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The previous answers are all good advice. The possibility of injuring or killing someone is a real possibility. Another issue is insurance. If he is in an accident, whether he's at fault or not, once the insurance company finds out he has dementia, and his judgment is impaired, they may not pay. So he could take a huge financial hit by driving.
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My Mom had a stroke and due to blockage in brain arteries, her blood pressure is unpredictable. It will be up to 200/98 or down as low as 90/60 all within a day. Both of these extremes could cause fainting, disorientation, stroke, death, etc. After continual arguments with her about the dangers of driving, I just asked the Dr. at a visit one day. Her Cardiologist looked her in the eye and said "Do you want to hit a school bus full of children and be responsible for one of their deaths or your own?" Of course, she was "No, of course not and I don't want to be mangled and in pain either!". So he told her, then I think it's best for the safety of everyone that you do not drive anymore. She hadn't driven in 2 years since the stroke anyway, but thought she had improved physically so much she could drive again. However, after that she agreed. When the car insurance came up again for renewal I asked if we could sell her car and save on insurance. She agreed. Now, I say this because she is reasonable and I also have POA but I allowed her to make the decision. Although, we made sure she didn't have the keys to the car to go anywhere. All her doctors are so great with talking to her about her current realities, limitations, etc. and it is helpful when they can help back you up.
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His doctor can report him to the DMV. I would also have the doctor sit right across from him, look him in the eye and say "its not safe for you to drive anymore" Disable the car and then tell him you are taking it to the shop. Store it somewhere. Out of sight, out of mind.

Does someone have POA? Has Dad been found incompetent? If not get his doctor to declare it in a letter. Than the POA will be in effect. You can then sell his car at market value. Keep good records if Medicaid may be in the picture.
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You can possibly lessen the impact by discretely arranging family, friends, neighbors, and church acquaintances to give him rides to places he would have normally driven himself, like doc appointments, shopping, etc. and then providing the drivers with a gift card to your dad's (or the drivers') favorite places to eat (and this is also a "thank you" to the drivers). Dad gets to his destinations safely while having some happy social time AND they have lunch or dinner together. I did this with my aunt and she was much less upset about the sudden loss of independence and looked forward to the outings. I wish you all the best in managing this transition!
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Report him to DMV. He will be tested and obviously won't pass the testing. They'll take his license away. Until then sneak his keys away and do anything to make the car inoperable our if you can, sell it. To allow him to drive as he does makes you an enabler. If he should kill someone or worse, a child, it's on you for allowing him to proceed.
We went through that as well and I reported her to DMV. They took her license..no questions asked and gave her a free ID card. Good luck!
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If you and dad are both in Kentucky, here is some relevant information:

https://www.nolo.com/legal-encyclopedia/kentucky-driving-laws-seniors-older-drivers.html
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