Paying cash for a car: does dealer have to run credit check?

[drpepper]

Thanks, all. Very enlightening.

Maybe I’m naive, but I honestly don’t see an easy way for them to run a credit check with just a drivers’ license with an arbitrary identification number (including, admittedly, a date of birth). Hubby has a very common name, so I’m assuming they can’t do anything with just that.

[RayMan]

@Philster

Read my post again.

A check can spur a credit check…or a check of prev check paying history. I work at TransUnion, I know what we have on file. If you are handed a check as payment, and it is a personal check, you can go ahead and pull a credit report, because you are issuing the buyer 15,000 bucks in credit when he drives off. Usually, bizs accepting checks will use a company that checks on check paying history…not a credit bureau, but pulling a credit report is not out of the question, especially since car dealers pull so many that they can wipe their asses with them.

Also, while some car dealers are a bit underhanded when it comes to checking credit REPORTS while you are on a test drive, to pull a credit report, one needs only to have ‘permissable purpose’, not PERMISSION.

I reread your post. Maybe you want to reread mine.

I specifically said a check is “not a form of credit in the sense that we are referring to in this thread”. Yes, when you receive a check for $15,000, you are taking a person at their word that the check is legit, the funds are available, etc. That is why car dealerships and other recipients of large checks will verify funds availability with the issuing bank, and may, at their discretion, wait for the check to clear before allowing a car buyer to drive the car off the lot. I have verified funds availability for large cashier’s checks before with customers in this situation.

But paying with a check is not being issued “credit” as a credit bureau would define it. If you work at TransUnion, you must know that funds availability and check bouncing history will not show up on a credit report. If a car dealership is accepting payment in full for a car in the form of a check, then they are not extending credit to the buyer of the car. A credit check is not justified.

You seem to imply that because car dealerships initiate so many credit checks, they are somehow justified in running one in the case in question. Presumably, such justification comes from the nature of the transaction, and not from what car dealership employees may or may not wipe their asses with.

[Gunslinger]

@David Simmons

However, it they try to show that they will give you a much better deal on the car if financed than they will for cash it might pay you to tell them they’re asking too much for car.

Every car I’ve ever bought or considered buying (~$4000 used ones), the cash price was about half the total financed price (of course, this more likely says something about the type of people that sell (and buy) cheap old cars than the industry in general.

I go to the bank and get a stack of $100 bills when I buy a car. That’s the easiest way to do it (although it’s not really convenient for more than $4000 or so).

[Philster]

If you start talking about writing a check for a car, and you are in a dealership, MAIL THIS IN, and it is legal:

They can pull your credit report. LEGALLY. Chances are, because they wipe their asses with them, they are not very likely to pass on the chance.

They don’t need your friggin’ permission. First of all, you are about to enter into a business transaction with them. Thus, they have permissable purpose. Heck, maybe they want to encourage you to put your check book away and take advantage of their 0% financing for 12 months.

Now, they don’t HAVE to do the credit check, but it is easy to understand that they can opt to, their motivation, and the legallity of it.
They don’t need you SSN, although that would help.

~Resident Credit Reporting Expert

[David_Simmons]

@Gunslinger

Every car I’ve ever bought or considered buying (~$4000 used ones), the cash price was about half the total financed price (of course, this more likely says something about the type of people that sell (and buy) cheap old cars than the industry in general.

I go to the bank and get a stack of $100 bills when I buy a car. That’s the easiest way to do it (although it’s not really convenient for more than $4000 or so).

I think it is almost impossible to get a price break on a used car, cash or financed. The dealer gives the new car buyer the best deal he can and has to sell the trade-in for the asking price in order to realize the expected profit.

For a $4000 car financed at 39% for 48 months the total cost is $7953.26

[Balthisar]

@Philster

If you start talking about writing a check for a car, and you are in a dealership, MAIL THIS IN, and it is legal:

They can pull your credit report. LEGALLY. Chances are, because they wipe their asses with them, they are not very likely to pass on the chance.

They don’t need your friggin’ permission. First of all, you are about to enter into a business transaction with them. Thus, they have permissable purpose. Heck, maybe they want to encourage you to put your check book away and take advantage of their 0% financing for 12 months.

Now, they don’t HAVE to do the credit check, but it is easy to understand that they can opt to, their motivation, and the legallity of it.
They don’t need you SSN, although that would help.

~Resident Credit Reporting Expert

Philster, but what stage of the game are you talking about? At what point is there a “business transacation”? If I’ve already made the offer and we’re filling out paperwork, then maybe there’s a possibility that they could be dicks and force a credit check. But if I’m in the showroom and want to take a car for a test drive, does that imply a business relationship? Does that relationship also allow them to SPAM my telephone for the next 18 months (now that we have a business relationship)?

For what it’s worth, I know for a fact that when I purchased my current car, the dealer did not conduct a credit check. It helps that I’m fortunate and can get company prices or buy company cars at any dealer I want for the same price, so there’s some incentive for a dealer to “behave.”

[Philster]

Originally Posted by Philster
If you start talking about writing a check for a car, and you are in a dealership, MAIL THIS IN, and it is legal:

They can pull your credit report. LEGALLY. Chances are, because they wipe their asses with them, they are not very likely to pass on the chance.
-end

I am not addressing the legallity of pulling a report whilst you test drive. I am addressing the legallity of pulling a report whilst you are trying to purchase a vehicle. It is legal, even if you pull out a pen to write a check. Again, maybe they want to offer you a great free financing deal, if you buy the extended warranty, or have top tier credit.

Casually looking over cars and driving some really isn’t enough (anymore) to justify permissable purpose. I never argued that. They might ignore this ‘rule’ and do it anyway, because the are habituall offenders (dealers), or have been.

So, let us keep the distintions clear: SHOULD they pull a report on a test drive: No. Might they: Yes.

Legally ok to check credit whilst doing biz (like writing a check): yes! permissable purpose: yes! Heck, to the consumer’s advantage, they might say you qualify for free financing and a 60 day $$ back warranty based on your credit! So, it is perfectly legit (permissable purpose, FCRA) to pull a report, even if you grab your check book.

[Duckster]

• A request to “test drive” a vehicle does not indicate an intent to purchase a vehicle and, therefore, does not “initiate” a business transaction. A dealer must obtain written permission if the dealer wants to check a consumer’s credit report before or during a test drive.

• Obtaining credit reports solely for the purpose of negotiating with consumers is not permitted.

• The fact that a consumer asks questions about prices and financing does not necessarily indicate an intent to purchase or lease a vehicle from the dealer. The consumer may only be “window shopping” or comparison shopping. Thus, the dealer must obtain the consumer’s written permission before obtaining the credit report if the consumer has simply asked questions about prices and financing.

• If a dealer needs to see a consumer’s credit report before answering general questions, such as inquiries about available financing when the consumer has not applied for credit, the dealer must obtain written permission from the consumer.

Source: FTC Report

[cstamets]

Unfortunately, from the above-mentioned FTC Report, it looks like a car dealer is perfectly within his rights to run a credit check if the customer is paying with a check:

The staff’s letter emphasizes that, even when the consumer is purchasing or leasing a vehicle, the dealer has a right to obtain a credit report on the consumer only when it has a legitimate need for the information, such as if the consumer requests financing (to review creditworthiness and prior payment history), or a dealer may have a right to access a consumer report to see if the consumer has a history of passing bad checks after a check is presented but before the consumer takes possession of the vehicle.

Bolding mine. Nothing says they “have” to, of course, except maybe company policy, but they can, unless the FTC somewhere else makes a distinction between consumer reports for bad checks and consumer reports for credit.

[DrDeth]

Dudes- Philster may work for one of the “Evil Empires” but he knows his shit. We disagree on how evil the Credit Reporting companies are sure, but he is a wealth of info on this subject.

[mikea604]

Hello;

I have worked for a couple dealerships over the years. Here is the deal…

1. There is NO law requiring a credit check or application to purchase a car on a cash sale. Most (if not all) dealers will want you to so they can finance the car on THEIR terms. Even if they offer you a better rate than what you can get at your bank, credit union, etc., THE DEALER gets an additional commission financing through THEIR sources.

2. It IS NOT against the law to REFUSE to sell you a car or EVEN LET YOU test drive a vehicle without a credit check or application if they want to require it. Remember a dealership is a PRIVATE BUSINESS and they can do business any way they choose.

3. If you LIE to a dealership on a credit application or give them false information in order to test drive a vehicle, you CAN be charged with bank or credit fraud, or (al least in some areas) be charged with criminal trespass. It’s rare, but it has happened.

4. As far as actual laws go regarding cash purchase of a vehicle, the only United States one that I am aware of is the requirement to report ANY CASH TRANSACTION of over $9,999.99 to the government. This is referenced in, among other places, the Internal Revenue Code (the rules the IRS uses, among others) and this rule also applies to checks, money orders and so forth. Source: IRS Agent.

4A) There is conflicting information, but even multiple smaller payments within a certain time mat also be reportable (i.e. you make a $5,000 down payment on Monday and pay the car off within 30 days) and I’m not sure of the time limit.

5. Most used car/private dealerships are less likely to cause you an issue.

6. While it is your RIGHT to pay for a vehicle however you wish, remember that MANY governmental agencies consider it hinky if you don’t follow the norm.

Just remember that the seller can make their own rules (although LYING to you that it is a “Patriot Act” or some other law could subject them to a potential lawsuit - consult your attorney) about selling anything, buying anything, or even renting anything. YOUR ONLY DEFENSES are to either do business elsewhere, check the laws, and as I do, CALL THEIR BLUFF!

I had a dealership I bought a car from pull the same crap on me. I have lousy credit, but a fat wallet. They claimed a law existed, I said it didn’t. I RECORDED on my phone what they said (in plain sight, a concealed recorder is against the law) and then researched accordingly. For $50.00 an attorney wrote a letter confirming, I called a radio station and took a news reporter in with me…

And made a MUCH better deal. The settlement says I can’t tell you HOW good.

Just remember NO ONE wants bad publicity!

[Green_Cymbeline]

I bought a car with a check recently. I do not recall agreeing to a credit check, but shortly thereafter I checked my credit reports, and the credit inquiry from the dealership appeared on my reports. I was pretty pissed because credit checks negatively affect your credit report.

[Keeve]

A few decades back, I bough a new car with a cashier’s check. During the price negotiations, I asked if I could get a discount for cash. He answered, to my surprise, that he makes a commission on the financing, so No, definitely no discount for cash.

[Mean_Mr.Mustard]

I bought a car last week for $5400 and paid with a cashier’s check. He did copy my license for the test drive, but once I said I was paying cash, credit or financing was never brought up.
mmm

[septimus]

I knew someone who wanted to pay cash for an expensivish car, but the dealer told them credit would be better as otherwise Treasury or IRS would be notified!

I don’t know who was scamming whom. Perhaps I was the intended victim, as I was asked to co-sign for the loan. :smack:

[Desert_Nomad]

We recently bought a car for cash (a large cashiers check and several thousand in physical cash). They insisted on running a credit check if we used a personal check but not for the payment method we used. They did require a SSN though - suposedly for the DMV.

They did report the sale to the IRS because the cashiers check was greater than $10K… even though right on the form they gave me it says cashiers checks over $10K are not to be reported.

They could not do much with my drivers license because I used my foreign one for the test drive and buying process.

[Pixel_Dent]

@DrDeth

Both Bricker & Philster are correct. They want to run a credit check because they will use it to try and sell you credit (along with undercoating, over coating and every other dealer profit maker that can find). BUT on the other hand, it is rather common for a type of scamster to go in, buy a car with a large check, have it bounce, then get a nice car to drive around in until the repo men catch up with you.

So, if you don’t want a credit check (and do note- an “inquiry” can sometimes cost you “points”), then bring them a cashier’s check.

They may be right some of the time but not always. I bought 2 cars via personal check in January. In each case they ran a check but financing was never mentioned. (And my credit is just about perfect so that wasn’t an issue). One dealer (Honda) did try to sell me an extended warranty but the other didn’t even try that.

[Hockey_Monkey]

@Bricker

I’m pretty sure they run a credit check because they want to have ammunition to switch you to financing. Even if you’re prepared to pay cash, they’re prepared to show you financing at their low rate will actually save you money. Dealerships make money on the front end (profit on the car they’re selling) and money on the back end (financing and insurance, or F&I). They are often willing to lose a bit of money on the front end if they are going to make it up on the back end.

Offer them a certified check. If they demand a credit check even with that, tel them you’ll walk.

This exactly. They want the opportunity to switch you to low rate financing that theoretically could save you money, but in actuality is to generate more income for the dealership. The finance companies pay the dealerships for good paper.

If you can make more on your money by leaving it in an interest bearing account or money market, it may be to your benefit to take the finance option. If you don’t care either way, just tell them that a credit check is not necessary for a cash transaction and if they insist that it is, then go to another dealer.

[Hockey_Monkey]

@Shoeless

Pardon the slight hijack here – it’s been a few years since I was car shopping, but I recall that most dealerships I visited took a photocopy of my license before they would even let me go for a test drive. Were they checking my credit while I was out for a test drive, before we’d even started talking money? (BTW, my SSN is not on my DL. Does that make a difference as far as their ability to run a credit check?)

If they did, it’s illegal. You cannot run a credit check without permission in the form of a signed credit application. Every service I’ve ever used required the social to get a report, so with just a license, there isn’t enough information. (I worked in retail auto for 9 years in the finance department.) We could get in huge trouble for running someone’s credit without permission, and once had to defend ourselves. We had a signed application, so all was good.

We made a copy of the license for insurance and for safety. As a female, I often went on test drives with complete strangers. It was good to know that if I turned up missing, the police had somewhere to start looking.

[Inigo_Montoya]

@drpepper

Thanks, all. Very enlightening.

Maybe I’m naive, but I honestly don’t see an easy way for them to run a credit check with just a drivers’ license with an arbitrary identification number (including, admittedly, a date of birth). Hubby has a very common name, so I’m assuming they can’t do anything with just that.

There are services–totally legal and instantaneous–that provide a lot of personal information about you. If enter an address, I can see a list of other people who have used that address. If I enter a name, I can get a list of people with that name, often with their birth date & SSN and any addresses they’ve used in the past. Now granted, I have to have a permissible reason to get that info, but if I wanted to I could lookup old classmates I knew in high school 25 years ago and find out where they are now and where they’ve been. In about 3 minutes. Give me your driver’s license and I can learn enough about you to not only run your credit, but become you on paper.