How to Buy a Used Car from Someone Who Still Owes Money on the Auto Loan

http://www.gobankingrates.com/auto-loans/how-to-buy-used-car-someone-still-owes-money/ How to Buy a Used Car from Someone Who Still Owes Money on the Auto Loan By Stacey Bumpus • Posted in Auto Loans • May 28, 2013 Home > Auto Loans > How to Buy a Used Car from Someone Who Still Owes Money on the Auto Loan 0 Buying a car is always an exciting experience. There’s something amazing about being able to get behind the wheel of a vehicle that you not only love, but one you can call your own. Of course, the process of purchasing a vehicle, particularly a used one, can be a bit trying. There are so many considerations to make, including whether the vehicle is in good shape, how you will secure an auto loan and even what insurance you need. For individuals who have found a used car for sale online, in a newspaper or even on a parking lot, there are even more considerations to make. One near the top of the list is determining whether the title is free and clear — and if not, how to buy a used car when the owner still owes on his or her auto loan. The Basics of Buying a Used Car from a Private Party Buying a used car isn’t a walk in the park for many prospective car buyers, primarily because, in order to ensure you’re not purchasing a lemon car, there are some basics steps you want to take. Think about the Certified Pre-Owned Vehicle A certified pre-owned vehicle is usually a late-model used vehicle that an auto manufacturer has put through a rigorous inspection process and given an extended warranty. These vehicles fall into a similar category as a refurbished phone or computer. You know they’re not brand new, but you hope that they will be in good condition because of the attention they have been given. Certified pre-owned vehicles are typically offered at dealerships, so if you want this type of guarantee then buying a used car from a private seller is probably not the best option for you. Conduct Vehicle Research If you’ve decided to go with a private seller (or purchase any used vehicle that hasn’t been certified), you will want to conduct a tremendous amount of research on as many aspects of the vehicle as possible. The following sources can be very useful in your research: Edmunds. Edmunds offers car reviews along with suggestions on whether it’s a good idea to purchase a particular used car. It also makes comparison shopping simple by offering details about similar vehicles in the same car class. Kelley Blue Book. Another great option to consider is Kelley Blue Book, which has always served as the standard for determining the worth of used vehicles. Here, you’ll be able to learn whether a seller is trying to overcharge you based on the car’s specs and current condition. Carfax. On Carfax, you can enter a vehicle identification number (VIN) to learn the history of the specific vehicle. This can prove invaluable in helping you steer clear of potential lemons. MSN Autos. Another great source for conducting research, this site offers information about problems you could run into with specific makes, models and vehicle years, as well as the average cost to fix those problems. Check the Vehicle Out One of the most important steps in the process of buying a car from a private seller (or dealership, for that matter) is seeing it in person. You never want to hop on Craigslist and agree to buy a vehicle without meeting the owner and actually test driving the car. But don’t stop there. Be sure to run the vehicle by a mechanic or AAA diagnostic center to give it a good once over. This way, you will have a better indication of whether the vehicle is in good shape and even if the asking price is accurate. How to Buy a Used Car from a Private Seller Who Still Owes on a Loan Now suppose you’ve taken all of the steps above and determined that you’ve found the car of your dreams. All you have left is to make the purchase. However, in conducting your research you’ve learned that the private seller of the vehicle still owes money on his or her loan. In extreme cases, banks that were still owed money have repossessed these cars. The first thing to note is that the seller of a vehicle under this circumstance cannot simply transfer the title to you, since it is being held by the company that has extended the loan. So how can you realistically and safely buy the used car you want, while ensuring it won’t be taken from right under your nose? Here are a few options to consider: Ask the Seller to Pay off the Owed Amount One option to consider is asking the seller to pay off the amount owed so that he or she can officially get the title, then transfer it to you. The person may have to take on a personal loan to pay off the amount, but this ensures nothing is owed on the vehicle itself. If taking this approach, get something in writing from the seller’s financing company indicating that the vehicle has indeed been paid in full on a specific date. Go With the Seller to His or Her Lender If you’re concerned that the process will not be handled appropriately, ask to accompany the seller when he or she visits their lender. Witness the payoff process and have the title signed over to you at the establishment. If you’re a bit more trusting, you can purchase the vehicle and allow the seller to pay off his or her loan with the sales proceeds, still giving you access to the title in the bank (this option isn’t recommended unless you absolutely trust the seller). Set Up an Escrow Account Another option to consider is setting up an escrow account that holds your money safely until the vehicle is paid off and the title is obtained. In the escrow contract, stipulate how long the seller has to provide you with the title. Have a Dealer Broker the Sale for You You could also get a dealer to purchase the vehicle from the seller, and then buy the vehicle from the dealership. Of course, in taking this route, the dealer is going to want to make a few bucks. If this is the case, you can ask the seller to pay the dealer out of his or her profits. One thing you want to ensure in the process of handling any transaction involving a pre-existing auto loan is that the amount the seller has to pay off is not somehow included in your negotiations. You should agree to a price that you think is fair and always make sure the seller settles the outstanding auto loan before you take the vehicle. After you’ve made the transaction, get documentation of everything associated with the sale and be sure to either pay with a cashier’s check or make a bank-to-bank transfer so the process flows smoothly. If you’re worried that you’ll overlook steps in this often complicated transaction, look at your state’s Department of Motor Vehicles website for further assistance or call a DMV representative. Doing so will give you access to information about fees and also advise you on any paperwork you will need to make the purchase properly Read more: How to Buy a Used Car With an Existing Auto Loan Balance Follow us: @GoBankingRates on Twitter | GoBankingRates on Facebook