My wife and I recently bought a new Chevy from a dealer here in California. We didn't use a loan, paid using a personal check. Even though we told them we weren't financing the deal, they insisted on going through the entire process of filling out paperwork for a loan, including running a credit check, and they demanded all the info you would normally expect when applying for a loan, including our income, our social security numbers, and the name and phone number of a relative. They also took photos of our drivers' licenses. When I asked why they needed all this info, they said it was in case our check bounced. They said the reason for the loan paperwork was because if our check bounced and they couldn't contact us to deal with the problem, they wanted to be able to convert the transaction to a loan.

The car is already bought, but I would be interested in knowing more about this for next time. Are their explanations right? I can't help suspecting that they really just want to make as many sales using loans as possible, because the loans may be more lucrative than selling the car, so they probably just tell their sales people to make sure there is loan paperwork on every sale. Would it have been possible to avoid the time and privacy violation by bringing a cashier's check? I dislike the idea of having the signed loan application floating around, for the same kind of security reasons that I don't like getting preapproved credit cards in the mail.

For extra points: -- The contract included a binding arbitration clause, which we signed. In the past, with doctors' offices, I've just not signed these, and they accepted that. Has anyone seen what happens at a car dealer if you say you aren't willing to sign this clause?