selling out of trust

Definition

A practice found in the automobile industry where the car sold has been bought through loan but the dealership does not use the sales proceeds to pay back the loan. In most cases, a dealership finances the acquisition of inventory through loan. When the car is sold, the sales proceeds should be used to pay for the loan and the profit for other purposes. In a selling out of trust situation, the dealer does not pay back the amount loaned and the lender cannot seize the car since it has already been sold to a third person.

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