Problems with car dealers accepting crypto

[cryptohak]

Hey. Noobie. here.
My parents have a used car dealership and I'm investigating ways to incorporate cryptos into the process. They don't 'get' cryptos and I don't come close to being an expert. Below are some of the pros and con (complications) that I see with accepting cryptos. I appreciate and welcome any input.

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PROS
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– Value of cryptos are likely to go up
– Crypto community will offer a warm welcome to early adopters willing to accept crypto
– There are many opportunities to advertise within the crypto community

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CONS
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TAXES
The way I see it, The buyer is looking for a way to purchase without switching to fiat so that there is not a big paper trail. The dealer must comply with federal/local laws or risk losing everything. It seems to me that the only way to make the transaction is if the dealer writes up a bill of sale in the fiat (USD) equivalent of the crypto and pays it's taxes accordingly. In this case the dealer is compliant and the seller takes his/her changes according to how he/she records the transaction.

WARRANTY
Most dealerships are required to offer a minimum warranty on the cars that they sell. I believe the minimum warranty in Maryland is motor/drivetrain/transmission is for 30 days or 3,000 miles. How would this fulfilled? With the value of the cryptos being so volatile? Assuming the value of the crypto goes up significantly, the buyer has a big incentive to return the car and to get the crypto back. He/she might have a mechanic sabotage the card or threaten the dealer with ruining the dealer's reputation. In this case a buyer with low morals may use the purchase of the car as a hedge against the value of the crypto going down.

DISTANCE
I think we have to assume that the bulk of marketing would have to be applied online and that the buyer is likely to live far away from the dealer. With the age of the Internet this really isn't too much of an issue. I just thought I'd bring it up. There definitely has to be some degree of trust involved–possibly a solution which includes a third party escrow account.

FINANCE
I don't think most crypto buyers are looking to finance but might as well add this to the mix of potential complications.

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SOLUTIONS
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I'd love to hear any solutions or suggestions from you. Here are some potential solutions that I quickly came up with:

TAXES
Original purchases can be made in Tether. Upon transaction and assuming it's available, buyer can shape shift crypto currency into Tether during transfer of funds. (Shapeshift option not currently available with Tether). The shapeshifting of Tether allows for easy conversion to USD for tax reasons and buyer does not have to use fiat currency to purchase car.

WARRANTY
In general, it's in the dealer's best interest to sell cars that will not have problems down the road but even new cars can have serious issues. Assuming that the state that the dealership is in allows for as-is purchases with no lemon law protection – dealer can give the buyer the option of purchasing the car as-is OR offer the minium warranty with returns in whichever is valued less: original fiat value or original crypto value.

Dealer can also offer 3rd party extended warranties but these warranty companies are not always reliable. 

DISTANCE
Some sort of escrow solution would need to be implemented. Cars delivered via carrier.

FINANCE
I would think that initially the dealer should not offer financing. I know there's a lot of lending coins out there. Hopefully one of them will offer a solid solution for dealers to use. 

Thanks for your input. It seems to me that this process has a lot of potential for the buyer and/or seller to get screwed. Their dealership has an outstanding reputation and the last thing I would want to do is to introduce a process that spoils it.

Kind regards,
Jason

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[Hazir]

Just word of advice here. Accept cryptocurrency as a payment, but always use the value of the current price in USD to determine the price.
So in short - when the car is worth $10k USD someone will pay you equivalent in bitcoin at the time of purchase - that is it.
When he will demand a refund after a year simply to exploit the system of volatile crypto - he won't be able to do it.
That is how refund works on basically every online shop that is accepting bitcoin - you won't get a refund in BTC, you get the equivalent of fiat money instead.

[brushtooth]

Just word of advice here. Accept cryptocurrency as a payment, but always use the value of the current price in USD to determine the price.
So in short - when the car is worth $10k USD someone will pay you equivalent in bitcoin at the time of purchase - that is it.
When he will demand a refund after a year simply to exploit the system of volatile crypto - he won't be able to do it.
That is how refund works on basically every online shop that is accepting bitcoin - you won't get a refund in BTC, you get the equivalent of fiat money instead.

This, then pretty much all of your problems are solved. I would really advise against holding on to crypto for the thought that the price will increase also, otherwise you might as well accept USD only and then take your earnings and invest them in to crypto. As a business you should be converting any crypto you receive in to USD instantly or else you put yourself at the mercy of the market gods.

[cryptohak]

Understood and agree. Thanks so much for your reply.
I sincerely appreciate it.
Jason

[edgycorner]

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PROS
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– Value of cryptos are likely to go up

Make your decision by excluding this point from the pros.The value may or may not go up.Holding coins that you earned from a service isn't a good idea.Unless you have decided to take risks to invest in it.
But I would insist on not too hodl them.Sell them for fiat the same day.Use the crypto ride to fuel your sale.Attract bitcoin nerds, earn profit.
Use it as a leverage don't gamble on it.

FINANCE
I would think that initially the dealer should not offer financing. I know there's a lot of lending coins out there. Hopefully one of them will offer a solid solution for dealers to use.

 
Will make things complex and might create problems.Better to keep it simple and allow finances only via fiat.

Good luck with your business

[shield132]

Just word of advice here. Accept cryptocurrency as a payment, but always use the value of the current price in USD to determine the price.
So in short - when the car is worth $10k USD someone will pay you equivalent in bitcoin at the time of purchase - that is it.
When he will demand a refund after a year simply to exploit the system of volatile crypto - he won't be able to do it.
That is how refund works on basically every online shop that is accepting bitcoin - you won't get a refund in BTC, you get the equivalent of fiat money instead.

Of course they way of refund should be like that: convert fiat in btc with current price because as you see if I sent 1 btc one week ago and it was 1000$ but now it's 1500$, why do I have to give you back 500$ more? Or oppositely, it felt from 1000$ to 700$, why do I have to be in 30% financial lose?
But OP the main reason we can see also is confirmation time and quick change in price. It can easily rise/fall by 1-2% in some hour. So why to risk when I can easily receive fiat and convert it in btc when I want and feel secure?

[dunfida]

Just word of advice here. Accept cryptocurrency as a payment, but always use the value of the current price in USD to determine the price.
So in short - when the car is worth $10k USD someone will pay you equivalent in bitcoin at the time of purchase - that is it.
When he will demand a refund after a year simply to exploit the system of volatile crypto - he won't be able to do it.
That is how refund works on basically every online shop that is accepting bitcoin - you won't get a refund in BTC, you get the equivalent of fiat money instead.

Its normal to have this kind of agreement and its dumb to let those people do ask for a refund then basing on the given bitcoin value since from the 1st transaction. We should always base on the value of usd when we are facing situations related to this. Seeing tesla they are accepting bitcoin as a payment and having those kind of dealings is already been settled up and as a buyer we are responsible enough on our obligations and the limitations of such dealings.

[cryptohak]

Thank you all for your comments and suggestions. Agreed that it's best to deal with transactions as though they were done in USD. Otherwise, working as a normal business. Hopefully the acceptance of cryptos will help add a boost to sales. 

[cpfreeplz]

Well for the warrenty, do what you would do with any other currency. If they pay in JPY, refund JPY. If they pay in Bitcoins, refund Bitcoins, not the USD equivalent of Bitcoins. I don't know anywhere that does refunds (I know it's a warranty and it's not the same, but for all intensive purposes let's just say it's a refund) people in a different currency, so that wouldn't be expected of your parents' company if someone paid with Bitcoins.

Obviously that's not legal advice. Oh and you don't need to worry about why people are spending Bitcoins and not leaving a paper trail, because they have to leave a paper trail. If they don't pay their taxes that's not your problem at all.

[BillCoin]

About the taxes thing, I can't see how you can escape from paying taxes.
Upon transferring the car, there is a paper to prove ownership, which means that you also transfer the ownership via the local government in your country.

So if you won't declare that you purchased the car, the country would assume where did you get the car from, if you say cash,you would need to explain where did you manage to get that large amount of cash.
Tld'r you can't actually buy a car with bitcoin in order to avoid taxes.

[trecore4]

I think the whole process will be just fine if you go through the paper trail and pre-own the car before you can make the transfer to dealer. This will insure that you have the product that you are buying, in this case the car itself. For giving the proof of payment you can always put remark on your transaction while buying the crypto currencies with wire transfer or credit card purchase from the bank to exchanger. Thats your first proof of payment. When the dealer will get his money into his exchanger then either he will withdraw it or hold it but the money will be on his wallet for the first time. The TxID can be taken as proof of virtual transfer. Thats just what I think can be made possible in the first place. You should be fine with that one. :-)

[CHENIEN]

If a certain business accepts transactions payments using cryptocurrencies, it is only a single contractual arrangement between the buyer and the seller, and if there is a future complain or any problems happened, both of the buyer and the seller they cannot file a legal complains on their transaction being made. For me, if I am a car dealer, to avoid any dangerous problem to happen, I will make sure to use a payments using legal paper money.

[talkbitcoin]

TAXES
Original purchases can be made in Tether.

this is not a solution it is a disaster. because tether is not a good choice ever.
first of all you said there is no "paper trail" but when you use crypto you just cut the bank, but you are still making a trade and it is registered somewhere!

WARRANTY

for this you just have to change the rules of the contracts if you are worried about the volatility. for example lets say the car is worth $1000 today you get paid 0.125BTC at bitcoin price of $8000 and tomorrow price of bitcoin goes to $100,000 and the contract simply says it will be the USD value taken from coinbase so you pay back 0.01BTC

everything solved!

you see when you want to accept a new form of payment, everything will come down to the rules that the two parties agree about in the contract. you think ahead and set these rules and you both sign them.