THE MARKET SIZE OF FRAUD

by car dealerships

Key findings

OVER 80% of new car purchase experiences involve 'dark patterns'.

An average overcharge suffered by a buyer of a new vehicle at an authorized dealership is ₽75,000+, or more, while at an unauthorized one it may exceed ₽169,000+.

The market size of fraud and 'dark patterns' used by authorized and unauthorized car dealerships amounts to at least 65 bn annually.
According to our survey, the majority (almost 95%) of new cars in Russia are purchased from authorized dealerships. The result coincides with the expert estimates of the share of unauthorized dealerships: they account for about 5% of new car sales.

It is widely known that unauthorized dealerships often resort to fraud: various schemes are described on specialized websites and forums of motorists. However, buying a car even in an authorized dealership is often associated with situations that lead to unplanned additional expenses. This is not a fraud, but such situations are perceived by customers as not honest. In the second case, we will talk about "dark patterns" in the automotive market. The main goal of the research is to study a complex of situations, both fraudulent and legitimate (fraud and "dark patterns").

The data shows that ⅔ of all car buyers face fraud or "dark patterns".
Introduction
Fraud
Key definitions
Dark Patterns
Those actions related to the sale of vehicles or services by car dealership employees that violate the Russian law
Those actions related to the sale of vehicles or services by car dealership employees that, although not formally in violation of the Russian law, are perceived by consumers as unfair


The total amount of overcharges suffered by customers of authorized car dealerships as a result of fraud and 'dark patterns' is at least ₽61 bn a year. Taking into account car sales generated by unauthorized dealerships, the total annual losses and overcharges incurred by buyers of new cars amount to ₽65 bn or more.

The estimation of the total market size is based on the survey findings (the prevalence of certain typical situations, the share of the buyers who suffered financial loss, and the size of average financial damage), the market split between authorized and unauthorized car dealerships, and the statistics for the number of vehicles sold in a year.
The market size of fraud and 'dark patterns'
An average 95% of Russian consumers buy a new car at an authorized dealership. Another 5% opt for unofficial dealers.

In most of the country's regions, 97% of purchases take place in authorized dealerships (in the Volga, Northwestern, Ural, Central, and Southern federal districts). This percentage is somewhat lower in the Siberian (95) and North Caucasian (89) federal districts.

Only 70% of car purchases in the Far Eastern federal district are made at authorized dealerships—a much lower figure compared to other parts of Russia.
Preferred dealerships
The share of unauthorized dealerships in new car sales by federal district, %
Volga
Southern
Ural
Central
Northwestern
Siberian
North Caucasian
Far Eastern
3
3
3
4
5
7
11
30
Among the most popular factors that determined the choice of a dealership by respondents are convenience of location (including proximity to the consumer's home), favorable terms (price, trade-in and financing options), as well as recommendations by friends and acquaintances.
Why did you choose this dealership? %
15
2
3
4
4
4
5
6
6
7
11
11
21
Other
It has a wide range of vehicles
I trust them
It's an official dealership
Special offers, discounts
It's the only suitable dealership in town
Quality
Previous experience
Reliability
It had the desired car in stock
Recommendations/reviews
Favorable terms of sale
Proximity, convenience of location
6 Pushing customers into buying a more expensive trim level
5 Intimidation, preying on emotions
5 A preliminary sales contract followed by a price hike
5 Lying about features of the vehicle
4 Offering an unfavorable comprehensive motor own damage (MOD) insurance ('casco') policy
2 Selling a damaged (in a previous collision) car as new
5 Demanding a deposit that turns out to be non-refundable
1 Dealership vanishing once the payment has gone through, without the vehicle being delivered
10 None of the above
8 Pushing customers into buying extra services
9 Misleading advertisement: the price turned out to be higher
9 A protracted and exhausting loan approval process
12 Offering an unfavorable financing option (suggesting a car loan from a specific bank)
Did you encounter any of the following situations during the latest car purchase experience? Please choose all applicable answers, multiple answers, number out of total respondents, N=55
multiple answers, number out of total respondents, N=55
Did you encounter any of the following situations during the latest car purchase experience? Please choose all applicable answers,
Target audience
Consumers who bought a new car in the last three years
Number of respondents
A total of 1,114
Data collection method
An online survey
Sample type
A stratified proportionate sample of Russian urban residents by federal district and city size. All federal districts of the Russian Federation are represented.
Gender distribution (male; female)
50%/50%
Survey period
April 2021
Designer:
Anna Ilyina
Illustrator:
Evdokia Kharitonovich