With the sky-high prices of new cars in today's market, many consumers are opting to save money by purchasing a used vehicle. However, the automotive market is relatively tight in pricing between new and used cars if you're looking for a low mileage, dependable, potentially with some warranty.

Seeking a newer used vehicle could lead to encountering sellers who are still making payments on the car. Or, you may have a friend or family member who has a car payment they can no longer afford. If you plan to take over an auto loan, there are a few things to consider.

### How is It Possible?

The person taking over payments becomes the new owner and borrower, so they have to undergo the loan application or purchasing process. 

The original agreement between the bank and the first owner is voided, and a new contract is signed between the finance institution and the new borrower.

With this in mind, consumers should be educated on how taking over a payment for a newer car can benefit or harm them in the long run. Armed with the right knowledge, you can decide whether to continue with the used vehicle you had in mind or if getting a loan for a brand-new car makes more sense.

### How to Take Over Car Payments on a Used Car:

Keeping the legality of the process in mind is the most crucial factor to consider when taking over payments on a used car loan. Failure to notify the current lender or the DMV of a change in ownership could lead to fines for both the new owner and the seller. 

Make sure you and the person selling the vehicle have a conversation about the legalities, and that you are both on the same page before moving forward.

#### Meet With the Seller in Person

Even if you know the seller, meeting with them in person is the most critical part of the process. An in-person inspection of the vehicle may reveal it is different than advertised, and even if everything looks OK from an untrained eye, you should still get a professional mechanic you trust to ensure all the mechanical pieces are operating correctly.

When meeting a seller in person, keep safety in mind. Coordinate the meeting in a public place, and bring someone you trust. Mentioning beforehand that you are bringing someone with you can ease anxiety for the seller, so they don't feel caught off guard, and open communication is always the best option.

#### Be Involved in Conversations with the Current Owner and Their Lender

Suppose a seller is above board with you on the logistics of their vehicle and the status of their loan. In that case, they will be OK with you verifying their conversations with their lender.

The seller must contact their lender to ensure they agree to sell the remainder of their current loan. Even if the lender allows it, the purchaser must still apply the lender for a decision.

Some contracts don't allow the transfer of loans or loan assumptions. In this case, interested buyers can still pursue a private auto loan and work with a new lender to coordinate the payoff of the used vehicle. If you're in a financial position to pay with cash, you can offer to pay for the loan balance and any associated fees and taxes.

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#### Request a Copy of the Original Contract

The vehicle's current owner should have a copy of their contract with their financing institution and, if they don't, you can request that they obtain a copy from the lender. 

Look for any fees or potential added costs associated with taking over the loan beyond what the current owner pays. Even if you're a qualified buyer, contracts are individualized, and you may be quoted a higher or lower interest rate, depending on your situation.

#### Organize Your Supporting Documents

Like any other auto loan, taking over a car loan requires the buyer to produce supporting documentation. Lenders typically require proof of income, a driver's license, an address, and insurance. They conduct a credit check and often check your employment status.

To expedite the process, you can also check with the seller to ensure they have a bill of sale or a letter of assignment ready. 

#### Apply with the Current Lender

The lender will confirm your credit score, income, and finances to determine if you can afford the car loan payment. You must submit an official loan application to verify that the loan and the lender are your best options. If you have a bad credit score, your options will be more limited.

You still have options if you don't agree with the monthly payment, the interest rate, or any other terms offered by the original lender. As previously mentioned, consumers always have the option to opt for a personal auto loan, and you may find more acceptable rates this way. 

### Alternatives to Taking Over Auto Loan Payments:

There are options if you need help finding someone to take over your auto loan or want to keep your vehicle but need a lower monthly payment. Below is a short list of alternative considerations.

#### Sell the Vehicle

The easiest way to transfer a car loan is to sell it. A buyer obtains lending for the vehicle and purchases it from you outright. Complications can occur, though, if your car is "upside down"—when you have negative equity on the vehicle, which means you owe more than it's worth. If this is your situation and you try to sell the car, you may end up paying the difference in value yourself.

#### Ask a Family Member or Friend to Cover the Payments

Despite the stigma behind the idea, asking a friend or a family member needing transportation if they would be interested in covering your payments is not uncommon.

If you choose this route, make sure you trust the person covering your payments, and if they're willing to sign a contract beforehand, it could help to avoid any misunderstandings in the future. If the person covering your payments needs access to the vehicle, alert your insurance company and add them to your plan before they drive.

#### Refinance Your Auto Loan

Refinancing is an excellent option for consumers who want to keep their vehicle but are seeking better loan terms. Refinancing means seeking a different lender for the car or asking your current lender about refinancing options. If you score a lower interest rate, it can significantly reduce the cost of your new loan payment, and your current lender may sometimes offer a lower interest rate.

Refinancing also allows you to introduce a cosigner and a new down payment. If your cosigner has good credit, adding them to your new loan could significantly reduce your monthly payment and financing rate. If you plan to transfer or sell the vehicle, refinancing can also be an avenue to transfer your car loan if it is not allowed in the original loan agreement.

#### Pause or Defer Your Payments

If your financial situation is temperately in jeopardy, pausing your payments could be beneficial. Depending on your lender, you can change your payment date or skip a month of payments. If you opt for a pause or deferment, remember that the lender will add any missed payments to the end of your loan amount, which means you can end up paying more in interest overall.

#### Give Your Vehicle Back Voluntarily

Even though it's probably the last thing you want to do, voluntarily returning your car can help you from getting into more significant financial trouble. If you can no longer afford your monthly payments, voluntary repossession will return the vehicle to your lender. The lender will then sell the car and apply the amount earned to your loan balance.

#### Trade-In Your Car for Something More Affordable

Dealerships accept trade-ins, and if your vehicle has positive equity, you may benefit from one, and trading your vehicle for a cheaper car could make your monthly payments more affordable. 

Some dealerships will even allow you to "roll" your original auto loan into a new one. That would allow you to make one payment even if your car is upside down. It can be risky, though, as it often leads to higher monthly car payments.

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#### Ask for a Personal Loan to Pay Off Your Auto Loan

Personal loans are ewxactly that—personal. If you have a good credit score, you can choose to finance a loan large enough to purchase your vehicle directly from your lender. However, this is only beneficial if your credit score has increased sufficiently to qualify you for a lower interest rate than you were paying on your previous loan.

### Benefits of Taking Over Car Payments:

#### Care and Quality

Odds are, the person looking for someone to take over their vehicle payment did not expect to be in a loan transfer situation when they originally purchased it. 

With that in mind, the odds are also in the buyer's favor that the seller has taken good care of the car. Buyers may be fortunate enough to score a low mileage, excellent condition, newer vehicle for a lesser price if the seller makes regular payments. 

#### Warranty Options

The average factory warranty covers a vehicle between three years and 36,000 miles, but coverage can extend to 10 years or 100,000 miles, depending on the manufacturer. Depending on the car, paying fees and refinancing may be worth the benefits offered through the manufacturer's warranty.

### Drawbacks of Taking Over Car Payments:

#### Depreciation Possibility

If the vehicle is worth less than what is owed, it may not be a good idea to buy it, because it could cost you more than the existing loan, which should be avoided. 

#### Process

Purchasing a car that's already under contract and still has monthly payments can be more complex than other forms of buying a vehicle. Often, lenders will not allow the process or may make it incredibly difficult. 

Sometimes, paying for a used car outright in cash is more beneficial. You can avoid having to trust a new person or opening yourself to the possibility of scams and a debt you may not need.

### FAQs:

#### Are The Payments Affordable For You?

If a friend mentions the vehicle being available to "take over" payments, pause and consider the actual cost of the car. There has to be a reason your friend wants someone to take over the payments. The vehicle may be exhilarating but could also be extremely costly. Review your finances and check your credit report before entering an agreement to transfer ownership. 

#### Is The Vehicle Worth The Monthly Payment Amount?

Consider if the amount is justified. Are you getting a vehicle worth its value, or are you paying more for someone else's choice of car? 

Check reliable sources, such as Kelly Blue Book and Edmunds.com, for the vehicle's market value. If the car you want to purchase costs more than it's worth, you may want to find a different vehicle.

#### Will The Vehicle Last The Life Of The Loan?

Check on the reliability of the vehicle and its manufacturer. You want to avoid being stuck with a high monthly payment on a car that's not worth much when you pay it off. Make sure that you can afford the monthly payment on an annual basis so you can avoid any issues. The average auto loan is five years or more, so income security is vital.

Taking over car payments from someone else, or having them take over your monthly car payments is possible, but there are both right and wrong ways to do so.

Taking Over Car Payments - What to Know

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