Motor finance companies are working to save car insurance customers money, make the country's roads safer and stop criminals by tackling fraud, but they say the recession has led to an increase in the number of people selling vehicles before they settle their outstanding finance – a phenomenon known as "conversion fraud".

According to trade body the Finance and Leasing Association (FLA), nearly 40 per cent of motor finance fraud cases between July and September this year were committed by individuals selling cars which they did not own. Around a quarter of motor fraud instances involved applicants giving false information on their finance application forms.

However, the association's head of motor finance, Paul Harrison, reveals that motor lenders have prevented at least 8,500 fraudulent deals worth £100 million so far in 2009.

"Whether fraudulent or mistaken, this kind of car sale can cause distress for the third-party buyer," he remarks. "I would urge anyone interested in buying a used car to run a car background check to ensure it is free of finance before purchasing it."

FLA figures highlight that London remains the nation's motor finance fraud hotspot, followed by Glasgow and Manchester.

If you enjoyed this post, make sure you subscribe to my RSS feed!