 2024. What once might have been an occasional “bad apple” borrower is now often part of large, coordinated scams.

Dealer Countermeasures Against Fraud
Dealers aren’t standing still. On the frontlines, stores are implementing new steps that balance efficiency with protection:

• ID Verification at the Desk – Scanning and authenticating driver’s licenses helps identify synthetic or stolen IDs before a deal goes through.
• Income and Employment Validation – Lenders and dealers are turning to AI-powered tools that scan for fake paystubs and flag inconsistencies in applications.
• Payment Verification – Before releasing a vehicle, many dealers confirm that electronic or ACH payments have cleared.
• Training and Awareness – F&I and sales staff are being trained to spot red flags like rushed deals, inconsistent information, or unusual payment methods.
• Collaboration – Many dealers are now working more closely with lenders and industry networks to share fraud alerts, building a stronger defense across the ecosystem.
• Lot-Level Security – GPS, geofencing, and motion sensors are being deployed to prevent theft and recover vehicles tied to fraudulent transactions.

These measures add time and cost, but dealers say they pale in comparison to the impact of absorbing a fraudulent loan or a stolen vehicle. It’s tough to recoup the loss of a $20,000 vehicle—or worse, defend against a lawsuit stemming from fraud tied to an employee.

Repos Hitting Bottom Lines
At the same time, repossessions are on the rise again. The Consumer Financial Protection Bureau (CFPB) reports that auto repossessions increased in 2024 after pandemic-era relief programs ended, with subprime segments hit the hardest (CFPB, 2024). More than 2 million vehicles were repossessed in the U.S. last year, according to Cox Automotive, and that number will likely rise again this year.

For dealers—especially those carrying paper or operating in the buy-here, payhere (BHPH) space—repos can be a financial and logistical nightmare. Between the costs of recovery, damage to vehicles, and lost loan balances, one repossession can erase months of profit.

Dealer Countermeasures Against Repos
To manage repossession risk, dealers are leaning on both technology and customer engagement:

• GPS Tracking – Real-time tracking allows faster and safer recoveries.
• Impound Lot Alerts – New tools notify dealers the moment a vehicle is towed or impounded, saving time and fees.
• Starter Interrupt/Kill Switch – Dealers can remotely disable a vehicle when accounts go severely delinquent.
• Agent Coordination – Live GPS data is shared with repossession agents, cutting down on search time and recovery costs.
• Data Analytics – Dealers are using predictive models to identify high-risk accounts and take preemptive action.
• Customer Engagement Tools – Automated reminders and alerts help reduce skips and defaults, turning potential repos into resolved payments.

Moving Forward
Fraud and repossessions aren’t going away. In fact, most indicators suggest they’ll get worse before they get better. However, dealers are showing resilience, tightening their processes and sharing lessons. The fight isn’t about eliminating risk—that’s impossible. It’s about managing it smartly and cost-effectively.

The industry has always been adaptable and today is no exception. As fraud grows more sophisticated and repossessions more frequent, the dealers who stay ahead will be the ones who protect their lots, their portfolios, and, ultimately, their customers.