risk of buying cars fraudently Declines

‘First-party fraud’, including ‘fronting’, was the most common type of motor finance fraud in the second quarter of 2012, according to the latest statistics from the Finance & Leasing Association. First-party motor finance fraud usually occurs when a person takes out credit on behalf of someone else and a finance agreement is ‘fronted’ when a vehicle is not being used by the customer who was originally approved by the finance company.

First-party fraud accounted for 37% of all car finance frauds reported to the FLA in the Q2 2012. Application fraud accounted for 30% of all fraud cases in the same period, and conversion fraud (when a car is sold when it is still on finance) accounted for 25% of cases. The remaining 8% of fraud cases were identification or impersonation frauds.

Overall, motor finance fraud cases overall fell by 6% in Q2 2012 compared with Q2 2011. There were a total of 184 cases of motor finance fraud in Q2 2012, and 743 cases were reported by motor finance companies over the previous 12 months.

In Q2 2012, FLA member finance companies and their dealer partners prevented at least 1,760 cases of attempted fraud at the application stage. This helped to avoid losses of over £23.8 million from potentially fraudulent deals, which helped to keep the cost of credit down for car buyers.

Paul Harrison, the FLA’s head of motor finance, said:

“It’s important that finance companies know who is driving their property for the duration of an agreement. This does not mean that a parent can’t apply for credit to buy a car for their children, because the location of car will be known. Lenders are more concerned about customers handing cars to third parties who cannot be traced. A finance company will usually remain the owner of car until the final repayment is made and any breach of contract could result in a case being referred to the police’s national Vehicle Fraud Unit for investigation.”


If you are buying a used car, make sure you don’t buy a car that still has outstanding finance. There are things you can do to protect yourself:

  • Do a history check with CDL (www.mycarcheck.com), Experian (www.autocheck.co.uk) or HPI (www.hpicheck.com), and make sure you buy a full history. It’s a small cost compared with the cost of the car and will give you peace of mind. A comprehensive car history check will give you a full description of the car and its past ownership, and should tell you if there is outstanding finance on it. It will also tell you the mechanical history of the car – whether it has been in an accident or scrapped, whether it has had its mileage adjusted, and whether it has ever been recorded as stolen.
  • When buying a car, new or used, do your research. Know what to expect from the make, model and age of the vehicle – if the deal looks like it’s too good to be true, it probably is.
  • Check the car thoroughly for damage, and make sure the vehicle identification numbers (VINs) match the documents.
  • Take the car for a test drive. If buying a used car, consider having it checked out by an auto mechanic.
  • Consider in advance how you will pay for the vehicle. Cash can be dangerous, particularly if meeting a private seller at an unfamiliar address. Always meet the seller at their residential address, and never – for example – in a pub car park or petrol station.
  • If buying a vehicle on the web, ensure you’ve done all your checks before transferring any payment.

AVCIS is a national police unit dedicated to investigating and recovering fraudulently-obtained vehicles, and prosecuting offenders. The FLA has sponsored the Vehicle Fraud Unit of AVCIS since September 2007. Acting as the eyes and ears for the police, contributing finance companies are able to report suspected fraudulent cases to the unit for investigation, recovery and prosecution of fraudsters.

The FLA is the leading trade association for the motor finance sector in the UK. FLA members provided £19.8 billion of motor finance in 2011 and financed more than 60% of all private new car registrations in the UK.