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).


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.

  1. Collateral

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

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

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

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

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

    A short-term loan in which the borrower's car title is used as collateral. The ...
  7. After-Acquired Collateral

    Collateral for a loan obtained after the borrower has already entered into a ...
  8. Lease Balance

    The amount of money that a customer owes under the terms of a vehicle lease ...
  9. Segregated Disclosures

    A series of lender declarations that are required by law to be grouped separately ...
  10. Capitalized Cost Reduction

    Any upfront payment that reduces the cost of financing. Capitalized cost reduction ...
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