Need advice on (sort of) selling my car out of state
August 20, 2014 5:46 AM   Subscribe

I want to sort of lease my car (that I'm still making payments on) to someone in a different state. Am I crazy?

So my spouse and I have recently moved to NYC from Mississippi. In doing so, it has become apparent that our car is more hassle than it's worth. We are still making payments on our car, we do not yet own it outright.

While teaching at the University of Mississippi, my spouse and I took a pair of recent graduates under our wing. We are godparents to their child. Well, it turns out that they desperately need a new car. Here's the complication: We can not currently take a loss on this car. The couple can not afford to pay for it outright. My idea, is for them to take over our monthly payments (which are relatively low). Now, my spouse and I would continue to make monthly payments to the bank, and the couple would in turn make monthly payments to us. This bypasses them trying to get a loan from the bank (which, given their financial situation would be a daunting prospect).

What sort of roadblocks/complications will we be likely to run into? We will be in NYC, and they will be in Mississippi. What about car registration? Insurance? etc.? You are obviously not my lawyer (and we may well be seeking legal advice) but does anyone have any insight into this deal? Is it a pipe dream or is it feasible?
posted by anansi to Law & Government (8 answers total)
This sounds like a bad idea for a number of reasons. For one thing, if they're making your monthly payments for you, then you're overcharging them for the car, since some of that payment is going into building your "equity."* Not to mention issues with insurance, registration, you get the ticket if they go through a red-light camera, and so on.

Re-framing this as "how can I help my good friends who need better transportation?" Since you are ready to trust them to make monthly lease payments, would you be willing to be a co-signer so that they could get a loan? That way, they could be building a credit history, plus they are the responsible owner and keeper of the car.

*Equity in quotes since cars are a depreciating asset
posted by penguinicity at 6:03 AM on August 20, 2014 [2 favorites]

Insurance liability is a biggie: heaven forbid they have an accident in your car and the other driver comes after you as the car's owner. Or something goes wrong mechanically and the brakes fail, and your friends come after you. (And will they have insurance coverage of their own?)
Basic upkeep of the car: who pays for what? Will you have some sort of agreement that they will maintain your vehicle in safe operating condition? How about dents and dings and cosmetic damage?
Payments: if they can't afford a decent car on their own, how certain are you that they will make their payments to you promptly every single month?
Distance: I've got to say, keeping an eye on things while you're several states away sounds difficult at best, and more likely impossible.

Generally speaking, this sounds like a bad idea.
posted by easily confused at 6:05 AM on August 20, 2014 [1 favorite]

You say that you cannot currently take a loss on the car, but can you afford to pay off the remainder of the car loan as long as you get reimbursed for the cost eventually? If you can, I would consider doing that, and then sell the car to the couple (with a payment plan if you want).

Another idea would be to sell the car, and use that money to buy a (used, cheaper) car outright which you would give to them.

If you do it your way, there are a lot of things to figure out. Who would own the car at the end of the payments? In a lot of states, there are taxes attached to the sale of a car; how would that work out? What happens if the couple gets into an accident - does your insurance pay? Could you be personally liable for an accident? What happens if they are late on a payment? What happens if they fall behind on payments, or stop paying? Even if you trust them completely, they could end up in a situation where they literally can't afford to pay you. If they didn't pay you, could you still afford to pay the bank? What happens if the car gets damaged or totaled? If you are not driving at all but own a car, would you need to have insurance? Can you afford that? And I'm sure there's a lot I'm not thinking of.
posted by insectosaurus at 6:10 AM on August 20, 2014 [3 favorites]

We can not currently take a loss on this car.

Meaning, I assume, that you're underwater with the loan and don't have cash on hand to make up the difference. Is there some way you could raise that cash? Because it sounds to me like you need to be rid of the car and your friends need a car, but your car probably isn't the one for them and they probably aren't the buyers for you.
posted by jon1270 at 6:13 AM on August 20, 2014

I don't think, as you've proposed it, this is exactly a good idea. Better to outright sell the car to your friend. That way there's no question that they're responsible for registration, insurance, property and sales taxes, and any camera tickets incurred.

Is there any way you could somehow come up with the cash to pay off the car loan? I would suggest doing this, and then outright selling the car to your friend with a payment plan established in writing.

I'm not sure how this works in Mississippi. In most states, the bank holds the title to the vehicle while there is a loan. In some states, the purchaser holds the actual title while the bank holds a document saying they have a loan on the car (here in Maryland this document is called a "Security Interest Filing") -- when the loan is paid off, the bank signs off on the SIF and you take that to Motor Vehicle to get a clear title.

Since you will be an individual (or a couple) holding the loan, I'm not entirely sure how this works -- consult with Mississippi DMV.
posted by tckma at 6:22 AM on August 20, 2014

"Am I crazy?"


I can't clang the bells loud enough. The liability here is HUGE. Your insurance company will be ridiculous to deal with, as in: your insurance company would drop you if they knew, they will not cover this!!

Sell the car outright. Take the loss if there is one. It is soooo much easier than anything else that could happen. *shudders*
posted by jbenben at 7:44 AM on August 20, 2014 [2 favorites]

Do NOT do it the way you're thinking of. They need to apply for a loan of their own. Then they use that loan to pay off your loan and the title will transfer to them and their lender. When I bought a car like this it was extra simple because I got my loan from the same credit union the seller had his loan at. So the process involved me filling out the loan paperwork to get pre-approved for a $10,000 loan a week before I wanted to buy the car. Then the owner and I scheduled an appointment to go to the bank together and sat there while the loan officer did her thing to close his loan and open mine. We signed a bunch of paperwork, I started my loan payments, and he handed over the keys. The credit union handled the process of transferring the title to mine + their name and when I finished my payments five years later I owned the car.
posted by MsMolly at 4:47 PM on August 20, 2014

Response by poster: Going with the unanimous consensus here, this is a no go. Thanks hivemind.
posted by anansi at 6:48 PM on August 21, 2014

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