for Auto Shops
There’s plenty of information on all the ways auto shops are scamming their customers. But no resource talks about how auto shops are scammed. What can auto repair shop owners do to avoid these scams? How does one even deal with such a situation? We’ve put together this guide to help auto shop owners, mechanics, and vehicle owners alike avoid scams.
How do you know you’re a victim of scams targeting your auto repair shop? These include staged accidents, fake parts, bounced cheques, and even dishonest employees who are damaging the shop’s reputation.
Similarly, your customers may also be falling for shop-focused scams on a day you’re not present at the shop. You may never know what goes on under your roof, from pushy upsells that cheat vehicle owners, which feed into bad reviews, lost business, and lost revenue.
Let’s dive into the main issues, how to prevent scams, and what steps to take if something like this happens.
Common scams against auto shops
Auto shops work with vehicles, vehicle parts, money, and often a lot of insurance paperwork. These are the most common areas where fraudsters target auto shops.
Fraud schemes and accidents targeting auto shops’ reputation
When it comes to staged accidents and insurance fraud schemes, these scammers damage the vehicle themselves and bring it into the auto shop. They create a false sense of urgency and ask techs to finish the repair quickly. In all this hurry, auto shops tend to take insurance paperwork at face value. In their drive to help and satisfy the customer, they don’t review the insurance documents in detail, and they start work without any verifications.
The customer will say the insurance company will cover the expenses. Once the repairs are done, they vanish, and the insurance company denies the claim. The autoshop is then stuck with the bill, or in some cases can also be accused of working with the fraudster to split the money.
What to do:
- Have a proper insurance verification process in place so no forgery or false claims go through.
- Document all adjuster communication and insurer authorization.
- Have a proper investigation about the accident timelines, and look out for clues from the fake customer.
- Don’t order expensive parts or accept information from free email addresses. These are also signs that it’s a scam.
Fraudulent parts from suppliers
Your parts supplier might be selling you fake parts or repackaged parts. They might even sell OEM parts at very low prices (a sign that these are fake). Sometimes auto shop needs parts fast because of high demand, cost pressure, or issues with the supply chain. The auto shop might look for bargains, for example, a batch of brake pads at half price. Later on, these will turn out to be fake parts. These won’t even last as long as the original ones and will wear out fast.
Since these parts are low quality, fake, or repackaged, they will fail early. Your customers will have to come back again and again. It’ll cause your shop time, you’ll lose reputation, and customers will be frustrated.
What to do:
- Check parts serial numbers or authenticated receipts.
- Ask for traceable invoices from your suppliers.
- Check for markings or packaging changes that seem suspicious.
- Don’t accept parts without complete product information and certification.
- Make sure your parts supplier isn’t dodging your calls or emails. They should be easily reachable and should be able to answer questions regarding the parts (if they aren’t, then you know they are hiding something).
Fake work orders or bounced payments
Customers are also often a part of these scams against auto shops. For instance, they can create a fake work order by forging signatures or altering job details. Customers want your techs to finish the job without any approvals. They don’t even allow time to verify payment sources. For example, if a customer gives a bad cheque that bounces or is using a stolen card, the payment won’t go through. If your auto shop relies on manual work, this will make it easy for customers to fake their work orders, signatures and payments.
What to do:
- Have a strong payment verification process. Verify funds before they release the vehicle.
- For any high-ticket job, ask for an advance deposit.
- Check for any differences between the customer ID and the payment account.
- Have a digitally timestamped work order.
- Keep a photo/video record, plus have an automated system in place where you get your customers’ e-signatures (which are harder to fake).
Employee fraud with unauthorized discounts and missing parts
Sometimes the fraudsters are closer than you think. They are your own employees who could misreport hours or overcharge customers for parts to keep the profit for themselves. Or in some cases, they might be making up unnecessary discounts, or keeping spare parts to themselves to sell. All these small scams can add up to bigger losses for the auto shop.
What to do:
- Keep a strong check on parts and have a strong inventory management system in place.
- Track the labor hours yourself.
- Invest in an integrated payment system where you can quickly verify the cardholder’s identity.
- To avoid missing parts, implement inventory serial tracking so you know where the part went from purchase to use by the customer.
The solution?
All of the frauds discussed above are made easy when a manual system is in place. When an auto shop relies on paperwork, manually documented work orders, a lack of photos/videos of the work done, and doesn’t even track parts. This makes it easier for scammers to do their job. But with a fully automated auto repair shop management software, it gets easier to avoid these scams. Ask your customers for e-signatures, have proper processes in place for insurance claims, have correct work orders, and an integrated payment system. You’re less likely to get into trouble once you have digital processes in place.
Now let’s address the other party. The customers and how they are scammed. Your shop needs to know all the ways customers are scammed to help them avoid these, and show them you care.
Scams against vehicle owners
Your auto shop can be honest and legitimate, but some dishonest work can harm your reputation and damage trust. Let’s face it, in today’s digital world where customers rely on online information, one bad review or getting caught in a scam scandal can cost you your reputation and loyal customers.
Misleading and pushy upsells
So when a customer comes in for a regular check or something as simple as one tire change, the technician says all the tires are punctured and need to be immediately changed. They create urgency and also mislead the owner into thinking their vehicle is unsafe. The result? The customer is sent back with a huge bill they did not expect.
The customer will eventually realize they have been scammed (they always do). This will destroy trust, and you will lose repeat business. They might even post a review online or take legal action. This is your one-way ticket to destroy the shop’s reputation.
A coupon bait-and-switch
An auto shop advertises a cheap coupon for a $25.99 oil change. The customer comes in, and at check out, they are convinced to go for an upgrade, get additional flushes, or even have some additional jobs done. This brings their total up from around $25 to over $300.
So, with this bait-and-switch scam they were brought into the auto shop under a pretense and then made to switch jobs. Again, the vehicle owners could share their experience online and warn others in the community, which will result in negative word of mouth.
Charging for non-existent services
This is again where your employees can scam your customers. They might increase a bill and add in parts changes or services that never happened. For instance, charging for new tires when old tires are used, or adding in a transmission fluid exchange to the bill when it never happened. These scams are easy to find out about. Customers could check tire treads, etc, and know they’ve been scammed. This can damage trust.
You might be running an honest auto shop, but somewhere an employee or a technician could be scamming customers, which will damage your shop’s reputation.
Wrong part installations
Your technician might even install the wrong part, which is unnecessary, just as a way to make an extra buck. For example, a wrong oxygen sensor, or adding a cheap sensor and charging for an expensive one. These can again cost you money, reputation, and trust.
Preventing scams against auto shops
So how can you avoid these scams in the first place? Prevention starts with having smart built-in processes and solid technological support. Plus, a culture of transparency can also help you avoid these scams. Let’s talk about this in detail.
Keep a digital record of all work done
Use digital vehicle inspection tool to keep a photo/video record all the work. Take digital proof of the vehicles condition when it came in, the odometer, the damage. Use a digital work order. Plus, its always a good practice to have prices approved and signed so the customer knows in advance. Always match the customer ID with the payment method for any high-ticket jobs.
Implement strong payment systems
For any high-value job above a certain threshold, ask for a deposit. For instance, if a job is worth $1,000, ask them to deposit $600 upfront. This reduces the likelihood of fraud or missed payments later on. Also have integrated card processing in place that can help you verify the cardholder. Verify funds when a customer is paying by check. Don’t order any parts before funds verification.
Check vendors before ordering
When you sign up with vendors, ask for references, check their company registration, and, if you can, ask for other customers and their reviews. Work with suppliers who share serial numbers, have traceable invoices, and also have digital processes in place. This helps avoid any paperwork issues.
Build trust with your employees
Now you can’t track your employees each and every move. That’s harmful for shop culture. But you can have certain processes in place that can help you avoid any harmful practices. For example, have separate people in charge of ordering parts, handling returns, or supplier credits.
When you can, tally the labor hours and invoices. If you see any major differences, look into it. Ask and train your employees to verify payments. Teach them how to recognize phishing. This ensures every invoice, receipt, and document is verified before getting processed and thereby helps your shop stay profitable and avoid any bumps in the road.
Have set insurance protocols
Ask customers for exact paperwork instead of accepting manual or verbal insurance authorization. Get insurer claim numbers and verify adjuster contact. If you suspect any false claims, stop work until all verification is complete.
Establish transparency with your customers
Show them digital proof of work. Record photos/videos of the before and after. Explain the work required in detail, have them e-sign the work order, provide correct estimates, and only do the pre-agreed work. Send them digital receipts for their records.
Manage your online reputation
Keep tabs on all online review platforms. See if any customer has left a negative review. Investigate their case and respond to the review. Apart from managing online complaints, have a process for written complaints. Make sure you acknowledge within 24 hours, carry out a full investigation within 3 days, and keep the customer informed throughout.
Wrapping up
Use these tips to safeguard your auto shop from any scams. Have strict processes in place, embrace technology to keep records, and process invoices and payments.
Scams can be detrimental to your business’s reputation, so implementing strict measures will prevent any major losses. Plus, it also helps you maintain trust with customers. Move invoicing, payments, inventory, and supplier workflow to a single auto repair shop management software. This will also take time-consuming tasks off your plate, giving you time to build those processes that can lead to long-term growth.
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FAQs
What can you do if a mechanic lies to you?
If a mechanic has lied to you, you should collect documents, gather proof, get another reputable mechanic or auto shop to have a look at your vehicle, and then file a complaint with a legal authority.
What to do in the case of a chargeback fraud by a customer?
In case of a chargeback fraud by a customer, review the chargeback notice, collect evidence to fight the case, write your rebuttal, and if it comes to it take legal action against the customer.
How to prevent false damage claims by a customer?
The best way to prevent false claims by a customer is by documenting pictures/videos of the vehicle when it came in to your auto shop and have clear, transparent communication from the very start.
