Wholesale and Retail Transactions

Deception, bad checks, false ID and bogus bank accounts. These are the tools of the con artist. They don't stick a gun in your face, break the steering column or hot-wire the car, but the results are the same. They drive off with your inventory and a big piece of the dealership's “bottom line.” Insurance may pay part of the loss, but other “uninsured” costs (loss of retail profit, deductibles, time spent reporting and investigating the loss, etc.) will be paid by you.

These people will use many different schemes to separate the vehicle from you or your employees. Wholesalers and brokers obtain vehicles using “site drafts,” held checks, handshake deals and disappearing ink. Sometimes a bankruptcy, revoked license, or cash-flow problem for the wholesaler becomes your problem. The computer revolution, with high-tech software and sophisticated printers available to everyone, has made it easier to produce fraudulent identification. Authentic-looking driver's licenses, social security cards, bank drafts, and checks can be produced very easily. Some of these people are professionals and can spot any weakness in a dealership's defenses.

In one instance, a wholesaler purchased three vehicles from a dealer using checks that were later returned due to “nonsufficient funds.” Total loss: $58,000. In another case, a dealer sold two cars to a first time customer who wrote a $35,000 check to pay for them. The customer asked the dealer to “hold” the check because he did not have the money in the bank at that time but was expecting a large insurance settlement very soon. The account was closed before the dealership submitted the check for payment. In spite of the fact that both autos were later recovered, this loss was in excess of $24,000. In a third incident two vehicles were purchased at different dealerships by customers issuing “nonsufficient funds” checks. One of these vehicles was purchased on a Sunday when the dealership was unable to verify funds in the customer's account.

Automotive manufacturers are constantly improving the anti-theft features they build into vehicles. After- market alarm and ignition interruption systems are also installed at the dealership. Professional thieves are driven toward extended theft, which is fast becoming the method of choice for stealing vehicles. Follow these suggestions and you'll greatly reduce the possibility of someone disappearing with inventory and hard-earned profits. Listed below are guidelines for both retail and wholesale transactions.


  • Establish written standard business practices for dealing with brokers and wholesalers. Know who you're dealing with.
  • Experienced dealers tell us this is the most reliable way to prevent wholesaler transaction losses.
  • Obtain a copy of the wholesalers or broker license.
  • Check references of all brokers and wholesalers.
  • Verify those you deal with are properly bonded and insured.
  • Contact the broker/wholesaler's banker and bonding company.
  • Re-evaluate wholesalers who deviate from their typical business transaction, i.e. suddenly change from buying $2,000 cars to $10,000 cars.
  • Don't become complacent. The wholesaler or broker that you've done business with for many years can suddenly get into financial trouble.
  • Purchase vehicles through auctions whenever possible since they guarantee titles and drafts. Verify funds before releasing the vehicle.
  • Politely decline to “hold” checks and do not otherwise extend credit.
  • Conduct credit checks of brokers and wholesalers on a regular basis.
  • Do not accept MSO's or titles that are not originals.
  • Don't release MSO's or titles until the check clears the bank.


  • The customer should fill out the entire credit application.
  • Contact the customer's present employer to verify employment and identification.
  • Verify their permanent address and how long they have lived there.
  • Require the customer to provide picture ID supported by other identification.
  • Make a copy of their driver’s license.
  • Verify the authenticity of driver’s licenses by checking:
    • the expiration date;
    • for the word “duplicate” on the license, someone else may have the original;
    • uneven or bumpy surfaces near the picture, which may be an indication of tampering;
    • closely for consistency of numbers and lettering;
    • for altered or missing state logos or seals;
    • the back side of the license, counterfeiters are often meticulous with the front but sloppy with the less important reverse-side;
    • thoroughly the overall appearance of the license by looking for pinholes, improperly cut or rough corners, inconsistent thickness, etc.
  • Ensure that a salesperson accompanies all prospective customers on test drives. Do not deliver the vehicle until financing is finalized.
  • Verify ownership of trade-ins by conducting a title search.
  • Call the listed insurance agent, verify insurance coverage is current and request faxed verification.
  • As with wholesale transactions, verify funds, politely decline to “hold” checks and do not extend credit.
  • Train F&I Department and sales staff to identify “red flags” on credit applications and bureau reports.
  • Sales staff should be cautious when taking checks from customers on Saturdays and Sundays.
Back to Library