Selling a vehicle to children w/payments?

[Yarome]

Off topic but more than a few of you have a great deal of life experience and would appreciate any input.

One of my children is wanting to purchase a vehicle from me and pay for it over time. I'm perfectly fine with that but have never dealt with a pay over time situation and am not sure how to handle the logistics, ie., title, insurance, etc. The vehicle would be.. for insurance purposes "outside of my control" and housed at a location other than the currently issuing state.

I'm fairly certain the title/registration would need to be in his name so that he's able to insure it. Correct?

I'm sure there must be some process to add a private individual as a lien holder until it's paid for, but I'm not really excited about going that route. More paperwork, hassle, and expense.

What I'm thinking is that the easiest thing would be to just sign the title over, but that doesn't leave me with much recourse.. but then again.. it's my child so what would I really do 'anyway' if payments stopped, right? More than the money I want our deal treated seriously as a point of responsibility, but I also don't want to set a bad precedent with the other kids or spark any jealousy.

Are there any issues I should be particularly aware of?

How would you, or have you, handled something like that?

[skp51443]

Payments, contracts and family often don't mix well.

 

I'd give them the vehicle outright so they can deal with all the responsibilities that go with it. If you want paid back just come to an agreement on how much and how often you expect to get paid back and keep track of it. If things don't work out you at least aren't facing having to try to re-posses the vehicle for non-payment, something that will have bad effects on all involved.

 

If you are really grumpy about not getting repaid, or there would be sibling issues over not collecting the debt you can add a note to your will that considers the unpaid balance as a partial distribution of your estate, one to be taken into account when dividing your final assets.

[SKP038620]

as my departed Father used to do , get a NOTE and then charge 10% interest. If not paid back he would do as stated above deduct it from estate. At least he did

that to my brother .

[Chad Heiser]

I have sold vehicles to friends/family previously. I treat it as I would any other business transaction and I explain that very clearly up front. I write out a basic sales contract with payment expectations and have both parties sign it. I then provide copies to the other party and I maintain the original. As far as the vehicle ownership, I have done it both ways of completely signing over the vehicle and also listing myself as a lien holder. That decision, I base on whether or not I think their might be any problems with the repayment. I definitely get it out of my name as the registered owner though, if it is not in my possession. I don't want any parking tickets or other liabilities coming back to me if something happens.

[Big Greg]

Some kids are very dependable and responsible paying off a parents loan, others not at all. In MI you can transfer a vehicle title to a close relative and there will be no sales tax to pay, not sure about your state. I'd transfer the vehicle to the child, they pay insurance (tell them if they let the insurance lapse and total the vehicle they are still responsible to pay your loan off), make a loan payment schedule (you can get an amortization schedule on the internet), have you and the child sign the note document. You can use an interest rate used by local banks for used auto loans. As the other have said, if the child defaults no more loans and a reduced inheritance. Greg

[Retiredin1993]

You didn't say how old your child is. Depending upon the state you could still be responsible for any liability if he/she is under 18.

[Barbaraok]

We bought several vehicles through the Bank of Mom & Dad - they were cheaper than the bank in terms of interest, and our interest to them was more than the bank was paying on their CDs at the time. We did a simple load agreement and if not paid, it would be deducted from the estate. Same with my sister. We've helped our DD & SIL do the same.

[LFDR3116]

I have sold vehicles to my kids with payments made monthly. The title was transferred to their name with me listed as the lienholder. They obtained their insurance. I was listed as the lienholder which meant that I would receive notices of coverage changes , non-payment if they failed to pay the insurance, and I also as the lienholder was provided with lienholder liability coverage automatically off their policy. They always paid, and never let the insurance lapse, but I left my name on as lienholder until they paid the vehicle off.

[Ronbo]

My I laws have given us several vehicles. In return I have given vehicles to my kids when they were no longer useful to me. Nothing expected in return. We also have a vehicle to use with the grandkids when we visit. No mess in my jeep.

[Kirk W]

What I'm thinking is that the easiest thing would be to just sign the title over, but that doesn't leave me with much recourse.. but then again.. it's my child so what would I really do 'anyway' if payments stopped, right? More than the money I want our deal treated seriously as a point of responsibility, but I also don't want to set a bad precedent with the other kids or spark any jealousy.

 

Are there any issues I should be particularly aware of?

I suppose that the first question you need to ask yourself is, what will I do if my child should fail to make the payments on time or at all? That is something that both you and the child need to discuss before this process begins. There is no reason to take formal contract steps if you are not willing to carry out the enforcement of this contract. If you are concerned about sibling problems, it would also be wise to include the other children in the conversation. You also need to ask yourself it the issue is worth the possible family difficulties that could arise from it.

 

I have on several occasions financed cars for our sons and have also cosigned a note for two of them. In every case, what I did was to require that the title be in my name or held jointly and that the insurance be on my policy with the child paying his insurance directly to me, so that I knew that it was in force. I also kept possession of a set of keys to the vehicle financed until it was paid off. Just as a bank makes rules for any loan issued, I do that same thing and I always hold something that can be used to enforce the agreement.

[SIBERNUT]

Anytime I have sold a vehicle, it did not leave my possession until I saw a copy of the title in someone else's name. If they never register it, etc, it is STILL YOURS in the eyes of the law if it is in an accident, etc. Child or not, you could lose everything you have in a suit.

"Lend money to a friend, get paid back by an enemy"

[sandsys]

From having what little experience I have regarding sibling rivalry and inheritance I agree that it would be best to get all the kids involved in the discussion about selling this vehicle to one of them.

 

Linda Sand

[Yarome]

I appreciate all of the feedback and ideas. Thank you!

 

I never would have thought to include something in estate distributions. I'll have to think on that, but no, I'm not grumpy about repayments and wouldn't repossess a vehicle from any of them for missed payments. Then again.. I also don't charge blue book values, interest, or feel it's my responsibility to ensure they are carrying proper insurance since any consequences would be on their shoulders (over 21).

 

I've had some time to let it "marinade" and feel comfortable with how to proceed. Again.. the input was greatly appreciated!