Once Is Not Enough: Why Car Dealers Need to Check for Fraud Throughout the Sales Process
By Michael Byrd
While many dealerships wisely use technology to scan a driver’s license for fraud at the start of the customer journey, most still rely primarily on the human eye and a gut feeling to prevent ID fraud. What they don’t realize is that fraud is a persistent threat at every stage of the sales process.
With the increase in sophisticated synthetic fraud, where fraudsters fabricate identities by blending real and fake information, it’s easier to slip past the basic verification methods many dealers employ. That’s why one fraud check simply isn’t enough. A multi-layered fraud prevention strategy is now essential for protecting your dealership, your reputation, and your bottom line.
The Limits of a Single Check
Many dealers operate with a “one-and-done” mentality: scan the ID, get a green light, and move on. However, synthetic identities can pass initial validation and still be fraudulent. These identities are often built over time—sometimes years—with real addresses, phone numbers, or even Social Security numbers acquired from data breaches or dark web markets.
Relying solely on one checkpoint is not only outdated—it’s risky. What you don’t catch on day one can come back to haunt your finance team with chargebacks and repos from customers you thought were clean.
Why Multi-Layered Fraud Prevention is the New Standard
Smart dealerships are shifting from one-time checks to an integrated, multi-stage fraud detection approach. Here are the core components of a comprehensive fraud prevention framework:
- Run Fraud Checks for Every Sale—Even Returning Customers
It’s tempting to skip verification for a loyal customer, but fraud can come from unexpected places. A returning customer could have a compromised identity, or a fraudster could be using the name of a previous customer. Running checks consistently for all transactions—regardless of customer history—ensures that assumptions don’t lead to overlooked fraud.
- Store or Group-Wide Fraud Alerts
What one dealership experiences can help protect another. A centralized fraud alert system across store locations or an entire dealer group enables faster detection of suspicious patterns. If someone attempts fraud at one location, all affiliated stores can immediately be warned, reducing the risk of repeat attempts.
- Use Technology to Validate Driver’s Licenses
Every U.S. state uses slightly different formats and security features on its driver’s licenses. While fraudsters often change the data on a driver’s license, they can’t alter the information embedded within a barcode. Using technology that verifies barcode data can catch fraud that may otherwise have been missed.
- Prequalify Prospects and Validate Identities
Prequalifying customers before they even arrive on the lot or begin an online application allows dealers to flag potential risks early. Validating a customer’s identity during prequalification helps eliminate synthetic profiles before they enter your CRM or lead pipeline, preserving both data integrity and staff time.
Know the M.O. and Enforce a Process
In addition to enforcing fraud checks throughout the sales process, it’s helpful to be familiar with common practices fraudsters use, which can reduce your risk of becoming a victim.
Money is no object: The “buyer” may put no money down or a small downpayment; $20k is a small price to walk away with a $100k vehicle. It’s a red flag if they don’t care about the terms, payments, or interest rate.
“Yes” to everything on the menu: Besides not trying to negotiate the price or terms, most fraudsters also say yes to every add-on you offer—on the sales floor and in F&I.
Remote delivery: Be aware of buyers who insist on a remote delivery to a “generic” location—office building, coffee shop, or any address that is not listed on the driver’s license as the buyer’s residence.
Fraud Prevention Technology = Invaluable Savings
An investment in state-of-the-art fraud prevention technology truly does pay for itself, especially as the cost of vehicles keeps rising. And the time spent recovering from incidents after the fact takes your team away from what they do best – driving more sales.
“We had six fraudulent car sales based upon fake IDs at a store in Texas before we put the fraud prevention software in,” said Jimmy Robinson, CFO, Pohanka Auto Group. “We wasted a lot of time and money chasing the car, doing damage control, working with insurance—which is painful—on claims. We put it in, and the next 12 months we had zero. So, it really makes a difference in the efficiency of the store.”
Robinson’s experience is common across the automotive industry, and when a fraudster is caught it’s a success story for your dealership.
“A male and a female at our one of our stores in West TX were trying to steal 2G wagons—those are very expensive $200,000 cars,” said Ben Stillwagon, Director of IT at Cavender Auto Family. “The driver’s license came back fraudulent, so we kept them in the box as we worked through everything with law enforcement, who showed up and took them away in handcuffs. It was really a success story, and we’ve seen that several times.”
Leveraging technology also validates that “gut feeling” you may get. As one dealer explained, when you bring in technology it takes away a lot of the doubt that you might have in your mind and reassures you that an unbiased platform is telling you the ID is fake.
A New Mindset for a New Era
Multi-layered fraud prevention is a business necessity today. The increasing sophistication of synthetic identities, coupled with the high-value nature of vehicle sales, makes dealerships prime targets.
While Informativ offers fraud detection and identity verification solutions that support each of these layers, the core principle applies universally: one check isn’t enough. Dealerships that adopt a proactive, ongoing approach to fraud prevention are better equipped to build trust with customers and maintain financial security in a competitive environment. By embedding fraud checks at every phase—from lead to close—dealers can protect their inventory, financing relationships, and long-term profitability.
About the Author:
Michael Byrd is the Chief Revenue Office at Informativ, the leading provider of fraud prevention, variable ops compliance, credit reports, and customer insights to the automotive industry.
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