There are a lot of risks for cash disappearance, liability, and inventory theft in the used car business, but you can succeed if you get involved in the business process. A few thoughts:
-- Make sure your prospective partner is properly licensed, bonded, and insured for used car sales, and that his sales site meets state used car dealer licensing and local building and zoning standards for hours open, lot security, lighting, etc...
-- Work out a business plan for used car sales including advertising, car sourcing and repair to sales standards, car sourcing so you can offer something besides salvage titles, car cleaning, ancillary businesses like relocation towing, etc...
-- Consider graduating to "floor plan financing" and shifting your stake to equity in the operating business once the business is stabilized enough to qualify for third party financing. Work out a business buy-sell deal that lets you recover on your investment in a reasonable period of time by making sure you have rights to purchase, sell, or recapitalize the business entity.
-- Keep a UCC lien in place on anything you help finance until fully paid.
-- Do a criminal background check and credit check on all potential partners, employees, etc...
-- Make sure you and your potential partner have compatible business styles and share personal values. A new business partnership (whatever the legal entity) is a lot more stressful than most marriages, and breaks up faster.
-- Finally, keep up with the books every day, and make sure all checks require two signatures, all expenses are mutually approved, and all indications are that you are making money together before putting in more money.
Hope this helps,