Criminal gangs arrange finance and insurance on a ‘clean’ identity that will pass credit and insurance checks.
Then new cars are sub-hired to other drivers for cash without notifying lenders or insurers.
Motor finance fraud cases were up 17% in the first three months of the year, with almost half of all cases involving sub-hire.
Buyers who purchase and sub-hire cars commit fraud as the car belongs to the finance company and the sub-hiring driver does not have permission to lease the vehicle on.
The drivers of these vehicles also have no insurance, so have no cover in case of an accident.
Motor fraud cases added up to £3.8 million in the first three months of 2011, up 13.8% on the same period last year. There were 230 cases of motor fraud in the first quarter, and 865 in the last 12 months.
Finance companies spotted more than 2,000 cases of attempted fraud in the first quarter of 2011, stopping £26 million of fraudulent deals.
Paul Harrison, head of motor finance for the Finance Leasing Association, said: “Sub-hiring is not a new phenomenon, but is a problem that has grown in recent months. It’s important that when you apply for a car on finance that advise your dealer if anyone else will be driving it and that during the life of the agreement you remain in possession of the car at all times.
“As part of this year’s national Car Crime Awareness week, we are again telling car finance customers about their rights and how to protect themselves against being the victim of fraud. A key aim of the campaign is to let organised criminals know that not only are most attempted frauds detected and stopped, of the ones that do get through, many vehicles are recovered and removed, and arrests are made.”
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