What you need to know before taking on someone else's ride and payments
Taking Over Car Payments
TDS Reader Solutions
Taking Over Car Payments
I'd like to hear from readers who may have acquired a vehicle by taking over payments from another owner. How does this work and what are the pitfalls?
Be Very, Very Cautious When Taking Over Car Payments
Generally, this type of transaction is a big no-no for a seller. Bankrate.com strongly advises people against selling their cars this way, as they still remain liable for the loan. If the new owner doesn't pay, then the seller gets stuck holding the loan, plus late fees, and is usually minus the car to boot. Unless the person wanting to turn the loan over to you is a trusted relative, I would question this person's motives. They are either incredibly dense when it comes to looking out for themselves financially and legally, or they're looking to cheat you.
Whatever you do, make sure that car is yours on paper. If you just start paying someone else's loan for them, then when that loan is paid-off, the bank will turn over the car's title to the person whose name is on the loan (i.e. not you). Then you will have to hope the person is honest enough to sign the title over to you. If the person is not honest, they could skip town with your car title, leaving you with a vehicle you can't insure or register. It may be interpreted as stolen if the police stop you and find that your name doesn't match the car's registration and/or the VIN. The seller can even pawn the car's title, so that if you do track it down, you will be stuck with a title/car with a lien on it, and you would have to pay off in order to get the car free and clear.
There are a lot of ways for someone to cheat you in this deal, so be careful. The safest thing to do is to just buy the car outright. First, go with the seller to his bank and see if you can assume the loan from the seller (probably cost you a processing fee). If the seller doesn't want to even attempt this, run (don't walk) away from this car. A person who honestly wants to sell you a car will work with you, but a scam artist won't. If the bank won't allow you to take over the original loan, then get a loan to purchase the car outright for the price left on the original loan (plus the sales tax if you can't pay that up front). Either way, with the loan in your name, the car is ultimately yours. Yes, it will cost you some extra in processing/loan origination fees, but isn't that worth the price of knowing the car is yours? If you can't qualify for a loan on your own to buy this car, then you aren't financially sound enough to take up payments on it on someone else's behalf either.
Keri in TN
There's Always a Downside to Taking Over Car Payments
If the seller's lender agrees to accept payments directly from you, then you have some protection. However, if you pay the seller, and he doesn't turn the money over to the lender, then the vehicle can be repossessed.
Also, usually in these agreements, the title information on the vehicle is not changed until the car is paid off. Here's the downside for the seller. If the buyer gets into an accident, the seller can be civilly liable. And now here's the downside for the buyer. If someone is awarded a judgment against the seller, they can take the car in spite of your payments.
Always Practice Good Buying Strategies
If you can't afford the payments, do not over-stretch your budget. Have a mechanic check over the car for defects before deciding to take over the payments. Get a service record from former owner to check up on the maintenance work done and how frequently. If they do not keep one, do not buy or take over the payments, as you may get yourself a lemon with engine problems in your future.
Carol in Peoria, IL
Reviewed February 2018
Take the Next Step
- Get free quotes on local used cars.
- Use this handy cheat sheet from a 30-year veteran of the auto insurance industry to get the best auto insurance deal that you can.
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