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My partner was is listing her car for sale (about $9-10K CAD). She got contacted by someone who wanted to pay with cash bills.

He was somewhat reassuring about the obvious risks of walking around with a lot of money, but it still felt offputting: if they agreed, he'd walk with her to her bank, hand her the money once there and she could deposit it herself.

So, she's not going to get robbed. But it still feels very odd. You can understand why a company would want to get paid in cash for services - to avoid reporting income to tax authorities. But for a buyer to go through the trouble of using cash seems weird - and not even very reassuring from their PoV if they got sold a lemon. So I am trying to understand possible motivations for wanting to use cash.

So what should one be on the lookout for in these circumstances?

  • Counterfeit? That seems unlikely since the bank ought to catch it. But she's the one holding the bag if the bills are found to be fakes.

  • Money laundering? Under $10K, she's not going to have to make any declarations about how she got the money when depositing. The buyer can then resell his car later on, looks like a perfectly legitimate transaction at that point.

  • ?

Note: She did not pursue this sale with this person. However, I was curious if paying cash was common practice with car buyers and what the risks would have been. The accepted answer covered both sides: motivations and it being common practice or not, as well as risk mitigation.

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    In my country cash is the default way of payment when trading with used cars. Wire transfers are slow, and payment apps don't handle large amounts. How is it typically done where you are?
    – Patrick
    Dec 14, 2022 at 9:53
  • Let us continue this discussion in chat.
    – gerrit
    Dec 15, 2022 at 16:51
  • I have deleted a lot of comments, none of which were about clarifying or improving the question. Please use the chat link above to continue the discussion.
    – GS - Apologise to Monica ♦
    Dec 16, 2022 at 1:33

10 Answers 10

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68

There are many reasons someone may want to pay in cash, from the innocuous (maybe a mild dislike of banks) to the nefarious (most common probably being doing work for cash under the table, paying no income tax, and wanting to use that cash directly wherever possible to obfuscate potential investigations into their income, whether from a legal or illegal source).

Whatever the reason for the buyer, you've already pinpointed the key requirement doing a large cash transaction safely: Transfer the cash at a bank directly. This is for your physical safety, and also gives the bank an opportunity to detect counterfeit bills. Even when selling your car for a cashier's cheque or other transfer method, quite often it is beneficial for buyer + seller to both be present at the bank.

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42

About 4.5% of households in the US and 3% of the population of Canada have no checking or savings accounts and 15% of Canadians only have limited interactions with their banks (ie no debit card/credit card for daily spending). These individuals deal primarily in cash. The individual could be one of those millions of people. They could just also be one of the many people who prefer to use cash for private transactions.

There's a chance the person obtained the money through illegal means and therefore wants to use cash, but that doesn't really present a significant risk to the seller. Similarly, many people dodge taxes or a portion of taxes via cash transactions, but that doesn't present significant risk to the seller either.

Having a bank check the bills is a good idea to eliminate concern about counterfeit bills.

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    I have doubts so called "unbanked" have 10k in cash waiting for a car purchase.
    – user26460
    Dec 13, 2022 at 15:13
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    @26460 Not everyone who doesn't use banks is destitute, but the unbanked population does skew towards lower income. Assuming that everyone who prefers cash is a criminal is unreasonable.
    – Hart CO
    Dec 13, 2022 at 15:36
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    @26460 Some workers especially in labor fields like construction deal often in cash; it's mostly a tax dodge and often immigration dodge, but those workers are as capable as anyone else at accumulating cash. They may not feel particularly comfortable taking it to a bank, and aren't going to get a loan for a car, so the only way to buy one is saving. People in tipped fields also may keep their cash in cash to not pay tax.
    – Bryan Krause
    Dec 13, 2022 at 16:32
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    @26460 You don't believe me that they exist, I say they do, what does telling you more do? There's data on the topic in the US, you can investigate if you care. You are now conflating wealth with income. You certainly don't need $250k income to afford a $10k car.
    – Hart CO
    Dec 14, 2022 at 1:56
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    @DKNguyen In the US many of the unbanked get regular paychecks and cash them at Walmart or other places. $10k isn't an outrageous sum of money for a used car. There are also a lot of people who do have bank accounts but don't use them regularly.
    – Hart CO
    Dec 14, 2022 at 2:03
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As someone who has bought several cars on craigslist in the past, my experience is that sellers usually prefer cash, because checks take a while to go through and can bounce. There are other options (eg. money orders) but I think most normal people have no idea how to recognize a fake money order, whereas fake cash is usually more obvious.

As the buyer, this gives me leverage to haggle a lower price. "You asked for $5000. I have $4500 in cash and can pick it up in 10 minutes." A lot of people would take that because avoiding the huge stress of selling a car and worrying about bouncing checks is worth $500 to them.

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    Re: fake money order / cashier's cheque, or similar - depending on your local banking system, you are likely able to go together to the bank, and deposit there with the bank able to immediately confirm it [Note - this does not apply to personal cheques, which may appear to clear but really won't be verified until days / weeks later, at which point the deposit can be removed]. If buyer and seller are with the same bank, you can even go to the teller and request a manual transfer - in some cases it may even be worth for the seller to open a simple account at the buyer's bank, to allow this.
    – Grade 'Eh' Bacon
    Dec 13, 2022 at 14:18
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    @Grade'Eh'Bacon open a simple account at the buyer's bank Have you tried opening a bank account recently? At least in the US, there is a lot of hassle involved. Not an impossible task, but a bunch of paperwork.
    – manassehkatz-Moving 2 Codidact
    Dec 13, 2022 at 15:09
  • Yes, it's about haggling.
    – user26460
    Dec 13, 2022 at 15:14
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    @Grade'Eh'Bacon No! That's a very dangerous mistake. If you deposit a fake money order/cashier's check at a bank that's not the original bank it's drawn on, they make no guarantee that it's not fake. It will have to go through the check clearing system back to the drawee bank who then looks in its database and finds its fake and returns it, several days later. So if you have a different bank, you have to go cash the check at the original bank... making the check irrelevant and going back to the OP's situation.
    – user71659
    Dec 13, 2022 at 20:03
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    Haggling is the strongest argument here... nothing beats the persuasive power of extending a handful of cash to a wavering seller.
    – John Mee
    Dec 15, 2022 at 1:03
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Regarding counterfeit bills it is probably a good idea to wait until the money is deposited before the ownership of the car is signed over. This means there should be no risk of this.

Money laundering or simple tax evasion seems to be the most likely explanation. If you have a lot of cash from all those under the table deals you might prefer to use it in an untraceable way rather than go through a bank account. Banks might be required to report large transactions proactively but that doesn't mean they won't report every transaction if some branch of law enforcement decides to investigate a suspects financial details and gets a warrant. I don't think your partner is at any risk of loss from this and so long as they aren't selling multiple cars a week to strangers, all of whom just happen to want to pay in cash, I doubt they would get in to difficulties with law enforcement. However someone with more legal knowledge in your jurisdiction might know of a potential legal problem.

A third explanation is that the buyer might simply prefer not to use banks because they don't like the idea of anyone knowing their business even when that business is perfectly legal.

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    Yep, this is most likely the other side of "business wants to be paid in cash" that OP refers to. Just like the construction workers I saw at the hardware store on a weekday morning taking a large wad of bills out of their pockets.
    – Olivier
    Dec 12, 2022 at 19:22
  • Another possible explanation: the buyer can report a lower price when registering the vehicle to pay less in sales tax. Might be a bit riskier when you have a record of the transaction in the bank.
    – aland
    Dec 13, 2022 at 10:54
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    @aland, the seller should provide a bill of sale showing the price paid for the vehicle. In my state there is also a place on the title for the transaction amount to be recorded by the seller who signs it over to the buyer. If you show up to register the vehicle without either of these documents showing the amount received by the buyer, they will look up the "book" value and charge taxes based on that.
    – spuck
    Dec 13, 2022 at 17:57
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    Your third explanation was my first thought. Cashless money transfers tend to have extra information associated with them (names, location, nature of transaction...) which can be leaked or sold to marketers, spammers, scammers etc. There's a small but significant counter-movement of people who deal in cash wherever possible to reduce the paper trail.
    – Pastychomper thanks Monica
    Dec 15, 2022 at 12:56
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    There is a fourth explanation. Suppose I want to buy a semi-nice used vehicle for one of my kids, and I decide $10k should do. So I go to my bank, withdraw $10k in cash, and look for individuals wanting to sell a vehicle for around $10k. And then I bargain: "I'll buy this car in cash for $9500. The individual might get $8k from a used car salesman (which sucks; they'll sell it for $11k) or $10k from someone using a personal check (which has its own risks). Nothing nefarious is involved, just cash in hand.
    – David Hammen
    Dec 15, 2022 at 15:56
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Possible motivation could be... I have a checking account, but no actual paper checks, just a debit card. Transaction is over the card limit. To buy a cashier's check or postal/bank money order costs a fee. To get cash money from my bank (assuming they can deal with the amount) costs nothing to me.

I can offer the seller 'cash on the barrel head', right now, no waiting for clearing, no fuss no muss. I watch them sign the title, then we trade title for cash. End.. of.. transaction. Go register the car and done deal.

Would I do that for over 15k? Nope. Under 10k? For sure.

EDIT
A couple commenters have asked about my last sentence. That's personal to me, not a rule I would state. The only 'rule' would be over the limit for reporting purposes. If I pulled 50k out, Federal paperwork would have to happen, right?

If I were going to buy, say a motorcycle or beater car for 4 grand, I'd just pull the money out of my account and go buy it. I, personally, have what I consider a comfortable life. Own my own home, good paying job, kids out of the house, etc. Good income, little to no expenses. If I lost 4 grand (had it stolen, whatever) I'd miss it, I'd report the crime, but it wouldn't be the end of the world. Even 9500, or 10k would be missed, but not the absolute end of the world for me at this point in my life. I'm not saying I'd just throw away money, but it wouldn't cause me irretrievable harm.

However, if I were going to buy a nicer car for, say 18000, I'd definitely have to quit sodas and chips, etc. It would be more painful. But thinking about it, I'm not even sure that's true. If I decided I need a snowblower, and found one for 15000 (a nice one :) ) I might even pull that out and take it as cash, if I was not going to be in a bad area of town, etc.

I guess what I'm saying is it is all perspective. "Kids these days" are used to just paying for everything by debit or credit, etc, I guess. I don't have a problem with what the OP is asking about. The person buying the car wants to pay cash and their immediate thought (as well as multiple commenters) is immediately nefarious. The buyer must be a drug dealer, must be laundering cash, etc. I'm saying not so. Maybe the buyer just wants to pay cash for something, to say that they did. To not have so much paperwork. No loan. No credit fees, etc.

Show up with a cashier's check, I'm not sure I would trust that. Personal check? Same. A bag of money? As long as it isn't counterfeit, nothing wrong with that. After all, my grandfather, back in the 60's and 70's, and even into the 80's, paid cash, as in a briefcase of actual cash money, for everything, cars, a home, etc. He had a few bucks.

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  • what's the difference between over 15k and under 10k?
    – littleadv
    Dec 13, 2022 at 17:57
  • Why would more than $15k in cash make you nervous?
    – spuck
    Dec 13, 2022 at 17:59
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    @littleadv For the same reason that multiple charitable organizations at this time of year ask people to donate $19 per month. A lot of research went into asking for this specific amount. Despite being only $1 more per month (or $12 more per year), people perceive $20 per month as representing a lot more money than $19 per month. People have their own personal rather sharp dividing line between what constitutes a lot of money and what doesn't. In this case, it's the (low) risk of theft between losing $10k vs $15k. Losing $10k is a tolerable risk. Losing $15k apparently is not a tolerable risk.
    – David Hammen
    Dec 15, 2022 at 15:12
  • @DavidHammen I disagree. 10K is telling - it's the "magic" amount that people assume would make the transaction be reported to the tax authorities.
    – littleadv
    Dec 15, 2022 at 17:54
  • @littleadv The answerer may disagree. Note that the answerer specifically wrote that they wouldn't necessarily have qualms with taking $15k out in cash for a cash purchase -- so long as doing so didn't involve crossing a bad part of town. That $10k limit is intended to catch repeat withdrawals and deposits, and it's stupid. Criminals (at least the smart ones) have learned to make $9900 withdrawals and deposits. Making an occasional withdrawal or deposit that exceeds $10k is not a concern for non-criminals who do so a few times per year.
    – David Hammen
    Dec 15, 2022 at 18:09
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I've recently paid a similar sum in cash because the credit card comes with a processing fee and the sum was above our debit cards' individual transaction limits. Changing those for a one-off is more of a hassle than just stopping at the ATM for a minute.

Cash also has the advantage that the transaction is final and cannot be reversed after the fact, or turn out to be bogus.

Last but not least, it doesn't leave a digital trail for data brokers and other unsavoury entities to track.

As long as you do the transaction at a bank and count and deposit the cash immediately, I cannot think of any special risks.

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One other feasible scenario is avoiding a financial record of the transaction because they want to evade having the car registered in their name.

I.e. you would continue to have financial responsibility for the car, or at least more difficulty proving that you had transferred ownership.

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    If there's a thing of "registering a car" in your country, chances are that the seller gets to report to the relevant government registration place that they've sold it (and to whom). That's certainly how it works in the UK. So this seems unlikely.
    – Graham
    Dec 13, 2022 at 9:15
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    @Graham This is actually a thing in at last some parts of Canada. The seller can sign over the registration paper and leave it to the buyer to file it with the government. I believe that's when taxes are paid so they have an incentive not to. More likely with a dirt cheap car that they don't mind loosing after 6-12 months however.
    – Olivier
    Dec 13, 2022 at 15:24
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    I'm not sure about the "difficulty proving" part. The OP only specified that the payment is in cash, not that there was a request for no other documentation. In Virginia, there is a form I download which when turned in to the State DMV by me, relinquishes my responsibilities. It has the buyer's and seller's information on it. Requiring that form to be filled out has nothing to do with how the payment for the vehicle is rendered.
    – CGCampbell
    Dec 13, 2022 at 17:17
  • My state really recommends producing a bill of sale which is signed by both the buyer and seller, with a copy kept by each. If the buyer then "forgets" to title or register the car, the seller then has at least something to show they are no longer the legal owner.
    – spuck
    Dec 13, 2022 at 18:01
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I’ve purchased vehicles from fleets in the past (US), and have had the sellers require cash.

For the buyer - i.e. the person holding a large sum of money, meet with the seller AT the bank, do not walk with a random stranger with cash TO the bank. Also be aware of “Something just came up!” and any pressure to complete the sale immediately away from the bank.

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    I hope I didn't mess up what you meant to say about where to meet with my edit. Seems to me you meant to say the person who most needs to worry is whoever is holding cash in their hand at any given point in time.
    – Italian Philosophers 4 Monica
    Dec 13, 2022 at 17:13
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I am not sure whether you speak only of large sums, like in this case, or in general, and I am aware this is a fringe view, but I would like to give mine anyway.

I pay via cash as much as I can, and the reason is largely political. It gets to the point, where I may intentionally to go a nearby ATM, just to withdraw cash with which I then pay. The only times I do not is when I pay online.

I do not like the idea of all my funds being kept by another entity, one that may not be trustworthy, supported by the increasingly feeble infrastructure that is digital or, really, electricity in general.

Here in Ukraine, everyone currently has routine power outages. How do you pay for anything then? One poof, and your money is practically gone. Even before this, it was always riddled with problems: pay via card, and you may get declined for whatever reason, it may simply fail or it may take ages to connect, etc. No matter how stable this infrastructure may become, this will always be a problem. Even more so, as people begin to rely upon it more and more for their basic existence. I do not want to be close to death each time my lights go out, no matter the times. That would make my great grandmother very disappointed, and I wouldn't like that.

With cash the transaction may take a bit, depending on which bills you or the other party may carry, but this is most of the time a problem with experience. In a supermarket you just grab a bit more until the problem disappears. In a smaller business a party may simply go in debt.

With card, none of this is possible. Its only advantage is short-term convenience. "The Future" they call it, but I find it laughable, really, much like I find convenience as an ideology itself. I'm fine if others pay by card, and I may be negotiated to use the bank, but, ultimately, I expect to always be allowed to pay with cash, and I certainly wouldn't like any negative stigma around it.

I know politics isn't expected on this site, but I think this is a valid answer.

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-1

The buyer most likely is a contractor or similar and wants to use his honestly earned, but untaxed income

I recently had to do some major renovations (I live near Seattle) and out of ~$50k, I had to withdraw ~$40k in cash to pay all the contractors (Who were heavily Mexican + former Soviet) who demanded to be paid in cash (This was during the pandemic when it was a sellers market for contractors so I couldn't argue). The $10K was one guy who needed to get legit income for a mortgage and was complaining about the unfairness of taxes.

This was not in Canada, but my parents live in BC and mentioned that it was the same for them when they did some Covid remodeling too.

You and your wife are most likely renters and haven't had to deal with building contractors yet, because this is super common.

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  • I offered to buy a car (for more than 10k) with cash--and the gov't already knows all about my money as they're the ones who pay me. It was just easier, there weren't any fees for cash. (As it turned out, the seller preferred cashier's check so that's what I used.)
    – user3067860
    Dec 15, 2022 at 15:44

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