Recession sees increase in used car finance fraud
As the Finance & Leasing Association (FLA) reports an increase in people fraudulently selling cars they do not own – otherwise known as conversion fraud - HPI is warning car buyers that if they purchase a vehicle on outstanding finance, they stand to lose both the car and the money they paid for it. With 1 in 4 cars checked with HPI subject to an outstanding finance agreement, falling victim to finance fraud is sadly an ever increasing possibility. HPI is urging used car buyers to be on their guard and avoid the latest finance scam triggered by the recession by checking the facts before they buy – or face the car of their dreams being repossessed by the finance house that rightly owns it.
Nicola Johnson, Consumer Services Manager for HPI. “Buyers need to be aware that some vehicle history checks do not include finance information which leaves them vulnerable to any type of finance fraud. The provision of a seller receipt or purchaser receipt will not offer legal protection for a buyer if the car later turns out to be on outstanding finance. The hard truth is that finance companies can and will take back their asset if a loan secured against it is defaulted upon.
“According to the FLA almost 40% of all motor fraud cases in Quarter 3 of 2009 were people selling cars that had outstanding finance against them and therefore they didn’t own. Our own data confirms these reports, with 1 in 4 cars HPI checks being subject to an outstanding finance agreement. The tough economic climate has seen people falling behind on their car repayments and unfortunately it’s clear from the figures that desperate people are prepared to take desperate measures.”
According to the FLA, finance companies have reported an increase in the number of people selling cars before settling their outstanding finance. This is known as ‘conversion’ fraud and poses a real risk to used car buyers. Paul Harrison, Head of Motor Finance at the FLA explains, “We have seen conversion fraud increase, as some people look for an easy way out of financial difficulties by selling a car that does not belong to them. The FLA advises used car buyers to always conduct a vehicle check to ensure it is free from finance. A car with outstanding finance can be illegally sold without a finance company’s knowledge. If a finance company is shown on the check as having an interest in the car, be sure to contact them to check whether it is possible to go ahead with the purchase.”
FLA figures reveal that London is the UK’s motor finance fraud capital, followed by Glasgow and Manchester. Fraudulent deals in Quarter 3 of 2009 cost the industry £3.4 million, but motor lenders prevented £100 million worth of fraudulent deals in 2009, illustrating the power of industry steps to clamp down on this crime. However, the FLA echoes HPI’s calls for consumers to take steps to protect themselves from fraudsters.
Concludes Nicola Johnson: “We fully support industry steps to combat the issue of conversion fraud, but consumers need to join the fight against these villains. One vital way of doing this is properly researching what vehicle provenance providers offer for their money. There is no substitute for a genuine HPI Check to protect yourself against fraud.”