What happens if there's a cash shortfall on a sale at a car dealership?

This isn’t important enough to warrant a post to GQ, but it’s a factual question of sorts (though maybe the answers will depend on the dealer or situation), so I’ll go MPSIMS.

About eight years ago, I bought a late-model used car from a car dealership, planning to pay in cash after selling my prior vehicle in a private sale instead of trading it in. It was a Saturday afternoon, so I put $5,000 as a down payment on my credit card to lock in the sale, agreeing to return on Monday with a cashier’s check for the remaining $25,000.

I went in after work on Monday, got greeted by the salesman, cooled my heels for 15 minutes and then spent 45 minutes in a room getting annoyed with their “financing officer” despite having the papers already in order from Saturday for a cash purchase. I sat there refusing various flavors of extended warranties and service contracts before he signed all the right forms to conclude the sale (basically forms documenting that he’d tried to sell me that stuff, from what I could tell - I was signing forms “refusing” the opportunity to get those deals).

I exited his office and the salesman escorted me to their cashier window, where I was given the keys to the car, waiting for me right outside the door.

The salesman shook my hand, apologized a bit for the “hassle” involved in picking up the car, and said he hoped I’d come back for servicing or for our next car purchase.

I looked him in the eye - he’d been very friendly and low pressure while showing me 3 or 4 different cars, had talked to me about his kids who were a little older than my own who had been climbing in and out of all the prospective vehicles - and said, “So, that’s it? I’m finally done with all the paperwork?”

“That’s it!”
“What about the registration, title, plates, and all that?”
“The plates are on the car, and the title and registration care are here (points to them)”.
“And the title is clear, in my name?”
“Yes, if there was a lien recorded, it’d be indicated on the title.”
“So the car’s all mine, I can just drive off now?”
“That’s right! Congratulations!”
“It just feels like we’re forgetting something.”
“No, you’re good to go!”

I looked him in the eye, with his broad smile and everything, while shaking his hand a little longer.

I ran through different scenarios in my mind, weighed my potential actions or inactions against a judgment of my soul… Then sighed, and with my free hand, reached into my jacket and pulled out the cashier’s check made out to their dealership in the amount of $25,000 and handed it it him without saying anything.

His handshake and face froze. His eyes bugged out. His jaw dropped. He was a black man, so maybe it was a trick of the light, but he seemed to go ash gray.

I laughed and said something like, “Think again, buddy!” while slapping him on the back, which almost sent him to the floor, his knees were a little shaky. He stammered “Oh, my God --”, then said “thank you”, to which I said, “You gotta be more careful!” and left.

So here’s what I was wondering: had I left without handing over the check, what would have happened?

From my perspective, I’m pretty sure I could have taken the check back to my bank the next day, said I had ended up not needing to use the check after all, and had the money redeposited into the account it had come from. I would have had all the paperwork documenting me as the legal and full owner of the car, as processed by the dealership itself, and that would basically be that.

But in my mind’s eye, in that 2 or 3 seconds that I held his handshake, I pictured either the salesman or the financing officer losing their job or worse, over the shortfall. $25,000 is a lot of money, but it was money I obviously could afford and had planned to spend, and I wasn’t about to dirty my soul and spend the rest of my life imagining the guy’s life ruined, even the annoying financing officer, who after all was only doing his job.

I would assume it was the financing officer’s job to have taken my check, in the 45 minute period he spent trying to sell me an extended warranty.

But, from the salesman’s very physical reactions, I suspect it’d have been HIM on the hook had I driven off. Maybe because the forms that documented it as a cash sale required the salesman to take the money?

And what would have happened to them anyway? Fired, I assume, but would either or both of them be personally responsible to make good on the $25K, or is there some kind of insurance that would kick in?

The dealership would have called you. If you had argued the point the the car is yours because of the signed agreement, without upholding your end of the signed agreement, what happens to you then is up for debate. But you breached the contract and retained the car.

When I purchased a car with a personal check, I noticed that the contract had a provision for specific financing to kick in if I hadn’t paid the amount in full within some number of days. So I assume they’d fall back to that if my check bounced (or in my case, if I didn’t come back with an acceptable check soon enough since my original wasn’t deemed acceptable because the physical check only had my wife’s name on it and she wasn’t there).

Maybe something similar exists in your contract?

Every car sale I’ve been involved in, the sale price was in the contract. You would have failed to abide by the contract as agreed. They would have rightfully (and politely, at first) insisted you make good on the balance.

They screwed up, but there’s no way they were out of luck on the transaction.

But how could they prove I hadn’t paid?

They handed me the keys and title and I had copies of all documents they gave me. The title transfer from the dealership to me was done BY THEM. It’s not like there was a missing receipt on my end - I gave my cashier’s check and drove off. I don’t have the paperwork any more but clearly I had everything they were ever going to give me.

From my POV there was literally nothing different, and it’d be on them to prove they hadn’t misplaced the cashier’s check.

I suppose they could request a cancel and reissue of the check, once the bank conceded the check was never cashed.

But what if I claimed I’d literally paid in cash? The detail “balance payable in cashier’s check” may not have been specified vs “in cash”. (Again I could be wrong, not having the papers)

They would take this seriously enough to subpoena your bank records so you wouldn’t be able to do anything with that cashiers check. They’d see you paid for it, and you didn’t pay for another one. And since it hasn’t been cashed and they don’t have it they can ask the bank to cancel it and issue another one and then you can’t ever cash yours.

They have a cashier. If you claim you paid in cash, there will be further questions, and possibly video.

Good luck with that.
First, w/o the check, they wouldn’t know what bank to go after.
Second, a subpoena is for records, it’s not an order to freeze his account.
Third, a cashier’s check is guaranteed by the bank, not the person who gave it to you because he gave his funds to the bank & everyone knows a cashier’s check is good (assuming it’s not a forgery) because it’s written against the bank’s account, not the customer’s account so even if you did know his bank & could place a freeze on his account, he could still take the cashier’s check & do with it what he pleased*.

  • The check would most likely have the car dealer’s name in the Payee (Pay to the Order of) line so he could give it to someone else who was buying a car there.

In this case the OP explicitly states he never gave them the check. If he didn’t realize that, went home & hung that jacket in the closet because the weather suddenly changed to warmer/colder, it would probably be assumed that he gave it to them & they lost it, because why would they give him a car & not collect payment. If it were me, I’d go to my bank & get them to stop the first check & reissue; however, the new check would be for the original amount minus any stop/reissue fees so the dealer would be out some nominal amount.

He’ll get subpoenaed and the judge will order him to reveal the name of the bank.

I didn’t say anything about freezing an account. That money won’t be there anyway, unless he deposited it in which case he needs to explain where it came from.

Right. So what? He’ll still have to cough up 25 grand to pay for that car.

And the bank would show that check cashed and the dealer would know who used it and that person would end up in court also. And that would kick the case up to a fraud charge instead of a simple tort. Or do you think this is all covered under the “finder’s keepers” law?

If you actually had a cashier’s check, it would be blatantly obvious you were lying. $25k in cash leaves a paper trail. It’s not something you can plausibly make up after the fact.

Also, I think making a false claim like that would put you at risk of prosecution for fraud.

Years ago my brother purchased a car with a bag of cash. He had exhaustively researched and compared the car he was interested in, and made an offer in cash. He had a brown paperbag with around $20,000 in hundreds. The offer was “take it or I go to your competitor and make the same offer”.

The sale went through, but they had another salesman and a finance guy witness the cash count.

Unless they realize it right away, as opposed to taking a few days to realize they didn’t get paid when accounting figures it out, then another day to search for the check (because they wouldn’t give a customer keys & paperwork to a car he didn’t pay for), then a call to the customer that doesn’t get returned right away it’ll be at least a few days, if not weeks until they go to the courthouse. Even if the judge acts on it that day, there’s time to serve the buyer & then more time until the court date.

Assume they don’t ask for my check, which I then give to you to go in & buy another car the next day. Bank records will show that my check was cashed - Geez, I bought a car, I gave them a check, it was cashed by them; even if they took a photocopy of it w/ your car purchase it must be the car dealer’s sloppy paperwork that’s the issue. Now they need to start the whole process over of going after you, weeks, if not months after the fact. Of course, you either gave them fake info when you bought the car or you’ve moved (out of state, of course) & they don’t know how to find you.

The money for the car is still owed. You would need to show you paid that. There has to be a paper trail. They’re going to remember $25,000 in cash, they’ll have witnesses to say they never received it, and likely no bank transaction showing they deposited that much cash. So no matter how long it takes they’ll keep coming after you for 25 grand, and they’ll be claiming fraud too. Your refusal to cooperate could elevate that to a criminal charge. You’ll be found out, have to pay the 25 grand, and it might cost you that much again to pay for a lawyer who might be able to keep you out of jail.

I will assume no such thing. If you steal 25 grand from me I’m going after you. I’ll find out you purchased a cashier’s check, and if it was cashed I’ll find out who cashed it. If not that money is still in the bank and they’ll give it to me through a court order, and they’ll make you pay interest too. And I may have given a prosecutor a great deal on a new car and he might be taking a real close look at you and consider your failure to respond truthfully in court grounds for a criminal fraud case.

I did. In scenario #2, I got a cashier’s check from my bank & it was cashed by the dealership. There’s nothing officially on that check to indicate which car it was used to pay for; that’s going to be in the dealer’s paperwork, if anywhere. The dealer is going to say that they used my check to pay for someone else’s car. Good luck getting someone to believe that it was me committing fraud & not them screwing up their deposits/paperwork.

Except I didn’t pay with cash (which would require different paperwork for that much cash - over $10m), I paid with a cashier’s check, which my bank shows the car dealership cashed.

The dealer cashed the cashier’s check made out to them. The fact that they never asked for it for the first transaction, which allowed it to be used for the second transaction may never be caught in their paperwork. - I had a cashier’s check for a new car, the car dealership cashed it. ‘Somehow’ the photocopy of that check ended up in a different customer’s paperwork/folder. Good luck getting anyone to think that was anything other than the dealer screwing up.

Bribing an official to take action???
If it was the DA himself, as opposed to an ADA who works in his office, I’d suspect he’d kick it up to the state AG’s office.
I never said I would give the check to someone else if the car dealer didn’t ask me for it; just saying it presents a near perfect scenario if that happens to somebody less honest than the OP or me.

This is all nonsense. There’s a paper trail. They’ll know who used that check just like they’ll know you didn’t pay for your car. You will not be believed in the face of witnesses and auditors. If you give the check to someone else that just means both of you are committing fraud, there’s only one check, one payment, two cars. You will not get away with this kind of thing. The dealer has accounting procedures, you have no way to prove you paid for that car. Again, “Finder’s Keepers” is not a law, it’s a child’s game. The law says you have to pay for that car and you can’t prove you did and if that check was cashed it’s your problem.
ETA: You should hope it’s only a DA that the dealer did a favor for, they may have other friends who won’t have much patience with you.

When did this thread degenerate into “how could I defraud a careless car dealership?”?

You pay the full amount as specified in the contract or you’re in trouble. The details matter only as far as the degree you’re willing to violate the law, and we don’t talk about that on this board.

Wasn’t that the premise of the O.P.?

This seems to sum it up.

No, defrauding a car dealership was not the point of the OP; I explicitly chose not to do so, not out of fear of prosecution but from simple honesty.

However I judged from the salesman’s reaction that there were some very dire outcomes for him personally had I not handed him the check that nobody at the dealership had remembered to demand of me.

It can’t be a routine thing that happens all the time, and I don’t think it’s crazy to think one outcome would be that if the dealership lost track of their cash deposits that it’s on them (not on me to prove I had handed over the cash), when the biggest proof is “why the hell would you have signed over title to me if I hadn’t paid you?”

Certainly in a private sale, title transfer is final; if someone buys my car for 10K and gives me an envelope and I sign the title over, and later I find the envelope is interspersed of $1 not $100 bills, that’s too bad on me.

At a minimum, even if the dealership would have realized which sale was missing which receipt and realized it was mine, either he or the financing agent would be in for hot water, and for years I’ve assumed it was him (otherwise his reaction might have been to curse out the financing guy).

As for them coming after me later for the 25K, had I not given the check - if they do their books on a monthly basis when would they realize the shortfall, and how would they tie it to my sale? I guess their accounts receivable system or whatever would have line by line “check number X from person Y for sale Z” level detail to reconcile with sales?

It seems certain that at the end of that day the discrepancy would be discovered. So what happens next? It’s very possible that the sales guy would be in huge trouble even if the dealership is pretty certain of getting their money in the next few weeks or months. It’s not fun being personally on the hook for 25 grand even if you’re pretty sure you’ll get that money back. Even if it’s just “you won’t get your commission on this sale until we actually get that money”, that commission is how he gets paid. And if it costs the dealership $X in lawyers and paperwork to get that money back, where does it come from?

So he probably wasn’t going to lose $25,000. But he could have lost $X, which is the cost of the bullshit the dealership would have to go through to get their money, which should have taken $0.

The salesman was likely upset because he would be in for an ass chewing if he didn’t receive the money prior to the car being let out the door, not because the dealership could never recover it, but because there could be a potential hassle because someone might make the same argument you have tried to make. Not that it would work, but that instead of just depositing money, now we have to go to court.

You are incorrect about the private sale. You would have many ways to contest it. First, call the police and have them document what you have in your hand. Take a cell phone picture of it. Subpoena the purchaser’s bank records to show that he never made a $10,000 withdrawal. Then depose him and ask where he got $10,000 in cash without it coming from a bank.

There is no finders keepers rule.