Is It Safe to Take Checks When Selling a Car?

For many people, cars are second only to real estate as their most-expensive purchases, and this is especially true among young people. Because cars typically carry price tags that reach into the thousands or tens of thousands of dollars, you should take every possible protection when selling a vehicle. In many cases, exercising extreme caution means not accepting personal checks.

In most states, a vehicle’s title is the exclusive instrument of ownership. When you sell a car, you typically must issue the buyer a bill of sale and sign the release of ownership item located somewhere on the title. Once the buyer drives away with the signed title, you may no longer have legal ownership of the vehicle. If the buyer stops payment on the check, if the buyer does not have sufficient funds to cash the check or if the check is fraudulent, you may lose both your vehicle and any chance of financial recovery.

If you must accept a check when someone buys your car, you can take several precautions to reduce the risk. Copying the buyer’s driver’s license can keep a record of the buyer’s identity in case something goes wrong, and you can use the driver’s license to verify the name and address listed on the check. Some banks will verify a buyer’s account is legitimate if you call them, and you can significantly reduce the risk of accepting a personal check by cashing the check at the buyer’s bank before signing the title.

Though accepting personal checks carries a substantial amount of risk, dealerships can mitigate the risk through a number of legal and financial tools. When buyers use financing to purchase a car, the lender places a lien on the vehicle. If the check bounces or is not legitimate, the dealership can work with the lender to repossess the vehicle. Dealerships also tend to have more financial heft than individual sellers and may be more capable of bringing legal action against buyers who write worthless checks.

Though all payment methods carry some measure of risk, other payment instruments are considerably safer than checks. Cash is typically the safest payment instrument, and is even more secure if you use a special pen designed to identify counterfeit bills. Bank checks, also known as cashier’s checks, are generally considered safer forms of payment, though you can significantly lower the risk by accompanying the buyer to the bank and observing the teller as she issues the checks. You can also use online services to accept credit card payments, but merchant service fees can eat into the amount you receive from the sale.