Fraud is evolving and dealerships are increasingly in the crosshairs. Rising vehicle values, increasing digital transactions and lingering economic pressures have created fertile ground for fraud. And it’s not just external threats. Insider fraud, committed by trusted employees, is now one of the most pressing risks facing UK dealerships.

According to a 2025 Cifas update, the UK’s leading fraud prevention service, internal fraud is up 32% year-on-year, with the automotive sector flagged as a particular concern. Dealerships are especially vulnerable due to the high-value nature of their assets, small finance teams and the pressure to hit performance targets, all of which can lead to manipulation or cover-ups.

So how can you protect your dealership? In this article, we explore the most common types of fraud affecting dealerships, share real-world examples and outline practical steps to mitigate risk.

The six most common types of fraud in dealerships

1. Profit manipulation

This isn’t about stealing cash - it’s about hiding poor performance. Profit manipulation involves falsifying financial results to present a more favourable picture, often motivated by bonuses or job security. 
Managers may collude with accounting staff to adjust figures temporarily, hoping to “fix it next month.” However, if the expected recovery does not materialise, the manipulation escalates, and fraudulent balances accumulate. This often exploits the power imbalance between sales managers and accountants, who may be pressured to conceal discrepancies.

Real example: A dealership had to write off £500,000 due to unreconciled manufacturer statements. The fraud was only uncovered when a motor trade specialist auditor insisted on proper reconciliation. 

Tips:

  • dual reporting lines for branch accountants to both local management and senior finance
  • train accounting teams on fraud risks and detection methods
  • regularly review sensitive accounts like vehicle bonus debtors
  • rotate accountants between sites to prevent familiarity-based cover-ups
  • clear disciplinary policies, including immediate dismissal for detected manipulation
  • monitor for signs of stress or pressure in accounting staff.

2. Cash and credit card sales fraud

This occurs when employees receive payment in cash or via credit card but do not remit the funds to the company. They may issue credit notes or proforma invoices to cover the discrepancy, leading to inventory discrepancies, such as parts or vehicles being recorded as in stock when they have been stolen or sold illicitly. 

Real examples: 

  • an employee stole £50,000 worth of sat nav systems
  • a Range Rover was misclassified as aged stock and disappeared
  • a salesman diverted customer payments into his personal bank account, defrauding a large dealership of over £40,000. He later admitted to 11 additional fraud charges linked to another dealership. 

Tips:

  • monitor credit notes by individual for unusual trends
  • implement perpetual stock counting
  • monitor credit card refund volumes
  • discourage physical cash transactions.

3. Teeming and lading

This common fraud involves employees misappropriating cash received and covering the shortfall by applying subsequent receipts to earlier debts. It can start small and escalate if undetected. It’s also used to conceal errors, such as incorrect vehicle transfers between dealers, which can result in significant financial losses.

Real example: A salesperson used deposits to fund a gambling habit. The fraud went undetected for months until the debt size raised alarms.

Tips:

  • segregate duties between cash handling and ledger posting
  • reconcile all balance sheet accounts monthly and ensure they are reviewed by management
  • ensure key staff take holidays - fraud often unravels when someone else steps in
  • use internal audit functions for independent verification
  • monitor for lifestyle changes or rumours indicating financial stress among staff.

4. Kickbacks and backhanders

This involves employees receiving payments from suppliers or customers in exchange for preferential treatment, such as sourcing business or offering lower prices. It’s hard to detect because transactions appear legitimate. 

Real example: A trader offered cash to a sales manager for guaranteed business. The dealership lost profit through undervalued part-exchange sales.

Tips:

  • implement auction-only policies for trade vehicles
  • establish fixed policies for sensitive supplier areas like auction fees, valeting, subcontracting, advertising, recruitment, cleaning and security
  • compare cost metrics across sites to spot anomalies.

5. Supplier fraud

This involves fraudulent invoices or duplicate payments, often orchestrated by someone with deep system access. Weak financial controls allow fraudulent invoices or unauthorised payments to be processed, often by manipulating purchase orders, invoices and payment details. This can lead to significant cash losses over time, with fraudsters exploiting trust and control gaps within finance teams.

Real examples: 

  • a finance manager duplicated purchase orders and invoices, then swapped bank details to divert payments, stealing £80,000
  • a manager used disputed invoices under £1,000 to write themselves cheques, extracting £25,000 over six months.

Tips:

  • ensure robust segregation of duties across purchase, receipt, invoice processing and payment authorisation
  • review payment schedules and bank reconciliations regularly
  • watch for changes in behaviour such as reluctance to take holidays, long working hours, disproportionate lifestyle, territorial behaviour or covering for absent colleagues.

6. Cybercrime

Cybercrime continues to pose a serious risk to automotive businesses. According to the UK Cyber Security Breaches Survey 2025, 43% of UK businesses reported experiencing a cyber breach or attack in the past 12 months. Key threats include cyber extortion via ransomware, which encrypts data and demands payment for decryption keys and email impersonation scams targeting financial transactions by impersonating executives or suppliers. 

Real example: In December 2022, Arnold Clark, the UK’s largest independent car dealership, suffered a major ransomware attack. Hackers stole over 500GB of sensitive customer data - including passports, bank details and National Insurance numbers - which was later leaked on the dark web. The breach cost the company nearly £50 million and triggered widespread recovery efforts.

Tips:

  • maintaining robust and updated IT systems has never been as important
  • secure comprehensive business interruption and cyber liability insurance
  • conduct regular staff training on recognising suspicious behaviour
  • avoid opening emails from unknown sources and be wary of urgent financial requests
  • verify requests through independent contact methods.

Final thoughts

Fraud can be subtle, systemic and devastating - and no dealership is immune. But while you may not be able to eliminate the risk entirely, you can put your business in a far stronger position to detect, deter and respond to it. Dealerships that foster transparency, accountability and robust controls are far better equipped to stay ahead of fraud before it takes hold.

Read more in our 2026 Automotive Outlook

Fraud is evolving, and it’s becoming increasingly systemic. From hidden "kickbacks" to sophisticated cyber extortion, we’ve identified the six key areas where UK dealers are most at risk in 2026.

Download our 2026 Automotive Outlook to access our exclusive 'What you can do today' action plan and stay ahead of the risks impacting the UK motor trade.

If you need any advice, please get in touch with Matthew Stephens or one of our automotive experts.

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