Selling Out Of Trust

AAA

DEFINITION of 'Selling Out Of Trust'

A term commonly used in the automobile industry to refer to the selling of a car that has been paid for with a loan and then not using the sale proceeds to pay back the lender. This practice may be engaged in by car dealerships or individuals facing financial difficulty. Normally, if an individual can't make his car payments, the bank takes back the car. When the owner sells the car out of trust and doesn't repay the loan, the bank can't seize the loan collateral (the car).

INVESTOPEDIA EXPLAINS 'Selling Out Of Trust'

Dealers who obtain loans to acquire their vehicles can likewise engage in selling out of trust. Normally, a dealer pays monthly interest in the loans used to purchase vehicles until the vehicles are sold, at which point the loan is supposed to be repaid. While this term is commonly used in reference to car sales, it can also be used in other situations where a debtor sells an item without passing the sale proceeds to the lender. Selling out of trust is illegal.

RELATED TERMS
  1. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  2. Creditor

    An entity (person or institution) that extends credit by giving ...
  3. Loan

    The act of giving money, property or other material goods to ...
  4. Trust

    A fiduciary relationship in which one party, known as a trustor, ...
  5. Secured Debt

    Debt backed or secured by collateral to reduce the risk associated ...
  6. Car Title Loan

    A short-term loan in which the borrower's car title is used as ...
Related Articles
  1. Holding Titles On Real Property
    Retirement

    Holding Titles On Real Property

  2. Used Car Shopping: How To Avoid A Lemon
    Home & Auto

    Used Car Shopping: How To Avoid A Lemon

  3. The Best Way To Borrow
    Retirement

    The Best Way To Borrow

  4. How To Get The Best Price On A New Car
    Personal Finance

    How To Get The Best Price On A New Car

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center