Car dealerships — especially used car dealers handling large volumes of financing data with limited IT resources — are increasingly in hackers’ crosshairs. Between vulnerability in software supply chains, ever-changing regulatory demands, and the massive cost of downtime, it’s not a question of if, but when, a dealership will face a cyber threat. That’s why used car dealer insurance packages need to include robust cyber liability insurance as a central component.
Growing Cyber Risks and Compliance Pressures
Car dealerships operate in an increasingly complex digital environment where both criminals and regulators are paying close attention. From ransomware campaigns that can shut down operations to federal mandates requiring rigorous safeguards, dealers are caught between two powerful forces. Understanding both the threats and the compliance obligations is critical for retailers advising clients on risk management.
Rising Threat Landscape
Cyberattacks against the automotive sector have surged recently, with reports showing a nearly 50% increase in early 2025 alone. Ransomware is responsible for nearly half of those incidents.
Supply chain vulnerabilities also pose a major problem. For example, in one attack, more than 100 dealerships were compromised through a third-party video service that exposed customers to malicious software.
The risks extend beyond isolated breaches, too. When CDK Global, a major vendor supporting over 15,000 dealerships, was hit in June 2024, many dealers were forced back to paper processes. The disruption is estimated to have cost the industry more than $600 million in lost operations.
Compliance Demands: FTC & Other Rules
Meanwhile, dealerships must navigate strict compliance obligations. The Federal Trade Commission’s FTC Safeguards Rule, part of the Gramm-Leach-Bliley Act, classifies dealerships engaged in financing or leasing as financial institutions, requiring them to maintain comprehensive written security programs. Recent updates to the rule added requirements for reporting certain incidents involving customer data directly to the FTC.
Why Cyber Liability Insurance Is a Must
If your used car dealer insurance program does not explicitly include cyber liability, you leave major exposure unaddressed. Cyber liability insurance typically covers:
- Breach response costs (forensics, notifications, credit monitoring)
- Business interruption and losses due to ransomware or extortion
- Third-party liability for claims resulting from compromised customer or vendor data
Inclusion of such coverage complements policy coverages already present in a used car dealer insurance package by accounting for digital risk, which traditional policies often exclude or under-insure.
Steps Dealerships Can Take to Stay Secure Online
Here are practical measures dealerships can take today to reduce risk:
- Train employees regularly. Make sure they know how to spot phishing, suspicious links, or strange prompts.
- Enforce multi-factor authentication (MFA) and strong passwords. Limit who has access to sensitive systems and data.
- Maintain and patch systems consistently. Outdated software or neglected vendor dependencies can be the weakest links.
- Vet third-party vendors, and monitor supply-chain exposures. The attack that compromised more than 100 dealerships through a video service showed how a vendor’s weak security can ripple across the industry.
- Develop an incident response plan. Having a plan means that when a breach occurs, dealers can act fast — limiting downtime and loss.
Protecting Used Car Dealers Both Online & Offline
Cyber threats against used car dealerships are growing in frequency, severity, and cost. With regulatory pressure increasing, dealers who leave cyber risk unaddressed could face fines, lawsuits, and irreparable harm to their reputation.
Insurance retailers should encourage clients to include cyber liability in their used car dealer insurance program, ensuring coverage is comprehensive — from breach response to third-party exposures. At Aegis General Insurance Agency, we understand these nuances and are ready to help agents design insurance solutions that reflect reality.
Get in touch with us to tailor an insurance package that covers traditional risks — and the digital ones, too.
FAQ About Used Car Dealer Insurance & Cyber Liability
What does cyber liability insurance cover?
For covered claims, it pays for breach response, business interruption, ransomware costs, and third-party claims when customer or vendor data is compromised.
Why are car dealerships frequent cyber targets?
They store sensitive financial data, rely heavily on dealer management systems, and depend on outside vendors that may have lax security practices.
How can insurance retailers guide dealerships on compliance?
Recommend cyber liability coverage, educate clients on the FTC Safeguards Rule, and promote proactive steps like training and vendor oversight.
About Aegis General Insurance Agency
Aegis General Insurance Agency — Specialty Dealer Division strives to create a leading underwriting and distribution franchise in the program insurance market. We’ve bridged the gap between agents and client payments with our efficient ACH payment system. Partnering with us gives agents the advantage of ACH payment capability, allowing for direct billing through the firm. Call us today at (866) 429-1638 to find out how you could partner with K2 to offer top-tier insurance coverages and modern features to your clients.
