Selling a car you finance for buyer

December 18, 2007 8:36 AM

How to go about selling a car where I basically finance it for the buyer?

I'm looking to sell my car to a coworker whom I've known for quite a while. The deal is he can't pay for the whole thing up front so I'm willing to take a down payment and then let him make monthly payments on the rest. He would be able to pay it off in about 6 or 7 months. Of course we want to do legal paperwork (bill of sale/as is warranty/etc....)

Does anyone have any experience doing this sort of thing? Thanks for any advice you can provide!

posted by covert7 to Work & Money (9 answers total)

Check out Virgin Money (or similar services). They specialize in managing peer to peer loans.
posted by crickets at 8:44 AM on December 18, 2007

Never a borrower nor a lender be, especially with friends and co-workers.

That being said, you probably are looking at a lien. An attorney would be the right way to go, but I am sure the internets are full of such forms.

Are you really going to repo your co-worker's car?
posted by caddis at 8:45 AM on December 18, 2007

I know this isn't the kind of advice you're after in this thread, but just in case you haven't considered the downside here, I agree with caddis entirely. I would not engage in such an arrangement. I have seen this movie before and I know how it ends.
posted by fusinski at 8:47 AM on December 18, 2007

I sold my car to a family friend like this a few years back. We basically wrote up a Bill of Sale and a Loan Note using generic forms I purchased at OfficeMax. Sadly, he stopped paying and I had to go repo the car. It turned out ok because he kept the car in good condition and I was able to re-sell it that week on Craigslist but still. If I were do to this again, I would have definitely checked the guys credit. He was a family friend that my mother had known for years but I should have done the due diligence.
posted by toomuch at 8:48 AM on December 18, 2007

Placing a formal lien on a car varies from state to state. In Georgia, you sign the title over to the buyer and put yourself in the "Lienholder" section. When they submit the title to the state, the state sends the title in their name to you, with you listed as the lien holder.

When they finish paying off the vehicle, you simply sign the title showing the lien has been paid and give it to the purchaser.

I did this about 4 years ago, and it was pretty simple.
posted by grumpy at 9:01 AM on December 18, 2007

As a lienholder, you will need to make sure not only that you get repaid, but that your friend insures the car properly and pays the necessary taxes (depending on your state) to avoid having the car seized. Does your coworker have no access to a credit union or a bank that will lend him the money? If he can't get a regular loan, you might wonder about his ability to pay you back and manage the insurance and taxes. Another way to arrange things would be to accept his downpayment, and let him use the car until he can pay the rest of it off. You retain the title, so if he stops paying, you don't have a lot of hassle -- you can refund him some reasonable part of his money and sell the car to someone else. The only problem with this is that there might be insurance implications. You should let your insurance company know that someone else will be driving your car. In any case, you should build the cost of insurance into his payments.
posted by ubiquity at 9:37 AM on December 18, 2007

IAAL IANYL TINLA

You really do not want to do this! Really!

However drafting the agreement should not be too hard. Basically you are selling the car and giving a loan for which the car is security.

Risks to cover include theft and damage ... so your friend should have the car fully insured at all times and give you a copy of the insurance papers. Your friend reselling the car ... so you need to hold the title or the title papers (depends on the law where you live). Maintenance - so the loan doc includes a clause stipulating service interval at a suitable mechanic.

But you really do not want to do this!
posted by jannw at 2:44 PM on December 18, 2007

This will end in tears.
posted by craven_morhead at 4:28 PM on December 18, 2007

Last year my wife and I sold 2 cars simultaneously to a co-worker of hers. She was having hard times and we felt bad for her. We had a lien on each vehicle and a promissory note for each one also. Make sure that you keep good records of times/dates of payment, amounts, collection phone calls you've made (including what was said), everything.

Fast forward 6 months with 3 months of non-payment. We had been threatening to repo it and at the last moment they came up with the final funds.

If I had to do it again, I would follow through on threats and repo the car after 30 days non-payment ... end of story.

Keep a key/clicker for the car. If you need to repo it, call the police first, there is a report that needs to be filed prior to collection (at least that's the case here). Be prepared to collect the car and have a big, bad falling out.
posted by enobeet at 11:51 AM on December 19, 2007