Parents Cheating To Obtain Car Loans For Their Children

New figures released by the car finance industry suggest that more parents are submitting fraudulent credit applications to finance cars for their children. The Finance & Leasing Association (FLA) reported a 17 percent increase in fraudulent car finance applications this year compared to 2010.

As more people with poor credit struggle to obtain financing, they rely on others.

From January through March 2011, 230 cases of UK auto fraud were discovered, valued at a total of £3.8 million. Lenders managed to identify and stop many more during the application stage. Nearly half of the fraudulent cases involved completing a financing application on behalf of another person, often a family member, or the illegal sub-hire of financed automobiles.

When a spouse or parent applies for a car loan for someone else and claims to be the main driver when this is not true, it is considered fraud. In this situation, the lender may reclaim the automobile. According to Helen Saxon with the FLA, auto financing companies cannot make responsible lending decisions unless they have complete and accurate information about the vehicle and its drivers.

Approximately 20 percent of the fraud instances involved a person with a car finance agreement selling the vehicle without informing the lender. Until the last payment is made on a vehicle, the lender owns the car. A borrower cannot sell it unless granted permission from the lender.

Anyone purchasing a car from another individual should run a car history report to ensure no outstanding credit agreement exists.

Rather than resorting to fraudulent methods, people with poor credit should explore bad credit car finance. Though the interest rates may be higher, the lending practice is legitimate. Individuals obtaining credit through this avenue will not need to look over their shoulder to see if the FLA, the lender, or the police are coming their way.