Question about insurance and car loans?

Question

I'm currently financing a truck, however I have been trying to sell it as I'm in need of something different. A close friend of mine has agreed to take over my payments for me, but I have a question about insurance. Because of some past credit problems my friend is unable to get a loan for himself, so this works out well for him as I said it would be fine if he just took over my payments. It's not a big deal if the registration is still in my name as I trust him. Our question however is how to deal with insurance. I obviously won't want to have it insured for me anymore since I won't be driving. What I'm not sure of is whether he will be able to get insurance put on it since the registration is in my name. Will I have to add him as a driver on my insurance and have him pay me directly, or will insurance companies allow him to insure the vehicle even though it's not in his name?

Answer 1

if the car and the payments are still in your name, and your friend is paying you directly,,,, then i suggest you keep the insurance in your name, and let him pay you for it,,,,,, since you loan company requires most likely, that you insure the car till the loan is paid,,,,,,,,,you might contact them and an insurance company, to see if your friend could do it in his own name,,,,,

Answer 2

Well, first off, you can't do that! Car loans are NOT assumable.

You're both setting yourselves up for a serious fall here. Insurance is just one of the issues. If the insurance company doesn't ask to see the registration or title, you might get away with it for a little while. But the insurance company needs to know about the lien holder and when they report the insurance to the bank with a name other than the one on the bank's records, the jig will be up.

There are other issues. Since you're still on the title, YOU can be held liable for any damage caused by your friend. The owner of the vehicle is always responsible and is usually the one that an injured party will go after. On top of that, you COULD just take the car back at any time and your friend would be SOL. Or your "friend" could wreak it and just leave you holding the bag.

Lastly, and this is a biggie, as far as your credit record is concerned you are responsible for paying the note on the truck. Trying to buy another vehicle may not be possible unless your income is sufficient to cover TWO notes and you've got a solid credit history.

If you need to get rid of your truck, do it the right way. Sell it to someone who can pay for it properly and retire the note in your name. If you try to go any other way you will likely regret it.

Answer 3

Wow, lots of things to consider here. It depends to a great extent on the laws of your state of course. Insurance companies don't care for the most part, and will take your money to put a policy on any vehicle you can supply information about, make, model, year, mileage and VIN is all it takes for the most part.

The problem really will be the lender. They are probably requiring some type of full coverage and would want it in your name since their contract is with you. They also may not like it if you have added another driver to your policy.

Have you really stopped and considered all the consequences of leaving the truck in your name? Sure, you're best friends now, but a quick read through here will turn up a dozen horror stories about 'friends' not being 'friends' any more due to a car deal like what you are considering.

For example, your truck is left if a no parking zone, or even in a parking mall where your friend has left it beyond the time allowed, and it gets towed. Only YOU can get the truck out of impound. Guess where the ticket gets mailed from the red light camera?

If you really trust him that much, I'd suggest you co-sign for a loan for him, and put everything in his name. Add your name as legal owner along with the finance company that carries him. As long as he makes payments, no problem. If he quits, they come after you, but you're no worse off than you are now, and could probably get the truck back upon getting the payments caught up.

Answer 4

Don't do this deal. As an insurance agent I can see all kinds of potential problems with the biggest one being liability. Ex. Your friend gets into a bad accident (property damage, injuries, etc). When the party that was hit gets a lawyer you will get pulled into the lawsuit because you are the owner of the vehicle.
Other problems could be your friend doesn't stay current on his insuruance or the car payments (he has bad credit already, do you really think he will stay current with the car payments). He not keeping up the car payments it will affect your credit.

If this person is a friend and really wants the vehicle, have him go to a bank and take out a loan in his own name. If he is not willing to do this, sell it to someone else.

Answer 5

Well, first off, that is a VERY risky thing you are doing. But, if you want to still go ahead with it. Have your friend start his own insurance policy. Have him put list your bank as the lienholder, and have them list YOU as the "additional interest" on the policy. Basically, what that means, in the event that the truck is a total loss, the insurance company will contact you...and the lienholder to arrange for final payment. Also, you will get copies of any renewal or cancellation notices that he will recieve. All it really means, by listing you as the additional interest, is that you have a financial interest in the vehicle, as well as the lienholder. Contact your insurance company, they will walk you through it. This will work in any state but New York. In New York, the registered owner of the vehicle has to hold the insurance policy. But, like other people have said...this is very risky, and I certainly would NOT advise of it, because you are still going to be liable for every penny of your loan, if your friend defaults.

Answer 6

Since the contract is still going to be in your name, you will have to provide the insurance. Even if your friend insures the car, your insurance company will not send in the proof of insurance required by the finance company. This would put you in default of contract and they will inturn buy a policy on your behalf and bill you for the cost. Which is very expencive. This could add as much as 50.00 a month to the payment. The insurance they buy only covers the for their loss. It is not a leagal insurance for anyone to drive the car. it will not cover any other car that might be hit or any person that might get hurt as a result of an accident. including yourself.

Answer 7

You are asking for advice so I'm giving it: do NOT do this deal. If you do, you will lose your money, your car AND your friend. Call your friend and jsut tell him you cannot do this.