Should You Tell The Dealer That You’re A Cash Buyer
Though some car dealers might act cold towards cash buyers, smart dealers know that it generally means a fast sale and good reviews if they treat the customer well.
It also means that there’s no risk of the deal falling apart in the finance department due to the buyer’s credit score. That means the only thing you’re ultimately negotiating is the final price of the car.
Some advisors recommend not disclosing that you’re paying cash instead, you can say you have your own financing and are open to other options. That includes choosing a lender not promoted by the dealer, such as your bank or credit union. Then add that you want to negotiate the best price based on cash.
The Irs Says You Are Not Paying Cash If Your Check Is Over $10000
That seems strange doesn’t it? Of course any cash over $10,000 requires IRS Form 8300 to be filled out which is how they trap cash buyers trying to illegally move money around. I call it structuring, where you have say $15,000 in cash, but you illegally structure the deal as say $7,500 cash and $7,500 in a check to avoid the $10,000 cash rule. But the IRS is on to you, they know what you did last summer.
It’s a strange game the government is playing here they are trying to trap people attempting to fly under the radar who are using cash or cash equivalents under $10,000. But the house always wins, they have traps set in place.
The IRS says that if you show up with a mixture of cash and a cashier’s check totaling over $10,000, they treat it all as cash and form IRS Form 8300 must be filled out. But for your personal checks and cashier’s checks larger than $10,000, which most car purchases are likely to be, the IRS does not consider those as cash, because presumably your bank has already filled out the required forms to the US Treasury’s FinCen via Form 112.
Can You Use A Cashier’s Check To Buy A Car
The bank guarantees a cashier’s check because the funds have already been cleared. This may seem more powerful than a personal check when it comes to car buying negotiations, but most dealers do not treat it differently. If you are paying in full for the car and the amount of the purchase is high, the dealer may ask you for a cashier’s check.
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How Do Car Dealers Check Your Credit
Car dealers gather financial information by asking potential customers to complete an auto loan application. They use the information you provide, including your Social Security number, to obtain your credit report. With your consent, the dealer’s finance department provides your information from the application to the credit bureaus. When a dealer pulls your credit report, it’s known as a “hard pull.” Although a hard credit inquiry can lower your score, the impact is usually minimal.
Dealers Are Required To Bounce Your Name Off The Ofac Sdn List
This all sounds like a brand soup of complications but we’ll educate you on this real fast it’s quite easy. The Office of Foreign Assets Control is a division of the US Department of the Treasury, and they administer and enforce economic and trade sanctions against certain foreign countries and regimes, terrorists, drug traffickers, people involved with weapons of mass destruction, and other threats to United States.
The OFAC publishes on their site a frequently updated list currently over 1000 pages long of these banned people and groups called the Specially Designated Nationals and Blocked Persons List everyone calls it the “SDN.” You remember how Santa Claus is making a list and checking it twice? Don’t forget Santa maintains a list of who has been naughty, and what a coincidence, so does the OFAC with their SDN list.
Their very long and extensive SDN list contains all the folks around the world who have been naughty and so we are not allowed to do business with them. Businesses such as car dealers are required to bounce your name off the OFAC SDN list and make sure you are not a terrorist, or some other person banned from doing business.
The penalty for non-compliance of the OFACs SDN list is huge, and the OFAC fines numerous entities every month. Here is a sample of their SDN list below:
OFAC Specially Designated Nationals list of blocked persons
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When You May Need A Cashier’s Check
Cashier’s checks may be required on certain large transactions, such as when you’re buying a car, motorcycle, boat or RV from a private party or dealership. It may also be possible to use one to close on a home purchase, though the title company may request a wire transfer instead.
If you’re making a large purchase like a vehicle or home, ask the seller, dealership or title company about the payment methods they accept.
What To Know About Paying Cash At A Car Dealer
One of the essential things to understand is that many dealers won’t give you a better deal for paying cash because they make money by signing up a buyer with a loan. For example, they get you approved for a loan and tell you that it’s 4.5% for 60 months. In reality, the interest rate is 3.5%, but the dealer gets to keep the difference.
It’s an entirely legal practice, and most car dealers do it. Plus, they usually run a credit check on the buyer during the process anyway.
The finance room of a car dealership is the profit center. Aside from profiting off the loan, they will also offer up warranties and protection packages, which are big money makers for the dealership.
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Don’t Discuss Your Trade
Its almost always possiblewith time and effortto sell an old car privately for more than the dealer offers in trade. Many buyers nevertheless find the convenience of driving their old car in and their new one away compelling. If thats your aim, research the value of your trade-in beforehand but decline offers or pressure to discuss it until after youve settled the price on the new car. If it turns out that youre upside down on the old carthat is, you owe more money on it than youre getting in tradeyou probably dont belong in a new-car dealership yet. At the least, the car should be sold privately to pay off the debt. Yes, the dealer will offer to roll your old debt into a new loan. But that’s not a good idea.
Precautions When Accepting Checks
If you must accept a check when someone buys your car, you can take several precautions to reduce the risk. Copying the buyers drivers license can keep a record of the buyers identity in case something goes wrong, and you can use the drivers license to verify the name and address listed on the check. Some banks will verify a buyers account is legitimate if you call them, and you can significantly reduce the risk of accepting a personal check by cashing the check at the buyers bank before signing the title.
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You May Get Discounts
Many car dealerships offer rebates for customers who pay for their cars in cash, allowing you to get a discount price. If you plan on buying a used car, paying in cash can also give you more leverage to negotiate on the price of the vehicle. Most people would prefer to have the full cost of the car upfront rather than deal with the hassle of monthly payments, so they may be willing to lower their asking price in exchange for the convenience of upfront money.
Do Your Research Online
What makes a new car the best new car for you?
With the incredible amount of data available, what specifically should you research? There are pricing and equipment options to consider, but what else should be of concern? Other important facts to discover include information about safety, quality and five-year cost of ownership. These ratings can help you achieve some needed peace-of-mind. Then, follow up by researching owner opinions and expert reviews.
Safety
There are two aspects of safety. They are passive and active safety. Know the differences of both and learn whats most important to you.
Passive Safety: This concerns itself primarily with protection of the occupants in the event of a crash. For the most part, passive safety is the job of the car, although the occupants have the responsibility to use the seat belts.
These are the features associated with passive safety:
- Airbags
- Seat-belt pretensioners
- head protection devices and the like
Active Safety: This concerns itself primarily with not having the crash in the first place. For the most part, active safety is the job of the driver, but certain important features on the car can help the driver avoid a crash.
Features associated with active safety:
- Antilock brakes
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High Credit Card Interest Charges
Credit card companies typically charge high interest rates. In November 2020, the average , on accounts that were charged interest, was 16.28%, compared to an average rate of 4.95% for a 48-month new-car loan. If you arent able to pay off your purchase right away and just make the minimum payments, you could pay more in interest with a credit card than you would if you got an auto loan.
Theres one caveat to this: If you get a new card with a 0% intro APR to make your purchase and youre able to pay off the balance before the intro period expires, you could avoid interest charges altogether. But if you dont pay the balance in full before the promotional period ends, youll pay the cards regular rate on the remaining balance.
Private Party Sales Agreement
Once you agree on a purchase price for the vehicle, it’s time to write up a sales agreement. Check with your state’s department of motor vehicles on what exactly is required, but it’s crucial to get a receipt.
A sales contract should include the following:
- Year
- Current mileage
- Sale price
An excellent way to make the vehicle for cash exchange is to do it at a DMV. That way, you’re in a public place, and you can make sure that everything is in order. Typically you would pay in cash or with a cashier’s check. With the latter option, you could also meet at a bank to make the exchange. Some police departments have a special space specifically for online transactions if you feel safer in a secure location.
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How To Trace A Certified Bank Check
A private car sale eliminates dealer involvement because you’re not selling your car to or through a dealer. Consequently, selling your car privately to an individual can be an effective way to maximize your profit from the sale because you don’t have to worry about the dealer reducing his asking price to meet his resale margin. Although you can walk away from a private car sale with more money in your pocket, you also have more potential risk when you receive a payment check from a buyer. Make sure the payment is secure before you let someone drive off with your car.
How Credit Scores Are Factored
Most consumers don’t realize that multiple credit scores exist for each individual, a fact that credit-scoring companies generally avoid explaining to their users. It’s important for consumers to know exactly how their credit scores are being issued and rated, so as to avoid fraud and false advertising.
In 2017, the Consumer Financial Protection Bureau ordered TransUnion and Equifax to pay more than $17.6 million in restitution to consumers for deceiving them about their personal credit scores. TransUnion and Equifax had each advertised that the credit scores they issued would be the numbers that lenders would use when making decisions, but this was determined to be a lie. The two credit bureaus also had to pay $5.5 million in fines to the CFPB.
The credit score given by providers like and are generic, educational credit scores, meant to give consumers an approximate idea of where their credit stands.
According to the CFPB, credit scores are based on the following factors:
- Your bill-paying history
- Whether you have had a debt sent to collection, a foreclosure, or a bankruptcy, and how long ago
Unfortunately, none of the credit scoring models have a breakdown of the exact factors that auto lenders use, but it’s safe to assume that these auto scores place more weight on variables that signal potential loan default.
For example, auto scores look for:
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Buying Cars Is Not The Same After The 2001 Terrorist Attacks
We used to say cash is king when buying a new car, but sometimes it does add complications. In this car buying scenario, you are out car shopping and decide you want to avoid financing your new car purchase, and instead you want to pay with cash or a cashier’s check, or even a personal check because after all, cash is king.
If you are not financing through the dealer, then unscrupulous car dealers cannot play their shell games and hide the fact that they just stuffed a $3,000 warranty into your deal, spread out and amortized into your 84 monthly payments, because guess what, there are no monthly payments!
Car salespeople will try to do everything they can to stop you from using your own financing, because they want that car loan commission. By paying with cash, you also won’t fall victim to their “financing fell through, come back and re-sign new papers” scam 2 weeks later, because there is no financing, no car loan, you paid cash. We are hearing from more and more car buyers all the time who are slapped upside their face with this Spot Delivery financing fell through scam.
Why The Credit Check
Car dealers check your credit to learn more about your financial situation and to protect themselves from fraudulent shoppers. Your credit report helps verify you are who you say you are. The information in your credit report is also essential to obtaining financing. When a dealer pulls your credit report and history, he will get a better idea of whether you are a good risk for a loan, and what terms to offer you. If you have poor credit, you can expect a higher interest rate on a loan for the same vehicle than someone with good credit. If you tell the salesman you want to stick to a certain payment range, running your credit can help determine which cars will fit your budget. For people with a very low credit score, financing may not even be an option.
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Dealers Don’t Need Your Social Security Number To Check Ofac List
All they need is a name, not a number. As we showed you above, if you are paying cash and the car dealer checks your name against the OFAC list, you can easily see they don’t need your Social Security number, so this is why I say it’s bogus when they force you to fill out a credit application when you pay cash.
Other unscrupulous dealers lie and say the “Patriot Act requires you to fill out a credit application”, which is just a flat out lie. Also the OFAC requirements were in place years before the Patriot Act. Ever since the early 2000’s we here at CarBuyingTips.com have received complaints from car buyers telling us the dealer told them it is required by the Patriot Act when they pay cash.
We warned about this scam in a previous article called Patriot Act Car Dealer Financing Scam.
In that article we advised you how to get a downloadable copy of the Patriot Act and how to search it and there of course is nothing in that PDF file referring to car dealers and credit applications. It’s just a lie some of them like to make up because it sounds believable to most people.
We suspect that some of these morally challenged salespeople are just trying to trick car buyers into financing through the dealer and earn a little more profit and commission, or running an unnecessary credit check on cash buyers to sway them into car financing instead of paying cash. Don’t let this happen to you.
How To Pay For A Car In Cash
This article was co-authored by Bryan Hamby. Bryan Hamby is the owner of Auto Broker Club, a trusted auto brokerage in Los Angeles, California. He founded Auto Broker Club in 2014 out of a passion for cars and a unique talent for customizing the car dealership process to be on the buyers side. With 1,400+ deals closed, and a 90% customer retention rate, Bryans focus is to simplify the car buying experience through transparency, fair pricing, and world class customer service.There are 9 references cited in this article, which can be found at the bottom of the page. This article has been viewed 73,106 times.
Buying a car with cash is a great way to avoid paying lots of interest on a loan. Kickstart the car buying process by determining your budget. Then, decide the type of car that you want and can afford. Look over car listings and make contact with a seller or dealer. Withdraw the cash or get a cashiers check and make your purchase.XExpert SourceCar Buying ExpertExpert Interview. 11 June 2019. Get an official receipt and paperwork to seal the deal.
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