Car Dealerships Vulnerable to Cybertheft During COVID

Dealers using digital retailing as a necessary substitute for in-store selling during the COVID-19 crisis face a heightened chance of getting bilked by con artists.

“Identity theft is a huge issue,” says Brad Miller, the National Automobile Dealers Assn.’s senior counsel-digital affairs. “It’s an area where the 1% can play a lot of games.”

ID thieves can ply their tricks of the trade in person at dealerships, where employees are trained – and required by “Red Flags” federal regulations – to spot suspicious behavior and bogus-looking customer information.

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He adds: “There’s a lot to wrestle with. When the bad times come, the bad guys come out. They can come out in force. Make sure you are delivering to the right person.”  (Brad Miller, left)

Dealers who are not veterans of selling cars online can become the most vulnerable to cybertheft, compared with dealers with more online-selling experience.

“Dealers have a Red Flags duty to take steps to verify the identity of customers,” Miller says. “How do you do that if the transaction is not in the store?”

He recommends working with reputable vendors who provide anti-cybercrime products, such as identity verification tools.

He also urges dealers to hire vendors with technology for transmitting and storing sensitive information. “Do not send sensitive information by email.” Additionally, “e-contracting is an area where a vendor is indispensable.” So is working closely with credit-rating agencies and lenders that offer online theft-protection services.

Before the pandemic, some dealers had not been particularly progressive in their online initiatives. The stay-at-home mandates that closed in-store vehicle sales in many states forced those auto retailers to amp up their digital efforts.

Post-virus, some of them may stick with online retailing as an alternative sales channel. Others may step back from it when the public-health crisis abates and showrooms reopen, Miller says.

Although much industry talk has centered on the prospects of doing a complete car deal online, “we are three or four years away from that,” says Stefan Drechsel, founder of DealerTech Nerd, a company that focuses on digital-retailing platforms. It's one thing to shop online. It's another to desk a deal, do a car loan (especially for consumers who have credit issues or negative equity in their current vehicle), determine trade-in evaluation and follow all the government regulations pertaining to a vehicle purchase.   

Dealership online initiatives ranges from level 1 (a basic website and some in-store paperless work) to level 5 (a self-serve setup that’s nearly A-to-Z digital), Drechsel says. “Only about 5% to 10% of dealers are at level 5.”

Under current circumstances, “a lot of dealers are trying to get from level 3 to level 5 overnight,” Miller says.

Most dealers are at level 3. Drechsel describes that as a “hybrid of the online and in-store experience.”