There, of course, are some questions that the seller is likely to ask. Having the answers ready will reassure the seller.
1.What if you wreck the car?
The insurance company will issue a check with both your name and the lien holder’s name on it. This check will be applied towards repairing the vehicle.
2 What if you get a ticket while driving this car?
Any points are charged to my individual driver’s license, not to the car.
3 What if you hit someone?
The Suggested Assignment Contract states that I am driving the vehicle, and am responsible for all liabilities. Your liability is limited because I will carry 100/300/50 liability coverage or whatever your Purchase Agreement with the lien holder requires, which will protect you. As the owner of this car, you are put in the same position as an independent leasing company or car rental agency. You own the car, but you are not driving it.
4.How do I know that you’ll make these payments?
You’ll receive a cashier’s check or money order made out to the lien holder at least ten days before your payment due date. If I’m late, you have the legal right to take the vehicle back. Believe me I don’t want to lose it. The agreement basically states that I will make the remaining payments or pay it off early. As long as I do this, you are under contract to sign over the title to me. Nothing hidden, no surprises, it’s fair and legally binding.
5.What about the license plates?
You are still the legal owner, just as leasing companies and rental agencies are. As such, the license plates on the car will have to be yours. However, I am the one who is primarily liable for what happens while it’s in my possession.
6.What if you move and cannot be located?
I am giving you a list of personal references, my driver’s license number and my social security number. Any repossession firm could track the car in a matter of hours. I can understand your concern, but let me assure you that I have no intention of going to jail for car theft.
As far as insurance is concerned, keep in mind that regulations differ widely from state to state. The simplest and most widely accepted structure for this arrangement is to list the owner as primary insured and you as additional insured. The loss payee will always be the lien holder.
The policy address can be that of either the buyer or seller. Insurance can remain on the existing owner’s policy by just adding the buyer as an additional insured. The owner may prefer to set up a new policy so that the buyer’s driving record will not affect the rates that he pays for his other vehicles.
Recommended liability limits should be 100,000/300,000/50,000: 100,000 maximum limit of liability per person, per accident; 300,000 maximum limit of liability for all persons per accident; 50,000 maximum liability limit for property damage, per accident. These higher liability limits normally will account for a minor increase in rates.
If the seller has a poor driving record, that would make your insurance premiums prohibitive; however, you do have some options. Some insurance companies will allow you to list the buyer as Primary Insured and the seller as Non-Driving additional insured.
They will treat the policy just like a normal lease. In the place of the leasing company, they will insert the name of the seller. The Loss Payee remains the bank or lien holder. Let the insurance company know that you have the Power of Attorney for this vehicle.
If this is the direction that is most economical for you, then you may want to find a creative, knowledgeable agent (this is not always easy). Many agents may reject your policy without fully understanding the relationship or legality of it.
It is generally recommended that you talk directly to the underwriters if the agent does not seem knowledgeable. If you do set up your policy in this manner, then you may want to contact the Department of Motor Vehicles in order to see if a lease tag can be issued in your name without changing the title.
When registering the vehicle, most states again have different policies regarding an agreement such as this. The most common is to register the vehicle in the seller’s name in care of buyer’s name and address.
You should keep Limited Power of Attorney with registration. In most states, limited power of attorney along with the assignment contract is sufficient to register a vehicle. Registration and license plates are to remain in seller’s name, (normally leave the same license plate on the vehicle).
This may seem like an impossible arrangement and one that no one would agree to, but think again. When a person has a large car payment and they are in danger of having the car repossessed, they want to avoid having such a large hit on their credit report.
Many people will explore whatever options they have to avoid repossession and the blemish it will leave on their credit. If you can show them that you are serious about owning your own car and that you can easily make the payments, this is a win-win situation for both of you!