Is It Suspicious To Buy a Car with Cash? All You Need to Know

Purchasing a car with cash can be suspicious activity as it can be challenging to track the source of the transaction. On the other hand, payment with a credit card can be tracked easily, increasing confidence in a specific transaction.

It’s important to note that there is nothing wrong with the cash payment to buy the car. However, paying a significant amount with cash creates certain risks that can create a suspicious situation. Further, the following risks are associated with the cash payments of the significant amount like in the case of purchasing a car.

  • Risk of a fake currency.
  • The money might have been sourced from illegal/criminal activities.
  • Risk of money laundering and layering.

There is an inherent risk of fake currency associated with large cash payments. Dealers feel anxiety and unease while counting the massive quantity of cash, which can lead to financial losses.

Further, the fake notes have been designed with much accuracy that can deceive anyone. In addition to this, the risk further increases when fake and real currencies are mixed as it can be really difficult to identify fake currency.

Further, cash transactions always indicate the risk of money laundering. It’s the process where money is placed in the complex cycle so that the source of the money cannot be traced, and the money might be coming from illegal activities.

So, black money can be shown as white if the source of the cash cannot be traced for the specific transaction and that can be the situation with large cash deposits while purchasing a car.

Similarly, car distributors may suspect customers to be criminals like drug traffickers or money launderers, etc., and they might think of being under some potential problems.

However, if the business receives $10,000 in a single/multiple transaction, it must report details of the transaction to IRS (Internal Revenue Services) by filing form 8300.

Why do dealers desire to sell the car in cash?

The dealers often desire to sell cars in cash and avoid debit/credit payments for the following reasons.

1-     There are transaction charges which may be a significant number.

5% charges are payable on the transaction via debit/credit card. Suppose the cost of the car is $40,000. So, paying $2,000 ($40,000*5%) as an extra cost, leading to a compromise on the business profitability.

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2-     Return policy

The customer has a right to fully return the purchase within 90 days. Although, there are some applicable rules and regulations. Still, the customer can apply to return the car.

3-     Wait time in receipt of the cash.

Banks may take some time to reflect the transaction in the account, in fact, transactions may take a time of one to two days to be complete. So, most of the dealers want to avoid this gap.

How to stay safe when buying/selling a car for the cash

Following tips can help you and the buyer to stay safe while dealing in cash for the car.

Tips for the buyer

  1. Make sure to document all the transactions. Documentation needs to be done in terms of the agreed price, date of the payment, method of payment, and transfer of ownership etc.
  2. Ensure the appropriate physical record is kept for the documents in soft.

Tips for the seller

  1. If the agreed price of the car is $10,000, make sure to timely file Form 8300. It helps Government authorities to track the flow of the money and verify authenticity.
  2. As a private seller, you should meet a potential buyer in some public place, which helps to check their transparency. On the other hand, it can be a red flag if they request to meet at some suspicious location.
  3. Make sure to deposit the cash in the bank immediately after receipt. Otherwise, storing cash at your home or business place can be risky.
  4. Make sure to backup copies of the ownership documents. This can be helpful if there is some dispute regarding a transaction in the future.

Guidelines to buy a car with the cash

Buying a car with cash is one of the most straightforward ways to finance the car, and it helps to avoid the hustles of the loan terms, rate of interest, credit card, and other details of the financing. Following the given guidelines and tips can help to enhance your car buying experience with cash.

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1-     Identification of reputable dealer

Finding reputable dealers can help to place reliance on the credibility of the dealer. Investigation of the dealers in terms of checking their website, reviews, and customer feedback can help.

2-     Effective negotiation of the price

Effective negotiation is only possible when you have updated market and product information. Effective negotiation can also be added by reading several car ranking reviews, articles, and journals. Further, window shopping at different showrooms can give a fair idea and put you in a position to confidently negotiate the price.

3-     Keep evidence of payment.

Always collect dealer receipts as payment evidence, and it will help you remain safe if there is some problem with the car in near future. Further, you should also get a bill of sale/sales agreement. This will help prove the date of your own transfer and track previous owners if there is some problem with the car.

Further, a seller needs to ensure compliance with certain filings like form 8300.

Civil penalties for the non-compliance with filing IRS 8300

Non-compliance with the filing of IRS 8300 can be unintentional/intentional. In case of unintentional non-compliance, the penalty can amount to $260 per return, and it does not exceed $3,178,500 per calendar year.

That’s under section 6721(a) (1). On the other hand, intentional disregard amounts to a higher of (1) $26,480 and (2) the amount received under the transaction.


Buying a car with cash can be a good decision. However, there are certain risks associated with the process. First of all, the payment of heavy amounts can be risky in terms of security, fake currency, difficulty in tracking source of money, and the risk of money laundering.

Further, the leading compliance requirement for a cash deposit amounting to $10,000 is the filing of Form 8300, where details of the transaction like parties in the contract, purpose, currency, and payment method need to be reported to the IRS. In addition to this, failure to report transactions can lead to civil and criminal penalties.

Further, the buyer of the car should keep adequate documents like the sale deed, receipt of the cash, and previous owner details. So, things can be tracked if there is some problem in the future. Overall, yes, it can be suspicious to buy a car with cash. However, the application of safeguards can help to limit the risks.

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Frequently asked questions

Who needs to file IRS form 8300?

Form 8300 is filed by the seller of the car/assets. This form is designed to provide transaction details to the Government. The details on the form include the following,

  1. Identification of the individual who has paid the cash.
  2. Identification of the person whose behalf transaction was carried.
  3. Details of the payment method or the mode of transactions. For instance, if it was a US currency, foreign currency, money order, traveler’s check, cashier’s check, etc.
  4. Details of the business activities, the cash was received for.

Filing of Form 8300 is required by law, and failing to timely file form 8300 can lead to civil and criminal penalties.

What are the criminal penalties for not filing form 8300?

The following two situations can be linked with not filing form 8300.

  1. If an individual refuses to file Form 8300, they may be charged with a fine of $25,000 or a prison of up to five years.
  2. If an individual purposefully files the false information in the form 8300, they may be charged with a fine of $100,000 or a prison of up to three years.

What are the benefits of buying a car in cash?

Following are some of the benefits of buying a car in cash.

  1. It helps to save the cost of interest.
  2. You get full ownership of the car from the very first day.
  3. You can sell the car (your owned asset) at any time.
  4. It’s the most straightforward way of purchasing a car.

What are the disadvantages of buying a car in cash?

Following are some of the Disadvantages of buying a car in cash.

  1. It drains all of your savings, and some people are left with nothing after making such a purchase.
  2. Investment opportunities are forgone if all of the cash is used in the purchase of the car.
  3. Not everyone can finance a car purchase with cash.