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Taking over someone’s car payments isn’t easy or always possible. Here’s what you need to know.
Owning a car can be expensive. In fact, the latest data from AAA shows that the average yearly cost to own and operate a new vehicle in 2023 is $12,182 or $1,015 per month. If a close friend or family member finds that they’re no longer able to afford their car, they might ask you to take over their payments.
The reality is that taking over someone else’s car loan is easier said than done. In fact, it’s not always possible. If it is possible, there are other options than paying the same rate the previous owner did. Cosigning, deferments, and refinancing can all be great options depending on your situation.
First and foremost, let’s go over the definition of a car payment.
If you take out a loan to buy a vehicle, you’ll have a car payment. It’s the amount of money you owe each month and is made up of principal, interest, and fees.
Your car payment will depend on factors like the amount on the loan, the loan term, and your interest rate. Once you make all your car payments in full and pay off your loan, you’ll own the vehicle outright.
If a friend or family member is struggling financially, you might wonder whether you can take over their car payments. Ultimately it depends on their lender, the original contract, your credit score, and several other factors.
The process of directly taking over someone else’s car payments, often referred to as loan assumption, isn’t allowed by most lenders. This is because the terms of the loan were based on the credit check and payment history of the original owner. The contract was made between the lender and the original owner.
What’s more likely 一 if you agree to become the new owner of the vehicle 一 is after the title and registration have been transferred the lender will set new loan terms based on your credit, essentially creating a whole new loan.
In the event a lender does allow the loan assumption, you (the new borrower) must qualify for the current loan. The terms, conditions, and payment date will likely stay the same so the lender will want to make sure they work for you. If the lender decides you are eligible and you agree to take over car payments, you’ll sign a contract to assume the loan.
Auto lease takeovers, also known as lease transfers or lease assumptions, are usually possible and can allow you to take over someone’s lease payments. Just keep in mind that each lessor has their own unique rules for lease transfers so you’ll need to check with them to understand your options.
The lessor may allow someone to transfer the lease to you completely or they may require the original lease owner to remain on the lease while you make their payments. It’s possible that if someone only has a few payments left on their lease, the lessor might not permit them to transfer the lease at all.
If a friend or family member asks you to take over their car payments and you accept this responsibility, you’ll need to follow these steps.
First, the person whose payments you want to take over (the original borrower) will need to reach out to their lender and find out if taking over their car payments is even possible. They’ll need to explain the situation and make a strong case for transferring their loan to you.
If the lender does give the original borrower the green light, they might request proof they can no longer make their payments and show you have the financial means to take over. As long as you have a good credit score, stable income, and a history of making on-time car payments, you’ll be able to help their case.
Next, meet with the original borrower and look over their contract. By doing so, you can get an idea of what you’ll be responsible for when you transfer the loan.
The contract will disclose the loan’s balance, any fees that might apply when the transfer occurs, and anything else you need to know about the terms and conditions of the loan. While the original contract may be a bit different than the new contract you’ll receive 一 since the lender will likely adjust the terms to fit your credit and income 一 it’s definitely a good reference point.
Now, it’s time for you to fill out a new auto loan application. Complete it carefully and submit all required documents to avoid inaccuracies that lead to delays.
Hopefully, the lender will approve your loan assumption or cosigner application fairly quickly. While some lenders are quick and offer approvals instantly or in a few days, others will take weeks. Don’t hesitate to reach out to the lender if you haven’t heard from them in a week.
Upon approval, you’ll need to transfer the car title to your name as proof of ownership. You can visit the local Department of Motor Vehicles with the current owner of the vehicle and bring proof of identity, like a driver’s license or passport. You may also need a bill of sale and proof of active insurance.
To drive the vehicle legally, you’ll likely need to meet the minimum liability car insurance requirements in your state. Work with your current insurance company to make sure the car is insured under your name. You can also shop around and find another insurer that offers you a policy with a better rate.
Before you go ahead and take over car loan payments for someone else, be sure to ask yourself these questions.
Car payments are often expensive. That’s why you should make sure the vehicle you’re getting is worth the payments you’ll be making. If it’s an older, smaller used car with a lot of issues, and you prefer a larger, new car, for example, taking over a car loan might not be in your best interest.
If you commit to taking over the loan payments and being the new owner of the vehicle, you’ll have to keep the car for the number of years required by the contract. This might be five years or longer so it’s important that you feel comfortable driving the vehicle for a while.
The balance of the car loan should work with your budget and financial situation. Let’s say someone’s car balance is $50,000. You might find that’s unrealistic for you to repay while maintaining your lifestyle and meeting other financial goals.
If you decide that taking over someone’s car payments isn’t a good option, you may want to encourage them to explore these alternatives.
The easiest way for someone to get rid of their existing loan payments is to sell their car. They’ll be able to avoid the hassle that comes with transferring their auto loan. Fortunately, many dealerships and online companies will buy cars without making customers buy another one from them.
If someone needs a new vehicle, they can always try to trade theirs in. This is a particularly good idea if they have enough equity in their current car to pay off their existing loan and use the remaining amount as a down payment for another vehicle.
In the event someone is going through a rough patch financially, they can try to get a cosigner to make payments for them for a while and let them drive their vehicle as an incentive. The cosigner will assume responsibility for the loan and make payments based on its existing terms and conditions.
Many lenders are open to letting borrowers pay less or even nothing for a few months if they’re strapped for cash, especially if they’ve been loyal and have a history of making timely payments. If someone expects their financial situation to improve soon, asking for a deferment from their lender can be worthwhile.
A car refinance replaces an existing auto loan with a new loan. During a refinance, a new lender pays off the original loan and provides the borrower with a new loan agreement, complete with a different interest rate, term, and monthly payment. Landing an auto refinance with a lower interest rate could help make car loan payments more affordable.
While taking over someone else’s car loan isn’t easy, it can be done in some situations. If you decide to go this route, make sure you can comfortably afford the payments.
In the event you don’t want to or are unable to take over someone else’s loan, rest assured there are other options they can consider, such as selling their vehicle, trading it in, getting a cosigner, asking for deferment, or refinancing.
Taking over someone’s car payments doesn’t mean you have to pay exactly what they were paying. RateGenius can help you refinance the loan on better terms and lower your monthly payment. Check out our rates here to see if it is the best option for you, or apply today to lower your interest rate and monthly payments!
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Taking over someone's car payments isn't easy or always possible. Here's what you need to know. Owning a car can be expensive. In fact, the latest data from AAA shows that the average yearly cost to own and operate a new vehicle in 2023 is $12,182 or $1,015 per…
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