When buying a car with a bank loan involved...any tips?

[BillyIdol]

Hey all,

I'm eyeing an NSX now, and I'm going to go check it out soon. The guy has a bank loan on the NSX, and he is making payments on it. I have never dealt with this before. What are the procedures (that would keep me out of trouble) for the following:

1-Paying him a cash lump sum, and then I don't make payments, he presumably pays off the bank loan.

2-Paying him a small lump sum and I take over payments.

What should I look out for? Does the bank get paid back, and then I get title? How does this work?

John

 

[Greg Z]

Hey all,



1-Paying him a cash lump sum, and then I don't make payments,
John

I'm not really following what you mean here.

But you can pay his car off for him directly to the bank. BUT, I don't think you have any recourse then if he decides not to give you title, lein release/ and or car! I'll explain an example that happened to me a few months ago when I bought my TT Vette. OK, obviously a seller will not give you his car unless you have paid for it. Well I didn't want to give him X dollars and HOPE that he pays his lein off, so I sent the money directly to Capitol One and paid his lein off. At that point I was at his mercy, he could have ignored me from that point on so beware. I'm sure there had to have been a better way for me but I didn't/still don't know of it at this time plus I was real impatient and wanted to make the deal go as fast as possible so I could get my car. If I had to do it over I would find a way to protect myself better because I did get the car that weekend but did not get a title for months. We were 1500 miles apart btw.

 

[TyraNSX]

Make sure the bank has the title ready ahead of time. Get a bill of sale drawn up. Have him and the bank check with the DMV ahead of time for any other forms & whether or not you need to have sales tax money in hand for a title transfer to occur or if it waits until you go to register it.

Get/print out plenty of copies of the necessary forms because you can be almost certain there will be an error or problem somewhere along the way. Also find out what other signatures that may be needed (like if his wife is on the title) & if you need stuff notarized make sure someone at the bank is a notary (they usually are) & will be there at the time you are doing this.

Let's say for the sake of round numbers the car is $40k & he owes $20K. You would get 2 bank checks for $20K each. One made out to him & one made out to his bank that holds the lien on the car. You guys go to his bank (set this up ahead of time with his bank- I would not give anybody a dime without the title ready to go. If this is a CA paperless title, different story- ask me how I know). You pay him & his bank with the 2 checks & they release the lien on the title. Title gets signed over to you by him. Have a bill of sale ready to go ahead of time to & take care of this then too. Now the car & title are yours.

If you have a bank loan to buy, I'm not sure what would have to be done at that time to get them on the title as lien holder. Ask ahead of time with your bank.

Good luck.

 

[tom4416]

The advice above is excellent, IF the bank has a physical presence. In today's virtual world, a lot of lenders do not have retail locations (Capitol One being a good example). In that case, you've got to do a couple of things to protect yourself. The first is a formal bill of sale that specifically states the sellers obligation to take whatever steps, sign whatever documents, to effect the transfer of a clear title to you. Also have them execute a limited power of attorney that covers this specific transaction (DMV should have a form for this purpose). Get these notarized and make sure all parties to the transaction have signed.

Then talk to the lender to see what processes you need to follow to payoff the loan and have the clear title sent to you (at this point, you have the power of attorney so even if the seller balked at signing the title, doesn't matter). They will probably want the payoff check accompanied by a letter from the borrower granting permission to send the title directly to you.

Finally, when you send the payoff check, put a restrictive endorsement on the back. This should read something like:

"Negotiation of this instrument by the payee guarantees delivery of the title to a (year, make, VIN) to (your name, address)".

Under the uniform commercial code, if the payee fails to deliver the title, they are liable. Send the payoff via overnight delivery, signature required. Include a return overnight envelope all filled out and paid for with your address on it.

Ideally, the seller would agree to wait for the balance of the payment after the title has been sent. However, that puts them at risk that you won't deliver although the formal bill of sale will have stipulated your obligations under the agreement. If the seller doesn't wish to have that exposure, then on the day you send the overnight, give them their payment and trust that you are protected by the procedures you've taken.

 

[Greg Z]

The advice above is excellent, IF the bank has a physical presence. In today's virtual world, a lot of lenders do not have retail locations (Capitol One being a good example). In that case, you've got to do a couple of things to protect yourself. The first is a formal bill of sale that specifically states the sellers obligation to take whatever steps, sign whatever documents, to effect the transfer of a clear title to you. Also have them execute a limited power of attorney that covers this specific transaction (DMV should have a form for this purpose). Get these notarized and make sure all parties to the transaction have signed.

Then talk to the lender to see what processes you need to follow to payoff the loan and have the clear title sent to you (at this point, you have the power of attorney so even if the seller balked at signing the title, doesn't matter). They will probably want the payoff check accompanied by a letter from the borrower granting permission to send the title directly to you.

Finally, when you send the payoff check, put a restrictive endorsement on the back. This should read something like:

"Negotiation of this instrument by the payee guarantees delivery of the title to a (year, make, VIN) to (your name, address)".

Under the uniform commercial code, if the payee fails to deliver the title, they are liable. Send the payoff via overnight delivery, signature required. Include a return overnight envelope all filled out and paid for with your address on it.

Ideally, the seller would agree to wait for the balance of the payment after the title has been sent. However, that puts them at risk that you won't deliver although the formal bill of sale will have stipulated your obligations under the agreement. If the seller doesn't wish to have that exposure, then on the day you send the overnight, give them their payment and trust that you are protected by the procedures you've taken.

Damn. I wish I knew all this before my TT Vette transaction. Its crazy how dead on the money you were to my transaction. Capitol One WAS INDEED the bank and the lein WAS 20K. It took a while but I got the title, but I did have a lot of sleepless nights hoping and praying. Never again.