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

[blasto9000]

Dealerships are independent business entities, and just like most people, the cars in their inventory are given to them on credit. So they must play by the creditor’s rules. Normally, if they sell GMs, GMAC would have provided the loan. If they sell Hondas, then Honda Finance Corp provided the loan. The creditor provides all the contract paperwork the dealership is allowed to use. Dealerships are NOT allowed to generate their own contracts if they are selling cars that are given to them on credit.

Since the vast majority of new car buys are done on installment contracts, generally the only type of paperwork available to the dealer is an installment contract. For the installment contract to be accepted by the financing bank, the customer’s FICO will have to be populated on the form. (This is typically systematic; if the form is sent with blank FICOs, it is automatically rejected without an analyst ever having seen it.)

So for a cash purchase, the finance manager would probably fill out the down payment as the amount given to them by check, and then the remaining monthly payments would be zero.

If the FICO comes in really low, and the customer is attempting to purchase an expensive car, the finance manager would probably reject the deal to to suspicion of fraud.

I have not seen a “lump sum” purchase contract for a new car… and if I did see one, I’d suspect the dealer fraudulently obtained the inventory. (Believe it or not, inventory-level thefts of cars from manufacturers is a very popular crime right now.)

In a nutshell, do not be surprised if a dealer wants to run your credit even if paying cash for a car. As long as the paperwork is handled above-board, there should be no fear of them having ulterior motives for having you go through the rigor marole.

FWIW, at the auto maker I work for, it is permitted for a credit analyst to do a Google search on a customer if the application is suspect or the info on the application isn’t readily verifiable.

[Voyager]

I’m guessing that what Bricker said 7 years ago is correct. When I bought my car - for cash - two years ago they certainly did not check my credit for the test drive - I’d be out of there in a flash if they had. They offered some high interest rate - 9% or something. As we were doing the paperwork they claimed that they needed to do a credit check. I forget the reason. When it came back all of a sudden the interest rate fell really dramatically, so I’m pretty certain they hadn’t checked before. I also figure they were lying about having to do it.

[Procrustus]

@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.

Same here, and I was in the middle of a refinance of my home. I specifically told them I didn’t want a credit check and would defer buying the car for a week of they were going to do one. They said they take a “peak” at the credit score,but it doesn’t show up as a “credit check.” [Red flag] Turns out they were lying and my credit score took a temporary hit as a result. It didn’t effect my refi, or their would have been Hell to pay.

[Desert_Nomad]

@Inigo_Montoya

Give me your driver’s license and I can learn enough about you to not only run your credit, but become you on paper.

You probably can’t do that with my Dubai license which doesn’t even have my birthdate on it - just name and nationality. FWIW even though we paid cash, the paperwork said we were financing it for zero months, with 1 payment and no interest.

[Inigo_Montoya]

@Desert_Nomad

You probably can’t do that with my Dubai license which doesn’t even have my birthdate on it - just name and nationality. FWIW even though we paid cash, the paperwork said we were financing it for zero months, with 1 payment and no interest.

Nope, yer probably right about that.