Can I legally provide financing for a vehicle I sell?

Question

I am a part time Used Car dealer. I do it in my spare time, and use tools such as Ebay, Craigslist, etc. I do not have a property or established business. I deal with cheap vehicles, mostly $2000 and under. I've had over 20 successful deals, all with happy buyers. In these 20 instances, all vehicles have been paid in full upon pickup.

Recently, I have been asked to provide financing on a vehicle I have for sale, which got me thinking. The vehicle in question is a 2001 Crown Victoria, with an NADA Value of upwards of $4500. I am taking in a partial trade, and the deal was that the buyer would pay $700 in cash to supplement the deal.

The buyer does not have the $700 in cash. He offered to pay me $150/month for 6 months to cover the cost. My question is what can I do legally to secure my interest in the car? Can I place a lien on the title, though I am not a bank? I am in Michigan.

Michigan Law allows me to sell 5 per year without a dealers license.

I normally sell less than 5 per year, therefore I am not in violation.

Answer 1

12-6-102. Definitions

(13) "Motor vehicle dealer" means a person who, for commission or with intent to make a profit or gain of money or other thing of value, sells, leases, exchanges, rents with option to purchase, offers, or attempts to negotiate a sale, lease, or exchange of an interest in new or new and used motor vehicles or who is engaged wholly or in part in the business of selling or leasing new or new and used motor vehicles, whether or not such motor vehicles are owned by such person. The sale or lease of three or more new or new and used motor vehicles or the offering for sale or lease of more than three new or new and used motor vehicles at the same address or telephone number in any one calendar year shall be prima facie evidence that a person is engaged in the business of selling or leasing new or new and used motor vehicles. "Motor vehicle dealer" includes an owner of real property who allows more than three new or new and used motor vehicles to be offered for sale or lease on such property during one calendar year unless said property is leased to a licensed motor vehicle dealer. "Motor vehicle dealer" does not include:

I think you should look over the LAW in Michigan again. Most states have if you have intent to make a profit you need a dealers license.

You must follow all Federal Lending laws. Such as the Patriot Act section 326 that you need to pull a OFAC report. Actually all dealers are requires to pull this, but since you finance this is a must.

Answer 2

I am a used car dealer in the state of Alabama. Of course all states have different laws but I have handled some Michigan titles. If I am not mistaken You simply list yourself as lien holder but be careful doing this because it will be noted you are not noting a DEALERS LICENCES #. I would check on the laws about repoing the car first with no dealer licences this could get into a he said she said and become a civil matter. In this case, you could not do anything but go the courts which is not worth it. Also, as of 6 months ago Alabama went to paperless title work. We have to all be on line the moment we sell and I hear all states will do this in the near future in order to keep up with everyone better. Personally I would not put myself through the headahe over this particular deal. I don't feel its worth it. Patience really may be a virtue in this circumstance.

Answer 3

I suggest you ask a lawyer in Michigan, as each state's laws are different. The lawyer will help you to draw up the necessary documents. When you agree to finance the car, you and the buyer are entering into a contract. The contract must be explicit in what is expected by each party, otherwise you could end up spending more on court fees and lawyer fees than what profit you might make from the car. The contract must also conform to your state's laws, otherwise the contract is voidable and you could be left holding the bag with no recourse.
If you choose not to have a lawyer draw up the necessary papers, you are taking a risk that a reasonable and prudent person would not necessarily care to take.

Answer 4

As long as you have a signed promisary note detailing the transaction you can put a lien on the title but to protect your interest in the car make sure the buyer has full coverage on the car with you listed as the lost payee

Answer 5

You need to get dealer license if you are going to continue selling. If you don't obtain one , you risk a hefty fine. As far as the question you asked....You can be put on as lien holder on the title until you are repaid in full. It is a simple process done at a local DMV agent.

Answer 6

You might not be able to get a lien on the title but you could take the guy to small claims court, for what it's worth. If his credit is good enough for you, it should be good enough for him to go down to the credit union and take out a loan and then pay you the cash.
.

Answer 7

PERSONAL I WOULD NOT JUST FOR YOUR PROTECTION IN THE EVENT THAT SOMETHING DOES HAPPEN AND THE LAST PLACE THAT YOU WANT TO BE IS IN A COURT HOUSE.

YOU WILL WIN BUT AT THE SAME TIME YOU DO NOT WANT ANY AND ALL OF YOUR PAST SELLS TO MAYBE PLAY A PART.

Answer 8

You need to have the person sign a personal note to you with the vehicle as collateral in the event he does not continue to make payments.

FOR VALUE RECEIVED, I, we or either of us, the undersigned, promise to pay to SELLER, or order, the sum of TEN THOUSAND EIGHT HUNDRED AND 00/100 ($10,800.00) DOLLARS at the rate of 8% per annum, both principal and interest due and payable to payee at ADDRESS.

This note is due and payable in monthly installments of $250.00 each, on principal including the accrued interest on the unpaid balance of principal, the first of which installments being due and payable on the ________ day of Next month, 200__, and a like installment being due and payable on the _____ day of each succeeding month thereafter until paid in full, both principal and interest. At maker's option, payment may be made on this note before due, in any amount on any installment due date and at any time other than an installment due date, and as to any principal so discharged interest shall cease to run from the date of such payment.

All past due principal and interest shall bear interest from maturity until paid at the highest rate permitted by law.

The prompt payment of this note is secured by the Vendor's Lien retained by SELLER, grantors, to the aforesaid payees, at the special instance and request of the undersigned, in deed of even date herewith, from said grantor conveying the property hereinafter described and referred to, to BUYER, grantees, to-wit:

Description of vehicle including VIN #.

And as additional security for the payment hereof a Deed of Trust is this day given from BUYER to NAME SOMEONE HERE, as Trustee, of even date herewith, in trust for the benefit of the payee or other holder of this note, conveying the abovesaid property and containing the usual and customary clauses and provisions, which said deed and deed of trust shall appear henceforth in the appropriate records in the County Clerk's Office, __________________ County, STATE.

In the event of default in the payment of any installments or in the performance of any of the covenants, agreements, or obligations imposed by the terms of this note or said Deed of Trust, at the option of the holder of this note, the entire indebtedness evidenced by this note may be declared due and payable and may be collected by suit or by the powers contained in said deed of trust or as provided by law. If this note is placed in an attorney's hands for collection or collected by a suit or through a bankruptcy or probate, or any other court, either before or after maturity, then in either of said events, ten percent of its amount shall be added and collected as attorney and collection fees, which upon accrual shall bear the same rate of interest as the principal of this note. The makers, signers, and endorsers of this note severally waive demand, presentment, notice of dishonor, diligence in collection, notice of protest and agree to all extensions and payments before or after maturity without prejudice to holder.
_____________________ BUYER
and DEED OF TRUST in kind, look on the internet for your state, deed of trust would be recorded, note would not.