Taking Over Car Payments for a Friend

Your good friend has a beautiful late-model car you've always admired. Further, they've just hit a financial snag and need to let it go. As you're talking about it, they offer to give you full use of the car if you agree to make the remaining loan payments on their behalf.

Does this sound too good to be true?

Well, taking over car payments for a friend is an exercise fraught with potential danger. If you're tempted to do it, here's how to make sure you're protected.

What Could Go Wrong?

Imagine you've made all the payments as you agreed and the loan is paid in full. Your friend then comes over that night, starts the car with a spare key and drives away. The next morning, you see the car parked in their driveway.

When you ask for it back, they say no.

You could well be forced to live with this situation as your name appears nowhere on the title to the car. You can go to small claims court, but lacking documentation of your agreement, the judge will likely side with your friend.

This is just one of the ways a deal like this could go sideways on you.

Get it in Writing

The lesson there is to always put everything down in writing.

However, you could still run into legal problems if the lender gets wind of the deal and decides they'd be better off with someone other than you. While it might seem to be simply a matter of taking over the payments, most lenders will want you to apply for the equivalent of car refinancing before placing your name on the registration.

This means you'll need to qualify for a loan as if you're buying the car. And, truth be told, you are buying the car. With this in mind, the lender is going to want to make sure you're a good risk before they let the original buyer off the hook - even if they're having payment issues with that person.

Treat it Like a Used Car Purchase

Sure, the car looks great sitting on your neighbor's driveway, but have they kept up on the maintenance? Given you're taking on the responsibility for the repayment of the loan, you'll also be liable for the vehicle's mechanical health.

You should also make sure you'll be comfortable with the insurance premiums the car will require. There are other financial considerations as well. You'll need to cover the cost of registering it, fueling it and replacing parts as they wear.

Will your budget let you care for the car properly?

Your friend may have cut a few corners in terms of its maintenance if they're having financial difficulties. A pre-purchase inspection should be conducted to ensure the car's mechanical condition is sound - even if it's still under warranty.

Does the Warranty Follow the Car?

Which brings up another point: Check to be certain the warranty follows the car if it has one. Some warranties apply only to the original owner. The last thing you want is to take on a car with a significant problem, thinking you have coverage, only to discover your ownership killed the warranty.

How Much Do They Still Owe?

Along those same lines, you'll need to conduct pricing research to determine the car's true value. The last thing you want to do is take on an 84-month loan your friend got to make the payments fit into their budget. This could well mean they owe more than the car is worth. Compare your findings to their loan payoff amount to be sure you're getting an equitable deal.

As you can see, there's more to taking over car payments for a friend than you might imagine. However, you can help someone out of a tight spot and get a really good deal on your next car if you follow the advice above.