Selling Out Of Trust

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).

BREAKING DOWN '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. Car Title Loan

    A short-term loan in which the borrower's car title is used as ...
  2. Title Loan

    A loan where an asset is required as collateral. These loans ...
  3. Refinance

    1. When a business or person revises a payment schedule for repaying ...
  4. Future Advance

    A clause in a mortgage which enables the lender to advance funds ...
  5. Renegotiated Loan

    The result of an agreement between a borrower and a lender to ...
  6. Buy Here Pay Here

    Used car dealers who also handle vehicle financing for the buyer, ...
Related Articles
  1. Budgeting

    Options For When You Can No Longer Afford Your Car

    If you have more car than you can afford, here are four ways to deal with this "debt on wheels."
  2. Credit & Loans

    Getting A Car Title Loan

    This loan-of-last-resort uses your car as collateral and features very high interest rates and fees. Be extremely wary of even considering one.
  3. Credit & Loans

    The 5 Things You Never Knew About Auto Loan Rates

    Buying a new car is an important decision, and if you're a savvy auto buyer, you know that getting a good deal involves more than snagging a great price.
  4. Personal Finance

    5 Ways To Get Top Dollar For Your Used Car

    Unlike the housing market, the used car market is a seller's market. Here's how to get your car ready for an unbelievable offer.
  5. Options & Futures

    Car Title Loans: Good Option For Fast Cash?

    These loans provide fast cash, but they could leave you deeper in debt - and without a car.
  6. Investing Basics

    How To Get A Good Deal On A Used Car

    Why are prices quoted by dealers and private sellers so disparate? Read on to find out how to use that info to your benefit when buying a used car.
  7. Options & Futures

    Your Car: Fixer-Upper Or Scrap Metal?

    Sometimes buying a new car can be cheaper than shelling out for repairs.
  8. Home & Auto

    Wait on Buying a Pickup (F, GMC)

    Used car prices are dropping everywhere. But if you're in the market for a pickup truck, a good bargain is less of a guarantee – thanks to strong demand.
  9. Insurance

    How Car Insurance Companies Value Cars

    Learn the methodology used by car insurance companies to value cars, and understand why the amount they give you may not cover the cost of a similar vehicle.
  10. Insurance

    Get Up To Speed On Car Gap Insurance

    It covers the shortfall if your car is stolen or totaled, and insurance pays less than you owe on your loan. Dealers may push you to buy it. Should you?
RELATED FAQS
  1. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  2. What is the importance of residual value in an automobile lease?

    Find out how dealerships assign residual value and why this is an important factor in car leases. Learn about a tactic some ... Read Answer >>
  3. What is the difference between asset-based lending and asset financing?

    In the most common usage, the terms "asset-based lending" and "asset financing" refer to the same thing. Asset-based lending ... Read Answer >>
  4. What types of companies are in the automotive sector besides auto manufacturers?

    Explore the relationships between automobile manufacturers and the numerous other types of companies that work in the automotive ... Read Answer >>
  5. What is the long-term outlook of the automotive sector?

    Find out about the long-term outlook for the automotive sector and the impact of technologies such as self-driving cars and ... Read Answer >>
  6. What impact will the growing popularity of electric cars have on the oil sector?

    Explore how the growing popularity of electric cars impacts the oil sector. Demand for oil decreases as the popularity of ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center