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Selling a car on installments to a private party.
April 23, 2014 4:32 PM   Subscribe

What would be the most practical way to do this, that would leave us least on the hook if this all goes pear shaped assuming we are fine with taking a hit if the guy turns out to be a flake and doesn't pay as we were going to donate the car to a charity for tax write off before he made an offer?

We have an old beater of a 1996 Corsica, which is basically mechanically OKish when it was last run 6 months ago but the brakes and suspension are completely shot and the body is full of rust. The registration has come due on it and I was bitching about wanting to get rid of it when an acquaintance of my Father in Laws heard. He has recently divorced and needs a car and has the skills to repair it but no ready cash money to buy it as he's just had to move. He has offered to pay us $1000 for it at $100 a week for it until it's paid off.

I think this is a pretty fair price for something that the Kelly Blue book has at $1,800 for one considered in fair condition, which this one is well past however we are not sure how to go about handling the installment payments idea.

While part of me wants to keep the title for security, my husband is worried that if we keep the title until the final payment then we are libel for anything he does in the car and if we give him the title, the cynic in me fully expects we'll never hear or see him again, which really isn't that big a deal as it really is a POS car and we were just going to do the whole donate it thing before this.

Suggestions or advice welcome, as long as it's not "don't do it" my husband wants to help the guy out so I am just trying to make sure we are covered.
posted by wwax to Travel & Transportation (9 answers total)
 
Check your state laws. In Georgia, you need proof you sold it. This is easy enough to establish but when I gave my car to someone, they could not register it without this proof. We created paperwork saying it had been sold to the other party for $1 (which is perfectly legal and I did that in the other direction once as well when someone basically gave me a car).

So I would probably sign the title over with the first payment of $100 and also have a very simple promissory note for the remaining the $900. Then, worst case scenario, you got $100 for it and are not liable for anything anymore.
posted by Michele in California at 4:41 PM on April 23 [1 favorite]


The way I would approach it is make the first payment equal to or greater than the amount to re-register the car with the state, and to make sure I had a bill of sale that satisfied your state's documentation requirements. That way if your buyer flakes, you can re-register the car and then donate it, or you can just go to your DMV and wash your hands of it.
posted by infinitewindow at 4:45 PM on April 23 [1 favorite]


The standard way to do this is for the buyer to get a loan from the bank, and pay the seller the full amount. Even when car dealerships sell a car, they do this (either with your bank or they have a bank they deal with for this).

If he's able to do that, I would highly recommend that. Otherwise, if his finances don't work out the way he expects, you lose some money and wind up in an unpleasant situation socially.
posted by aubilenon at 4:48 PM on April 23 [2 favorites]


How much would the value of the tax write off be at the end of the year? An option would be to just sell it to him for that and call it a day.

If you do the installment plan, holding the title increases your chances of getting paid but also increases your chances of hassle -- are you really ready to repo it from a family friend? Whereas giving up the title increases the default risk but let's you choose to walk away at that point with a shrug.

I've sold a vehicle this way twice and chose both times to give the guy the title because we had a lot of friends in common and they would have lost more in embarrassment than I would have in money by not paying, and there was zero chance I was going to repo it over such a small amount (to me) of money. We just signed a handwritten promissory note and they paid me more or less on time. In my head I treated it like loaning a friend money -- a bonus if it is repaid but not something I am going to battle over.
posted by Dip Flash at 4:58 PM on April 23


If you were going to donate it anyway, why worry? Sign the title over on first payment, and forget about the rest of the money. You can either give it to him or use any money he pays you to put into savings or go to dinner.

If you really don't need the money, sell it to him for $100 and be done with it. Who cares what it's worth? The guy's going through hard times and he needs the wheels. If he's honest and too proud to take it for that little, let him pay you then, but don't worry about it after it's in his name. That's way too much hassle for a rusted out beater.
posted by Marie Mon Dieu at 5:01 PM on April 23 [8 favorites]


Write the bill of sale for the full amount, transfer the title to him, and write a separate promissory note for the loan.

This minimizes your risk to $900. That is unbelievably cheap compared to your liability if you retain the title.
posted by Kakkerlak at 8:05 PM on April 23


Retaining the title as collateral, with a bill of sale having been executed, is not the same as loaning someone a car. As long as you've got a good bill of sale, you are not going to be liable for what he does with the car. This is exactly what banks always do. The dealership has sold you the car, they give you a bill of sale (which is what you go get your tags with), and they send the title to the bank if there's a loan involved. You get the title after the car's paid off.

All that said, given the low stakes I might write a bill of sale and a promissory note, give him the title, and just accept the fact that if he fails to pay you the balance he still has the car. Do you really want this thing back?
posted by randomkeystrike at 8:48 PM on April 23


Keep it simple: let a bank take the risk.
posted by devnull at 2:50 AM on April 24


What Kakkerlak said. I did this twice for much more valuable vehicles and we wrote a bill of sale for the total vehicle amount, transferred the title, and created a contract that outlined the terms and payment schedule. Also, if you're a AAA member, in some states they can do all the paperwork for you, saving you a trip to the DMV. (I know they can do this in CA; they cannot in NY. Your state may vary.)
posted by bedhead at 8:32 AM on April 24


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