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My wife and I recently bought a new Chevy from a dealer here in California. We didn't use a loan, paid using a personal check. Even though we told them we weren't financing the deal, they insisted on going through the entire process of filling out paperwork for a loan, including running a credit check, and they demanded all the info you would normally expect when applying for a loan, including our income, our social security numbers, and the name and phone number of a relative. They also took photos of our drivers' licenses. When I asked why they needed all this info, they said it was in case our check bounced. They said the reason for the loan paperwork was because if our check bounced and they couldn't contact us to deal with the problem, they wanted to be able to convert the transaction to a loan.

The car is already bought, but I would be interested in knowing more about this for next time. Are their explanations right? I can't help suspecting that they really just want to make as many sales using loans as possible, because the loans may be more lucrative than selling the car, so they probably just tell their sales people to make sure there is loan paperwork on every sale. Would it have been possible to avoid the time and privacy violation by bringing a cashier's check? I dislike the idea of having the signed loan application floating around, for the same kind of security reasons that I don't like getting preapproved credit cards in the mail.

For extra points: -- The contract included a binding arbitration clause, which we signed. In the past, with doctors' offices, I've just not signed these, and they accepted that. Has anyone seen what happens at a car dealer if you say you aren't willing to sign this clause?

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    Related article: creditcards.com/credit-card-news/… – BobbyScon Jul 30 '18 at 19:20
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    Both "in case our check bounced" and "they really just want to make as many sales using loans as possible" very well might be true. – RonJohn Jul 30 '18 at 21:08
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    You could have used a bank-certified check instead of a personal one, and taken their whole argument away. It sounds quite fishy to me anyway; I would have walked out. – Aganju Jul 30 '18 at 21:44
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    You are the customer, you have what they want (money) - if they aren´t willing to stop violating your privacy, why don´t you just take your money somewhere else? – Daniel Jul 31 '18 at 7:21
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When I went to purchase a car, I refused to give them any of this information. I told them I'd bring a certified bank check, but would not agree to give my SSN, or sign off on a credit report. I told them if they didn't agree to that, I'd find a dealer who was happy to take cash (check) to sell a car off the lot.

A strange business, where I walk in, spell out exactly what I want, and am subject to nearly an hour of BS questioning my decision on the car model, and choice to not go with financing. Next time, I'm prepared to walk out far sooner than that.

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    It is one of those instances of the blind attempting to show you the way. Car salesman, as a whole, are mostly poor in the area of personal finance yet they seek to give us financial advice. It is a crazy world. – Pete B. Jul 31 '18 at 11:09
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    Part of my issue is that my career was in sales. At 22, I was taught to listen to the customer, let them talk, and sell them what they want. Not too tough. The first dealer? Me: I know exactly the car I want, pls show me the Avalons you have on the lot. Him: Ok, let's test drive 4 other models. At the second dealer, at least I didn't get in to another car. – JoeTaxpayer Jul 31 '18 at 12:35
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    Yet another reason to buy used from a private party - even if it does mean you have to show up with an envelope full of $100 bills :-) – jamesqf Jul 31 '18 at 16:44
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Car dealerships always want you to fill out credit applications. I am not sure why, but they do. I have a feeling it is because they may be able to finance you in a car, and the finance room is the most profitable square footage in the dealership.

You can combat this in one of two ways, simply flat out refuse. If it breaks the deal, then get up and walk out. Now this may not be practical in some cases, so it may not always be an option. A small alternative to this is to fill out the application but with incorrect information. Put down 5 digits for your SSN, and insist that it is correct, or just use a different name, that sort of thing.

The second way is to just say that your credit is frozen. Reading your post, I would suggest to do exactly that. Even if you need a loan in the future you can always unfreeze your credit. However, I would not do so if a car dealer just wanted me too.

Even if a person does not actually have their credit frozen, they may just want to tell the dealer that to avoid the application.

Your binding arbitration might be better answered on law version of stack exchange.

  • I assume that if we had put down a false SSN, they would have run the credit check and detected the discrepancy. Giving them a fake name would not have worked, since we were handing them a check out of our checkbook. We do actually have a credit freeze, and I think we told them that, but they didn't seem to care. – Ben Crowell Jul 30 '18 at 20:35
  • Last time I bought a car, I got a 48-month zero-interest loan, which can't have been lucrative for the dealership. – David Thornley Jul 30 '18 at 22:18
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    @DavidThornley The 48-month zero-interest will already be baked into the price of the car. It's not exactly free. – Dheer Jul 31 '18 at 3:48
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    Put down 5 digits for your SSN, and insist that it is correct, or just use a different name - I´d be cautious to follow that advice, sounds borderline illegal! – Daniel Jul 31 '18 at 7:23
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    Is it illegal to write a fake SSN on a credit application, even though you are paying for a car in full? I guess the dealership should have called 911. I bet the police would have arrested the incorrect SSN writer on the spot! (or at least given the person an expensive ticket). – Julius Seizure Aug 1 '18 at 21:38
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Worst case: It's a scam. You left them a signed loan application. So they take your cash, and then they put through the loan paperwork, and now you have to pay finance charges on the loan.

More likely: The loan application gives them all sorts of information about your finances. If they decide you are buying a much cheaper car than you can afford, they can pressure you to buy a more expensive car. Or they do nothing with the information now, but wait six months or so and then start sending you advertising literature for more expensive cars that they think you can buy. Or they sell the information to other marketing organizations.

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