Auto Loan Fraud Surges 16 Percent, Driven by ‘Array of Misrepresentations’: Analysis

From inflating salaries to credit washing, auto loan fraud takes many forms.

New Hyundai cars are displayed on the sales lot at San Leandro Hyundai in San Leandro, Calif., on May 30, 2023. Justin Sullivan/Getty Images

Auto loan fraud surged more than 16 percent to $9.2 billion last year, driven by “an array of misrepresentations,” a new report finds.

Point Predictive, an artificial intelligence solutions provider for consumer lending, assessed a treasure trove of data for lenders and dealers. This included 256 million historical applications, 300 million reported incomes in submitted applications, and billions in reported fraud and default.

Researchers determined that misrepresentations were a substantial source of fraud.

“While dramatic cases of organized crime ring stealing identities make headlines, our data reveals that the true story behind most auto lending fraud is an array of misrepresentations,” said Frank McKenna, chief innovation officer of Point Predictive, in a March 25 statement.

The study, titled the “2025 Auto Lending Fraud Trends Report,” found that borrowers inflating their income and misrepresenting their employment account for 42 percent, or $3.9 billion, of the total fraud risk.

Borrowers are also using credit washing techniques—a tactic that involves falsely claiming to be victims of identity theft to remove negatives from credit reports—and creating synthetic identities that combine real and fake information. These measures represented more than a quarter, 27 percent, of the committed fraud, or $2.5 billion worth.

Despite accounting for most of the fraud risk, “these patterns often go undetected,” McKenna added.

Fraudsters favored European luxury cars, with Mercedes-Benz at the top of the list, followed by Maserati, Audi, Land Rover, and BMW.

Georgia, Texas, Nevada, and Florida were the riskiest states for auto lending fraud. Vermont, Maine, and Alaska were the least risky.

It’s the Economy

Macroeconomic factors, be it inflation or interest rates, appear to be driving these industry trends.

“This financial pressure creates perfect conditions for first-party fraud growth across the auto lending landscape,” the report stated.

“Auto loan expenses did decrease slightly thanks to lower used car prices and longer loan terms. But this slight relief was quickly overshadowed by high interest rates and inflation in other essential spending categories. ”

The industry, the report concludes, is facing multiple headwinds.

Over the last 24 months, the firm’s Early Payment Default Risk Index—a gauge of loans that stop paying within the first six months—has swelled 25 percent. This can be a solid indicator of significant misrepresentation on applications or evidence of fraud.

Additionally, systematic dealer risk—inflating vehicle values and relying on fake employment for borrowers—has raised lenders’ default risk for those dealers.

According to the Federal Reserve Bank of New York, total auto loan debt stands at $1.655 trillion, higher than student loans ($1.615 trillion) and credit cards ($1.211 trillion). Auto loans also have one of the highest flows into serious delinquency rates, nearing 3 percent in the fourth quarter of 2024.

A Tesla showroom in New York City on March 20, 2025. Samira Bouaou/The Epoch Times

Cox Automotive data suggest that new auto loan rates sit below 10 percent. “Low-interest rate deals have declined since the end of 2024 and show little change in March,” said Jonathan Smoke, chief economist at Cox Automotive, in a March 18 note.

Artificial Intelligence Playing a Factor

The report noted that new artificial intelligence-powered threats are emerging.

Researchers discovered a more than 600 percent increase in criminal Telegram channels discussing AI and deepfakes for fraudulent purposes. The messages concentrated on circumventing identity checks to bypass controls created by lenders, banks, and credit unions.

These schemes include AI-generated counterfeit identification documents, AI-supported impersonation scams, and fake identity generators. AI is also being utilized at scale to accelerate the malicious practice of credit washing.

“This includes generating realistic handwritten letters that seem to be written by real people, as well as using AI to accelerate the processing of identity theft reports,” the report said. “As a result, auto lenders will likely encounter a rise in these new AI-driven schemes.”

Last year, the Deloitte Center for Financial Services raised alarm bells when it projected that artificial intelligence could cost the finance sector tens of billions of dollars in fraud in the coming years.

By 2027, generative AI-fueled fraud losses could reach $40 billion, the organization estimated.

Amid the prevalence of AI-related fraud, a 2024 report found that financial institutions are using the technology to boost their fraud detection tools.

According to a PYMNTS Intelligence and The Clearing House study, titled “Instant Impact: AI’s Role in Advancing Real-Time Payments,” 94 percent of payments professionals say AI has a role in fraud detection and could change how transactions are secured and monitored.