Right away most of you have read the headline and thought, “Of course not, McParland! How obvious do you need to get?” I too thought this was common sense—until I got an alarming amount of emails from readers that have put themselves in a tough spot because they agreed to finance their buyers.
The most recent message went something like this:
“I bought a 2004 Mustang for $4,000. I sold it for $10,000 and agreed to have the seller make payments of $500. He gave me one payment and now I haven’t heard from him again. What can I do?”
This poor guy was likely the victim of a scam.
When I asked if the buyer had the title to his car, I never got a response. But if that is the case, someone just walked off with his Mustang for a mere $500. This highlights the first reason you never accept payments for your ride: There are so many scammers and thieves out there looking for an easy target.
These buyers will often offer amounts that are way too good to be true. The first alarm should have been set off when the supposed buyer “agreed” to pay $10,000 for a 2004 Mustang that was purchased not long ago for only $4,000. This likely wasn’t some special edition car that the owner picked up on a secret bargain. Unless you are selling some ultra-rare collectible car, never trust a buyer who offers way over your asking price.
To protect yourself against scammers, I suggest that sellers only accept one of two forms of payment: cold hard cash, or a certified bank check that is issued directly to the seller from the bank itself. In the case of the check, have the buyer meet you at their bank or yours and complete the transaction there. Most banks will help you facilitate this. The buyer will hand over their payment to the bank, that will then issue official payment in cash or check to the seller.
More often than not the problems with financing your buyer doesn’t arise from scammers, but rather from people, usually friends or relatives, who just can’t make the payments. This can cause some serious friction if it’s family, as in the email below:
“My cousin bought my car for $5,000 and I let him give me some payments every week once he got paid, but now he stopped paying and I don’t know what to do. He needs the car to get to work.”
In this case, the seller has two choices: He can either gift the car to his cousin out of generosity, and use this as a learning opportunity, or he can take his car back and risk some family strife.
There is almost never a scenario where acting as a bank for a family member ends well. If you want to help someone get back on their feet and have the means to do so, do it without expecting anything in return. If you want to sell your family member your car, tell them you will hold onto it for a bit until they save up. If at a certain point in time they don’t have the money, find another buyer.
People can be easily swayed by tempting offers or some sense of obligation to help out a friend or family member. But in the long run, your best bet is to stick with this motto: “No cash, no car.”