Auto finance fraud exposure expected to surpass $10B in 2026

Fraud exposure is expected to cost the auto finance industry 8.7% more year over year in 2026, as schemes become increasingly elaborate and reliant on AI. Fraud exposure will likely exceed $10 billion this year, Frank McKenna, chief fraud strategist at risk management platform Point Predictive , told Auto Finance News . For comparison, fraud exposure totaled $9.2 billion in 2024 . The increase, he said, continues to be driven by: More organized fraud activity like fraud rings ; More “credit repair” activity teaching consumers how to commit fraud under the guise of strengthening their credit score; and AI, which allows generation of realistic pay stubs and financial statements. The auto industry may also see more “commercial auto fraud,” which targets transactions involving commercial vehicles, such as fleets of cars or trucks, Steve Lenderman , head of fraud prevention at payroll software provider isolved and co-chair of the Bust Out and Synthetic Identity Industry Group , told AFN . The commercial fraud “trend is driven by the fact that fraud controls around commercial transactions are far less mature than those in the consumer space, combined with the ease of creating fraudulent businesses,” Lenderman said. Wilmington, Del.-based Bust Out and Synthetic Identity Industry Group is an organization of more than 500 professionals working to mitigate and investigate bust-out and synthetic identity fraud. Growing AI-powered fraud As AI advances, the technology is projected to accelerate auto fraud in 2026. Most lenders saw an increase in fraud attempts year over year in 2025, continuing an upward trend “that accelerated during the pandemic and has since normalized in at a higher baseline,” Megan Prouty , assistant vice president of consumer lending operations at PenFed Credit Union , told AFN . That trend comes, in part, from an “increasing use of AI-assisted tactics,” she said. “Fraud is becoming less about single data points and more about patterns across identities, devices and behaviors.”— Megan Prouty, PenFed Credit Union In fact, AI-assisted fraud rings contributed to a 25% YoY rise in overall fraud losses across the United States in 2025, totaling $12.5 billion, according to FTC data. For example, scammers are using AI to quickly create entire fictitious online retailers in a scheme known as “AI Dealer Cloning,” Point Predictive’s McKenna said. In those instances, AI is used to generate websites that mimic existing dealership sites, which, with fraudulent car listings, can “scam directly from consumers,” he added. To defend against AI-powered fraud, dealers and lenders can use “their own good AI to fight bad AI,” McKenna said, noting that AI can be leveraged to detect AI-generated documents . Prevention in 2026 Without the assistance of automation and a specialist fraud team to combat fraud, dealers and lenders “are bringing a butter knife to a gunfight,” McKenna said. “AI techniques are making fraud too hard for the typical underwriter to identify, and social media and organized fraud is making the scale of fraud worse than before,” he said. With a specialist fraud team, lenders and dealers can create strategies “highly targeted” toward the small pool of fraudulent applications, so most legitimate borrowers “don’t get crushed with onerous verifications,” McKenna said. “You have to learn how to walk the fine line in 2026 to stop the rare instance of fraud without crushing the business with too many verifications.” — Frank McKenna, Point Predictive Layers of controls Meanwhile, lenders are using layered controls, which combine different types of identity and device verification to prevent fraud, PenFed’s Prouty said, noting that multiple tools are more effective than "relying on any single tool.” Dealers and lenders also will need to work together more often, she said. For dealers to prevent fraud, they need to examine applicants “beyond traditional credit risk” by looking into their businesses and state information, isolved’s Lenderman said. “Dealers should operate with the mindset that every transaction carries some degree of fraud risk,” he said. “It’s far better to identify and manage that risk early than to assume it doesn’t exist.” Auto Finance News will present multiple invaluable events for industry professionals in 2026, starting with Auto Finance Summit East and Auto Finance Capital Summit in May. To see event agendas and register, visit autofinance.live .

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