Anne-Marie Kelly
Something doesn’t add up — and it’s not just the cost of used cars. In today’s market:
- Dealers who traditionally see 400–600 credit score applications are now also seeing 700–800 applicants.
- Subprime portfolios are filled up with prime and even super-prime credit profiles.
- At the same time, auto dealerships are reporting an increasing occurrence of fake bank drafts and counterfeit certified cheques.
- Some lenders are underwriting like its business as usual.
So, what’s happening here? There’s an old narrative in play, one that now needs to be challenged. Traditionally, there’s been a narrative around identity fraud in auto finance which says that prime credit score “applicants” are what are used by fraudsters.
The thinking being that posing as a prime/super-prime applicant enables a larger “return” on investment for the fraud being committed. Why bother trying to steal a $25,000 vehicle with a subprime identity, when a prime or super-prime profile will enable a $100,000-plus return on investment?
But that narrative is starting to change. Used vehicle prices are climbing. The average price of a used vehicle in Canada in June 2025 is $37,000. With prices this high, used vehicles are now valid targets for fraudsters that can produce decent returns on investment.
Furthermore, as the large prime (bank) lenders start to tighten up on IDV requirements for their dealer partners, and are increasingly charging back these dealers on any and all fraud-related costs, the amount of fraud being committed with these dealer partners will start to decrease. This means that fraudsters will have less opportunity with prime lenders under this scenario.
Where then is the opportunity for fraudsters? The answer lies in captives and non-prime lenders. Fraud is like water looking for cracks.
The banks filling their cracks are diverting the flood, leaving unprepared lenders squarely in its path. The result is that more prime “applicants” are going to captive and non-prime lenders. This, on the face, might be misread by these lenders as positive signals that their acquisition strategies are paying off and resulting in higher-quality applicants. In fact, the opposite is true.
Instead of congratulating themselves on this shift in incoming higher-quality applicants, dealers, captives and non-prime lenders should be asking the following questions:
- Why are we, as a subprime lender, seeing a spike in prime applications, given that our interest rates are far higher than prime lenders?
- Similarly for captives, apart from subvented financing deals, why are we seeing an increase in the volume of applicants from prime customers when our non-subvented interest rates aren’t as competitive as the banks?
- Is this fraud? Identity manipulation? Synthetic ID?
- Do we fully understand the risk we are underwriting now? Are we being played and adversely selected due to lower standards on identity verification?
The volume of “prime” deals being directed to non-traditional (higher-rate) lenders should raise red flags, not smiles. It’s time we start asking the tough questions.
This guest blog post was written by Anne-Marie Kelly, an Advisor & global SME with decades in fraud prevention, digital identity risk and compliance, specializing in FinCrime prevention and cybercrime. You can read Anne-Marie Kelly’s original blog post, and other articles on fraud in automotive dealerships here.
Paays Financial Technologies is a Canadian company specializing in fraud prevention and digital identity verification for the auto finance industry. Its product, ID Verifier, enables real-time government ID validation, facial biometrics, and fraud risk scoring tailored to automotive retail and finance workflows. Paays serves both automotive retailers and lenders, helping them reduce fraud, streamline compliance, and accelerate credit decisions.
