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Discussion Starter #1
Hi All,

I am interested in potentially purchasing my parents a new vehicle for Christmas (I know its still 5-6 months away). My mom currently drives a 1999 Toyota Camry with close to 300k miles on it. She and my dad don't have a ton of money, so if they have to purchase something else on their own, it would probably be 10 years old. I don't think my mom has ever owned a new car, so I would love to surprise her and my dad with something. She recently drove my aunt's Nissan Murano (probably from 2012-ish) and commented that she may enjoy having an SUV as her next vehicle. I am a big Honda fan and love what they have done with new CR-V, so I am leaning in that direction. Unfortunately, I don't have enough to pay cash for the car up front. My plan was to pay cash for half, finance the other half, pay off the remaining balance the next year, and then remove my name from everything. However, I did some research and it doesn't appear I can finance the car in my name, but have my parents listed as the owners and have the vehicle insured in their name. Apparently this is called a straw purchase. Does anyone have any ideas on what my options could be? Could I add my parents to the title, in addition to myself, when I finance the car without them actually being on the loan? If so, would this allow them to register the car in their name only? I know that the car might have to be insured in my name. I would be okay with putting the car on my policy with my parents listed as the primary drivers until I pay off the lien. Would there be any issues with this?

I know that I will ultimately need to talk to my bank and insurance company, but I wanted to go ahead and get some research done to make sure this is even possible. Any thoughts would be much appreciated.
 

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No, you can't put your parents on a loan without them knowing about it. In fact you don't want your parents on the loan at all. Should something happen to you before the loan is payed off they will be on the hook to make the payments.
What you want to do is buy / finance the car in your name and insure the car with your parents on the policy. Once you pay off the car you gift it to your parents and sign the title over to them. In most if not all states, you may transfer ownership to close family members without having to pay taxes. So basically you handle it as if you are the parent.
Of course there is a draw back. While you own the car you are libel in any lawsuit.
 

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Of course there is a draw back. While you own the car you are libel in any lawsuit.
Great summary. Confess I laughed a touch at the last sentence. Think you intended to say liable not libel.

Yes, I hate auto correct to!
 

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Discussion Starter #4
No, you can't put your parents on a loan without them knowing about it. In fact you don't want your parents on the loan at all. Should something happen to you before the loan is payed off they will be on the hook to make the payments.
What you want to do is buy / finance the car in your name and insure the car with your parents on the policy. Once you pay off the car you gift it to your parents and sign the title over to them. In most if not all states, you may transfer ownership to close family members without having to pay taxes. So basically you handle it as if you are the parent.
Of course there is a draw back. While you own the car you are libel in any lawsuit.
Thanks for the summary and input. And to clarify, I wouldn't want my parents on the loan at all. Also, none of this would be done without their knowledge. My plan would be to surprise them before any final paperwork was signed, just in case they didn't like the car for some reason and so they could sign any paperwork, if needed. My preference would be for them to be able register the car in their name, so they could transfer their existing tag. My understanding is that they would have to be on the title for this to happen. I've done online research and some have said that lenders will allow an additional name to be added to a vehicle title, but not be added to the loan itself. However, some have said that isn't true. If I had to register the car in my name, could we transfer their existing tag to me and then transfer it back to them? Or could we just add my name to their tag/registration temporarily? I don't mean to sound stupid. I am just not sure how all of this can/would work.

If all goes according to plan, the car would be purchased at the end of the year and then paid off in February (I get an annual bonus at that time), so this would only need to be a temporary solution. I know that I could wait until February to purchase the vehicle, but I would love to be able to see if I could get a good end of the year deal.
 

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Simple solution?

Your parents buy the car, they get the loan and insurance as though you had nothing to do with it, and you cosign the loan so you are liable for it, and you make the payments. Since you are cosigning I think you can include credit/life on it in case you croak? When the loan is paid off it is over?
 

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Another even simpler solution (cosigning on the loan is a good suggestion) is if you can qualify for an unsecured loan or maybe a home equity loan. Your problem stems from "financing the car" where the car is collateral for the loan. That's what causes the titling requirements. The bank needs the title in the borrower's name so that they can repossess if necessary. If you have good credit, you probably can arrange an unsecured or home equity loan although it would be at a higher interest rate. With a short term loan, though, it would not add up to much more.
 

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Another even simpler solution (cosigning on the loan is a good suggestion) is if you can qualify for an unsecured loan or maybe a home equity loan. Your problem stems from "financing the car" where the car is collateral for the loan. That's what causes the titling requirements. The bank needs the title in the borrower's name so that they can repossess if necessary. If you have good credit, you probably can arrange an unsecured or home equity loan although it would be at a higher interest rate. With a short term loan, though, it would not add up to much more.
You beat me to it. I would try to borrow the money independent of the car. It could be a personal loan, refinance of your own car, home equity loan, etc. I would want a gift to my parents to be clean and clear when they get it. Bring an old retired parent, I would not want my kids to spend money to get me a new car since I'm more concerned with them taking care of their own needs and not mine. I would feel the parents out to see if they would want you to do that.
 

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Discussion Starter #8
You beat me to it. I would try to borrow the money independent of the car. It could be a personal loan, refinance of your own car, home equity loan, etc. I would want a gift to my parents to be clean and clear when they get it. Bring an old retired parent, I would not want my kids to spend money to get me a new car since I'm more concerned with them taking care of their own needs and not mine. I would feel the parents out to see if they would want you to do that.
My parents would feel the same way. They will probably fight me every step of the way. However, I think they will give in after we talk it out. Its not something I am doing just to be nice, but rather something that is partially being done out of necessity. My mom drives a car that is almost 20 years old and has almost 300k miles on it. If/when it is on its last leg, they will try to buy something that is probably close to 10 years old and in the $5-7k price range, which could need big repairs or need replacing in the next 5 years. They wouldn't do this to be frugal, but do this because that is all they can afford to do. Even that would be a huge burden on them. They don't make a ton of money and are supporting my teenage sister while trying to take care of my elderly grandmother and disabled aunt. I, on the other hand, don't have a family to support and make 3-4x what they do. I don't have any debt other than a modest mortgage. They sacrificed a lot for me when I was in high school and college, so that I could graduate essentially debt free. A new car is a very practical need that they have and I am really excited that I am in the position to do this for them. They sacrificed to take care of me when I was younger, now its my time to return the favor.

I went ahead and talked to my financial institution. They said I could finance the car under my name only, and just add my parents to the title as co-owners. They would have legal ownership of the car (at least partial) without legal responsibility to pay for the car. I confirmed with the DMV that their names would be on the registration using this method, and I talked to the insurance company and confirmed that they could insure this car on their own policy. I think this is the route I am going to go. While I could get an unsecured loan or home equity loan, the rate on an auto loan is the best by far (current rate 1.8% for up to 72 months). While I plan on paying it off within a couple of months after buying it, it gives me a little extra flexibility and security should something else happen. Also, it would allow me to purchase the car a little earlier if for some reason the one dies or needs a major repair between now and Christmas.

Thanks to everyone for taking time to provide input. I really appreciate it. I am going with another family member to test drive the new CR-V (and maybe a few other things) later this week. I want to go ahead and get my ducks in a row in case I need to pull the trigger earlier than anticipated. Plus, looking at and testing driving new cars is fun. :)
 

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Looks like you have most of it covered if your parents will go along with you. -The only other thing I would do is you will needed to be added to your parent's policy as an additional insured.
 

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Looks like you have most of it covered if your parents will go along with you. -The only other thing I would do is you will needed to be added to your parent's policy as an additional insured.
Is there a reason I would need to be added? Their names would be on the title (in addition to mine), on the registration, and the car would be on their policy. I would never drive it and it would be parked at their address. The reason I would like to avoid it, if possible, is because I am a single male in his 20's. I wouldn't want to drive their insurance rates up, if not necessary.
 

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Is there a reason I would need to be added? Their names would be on the title (in addition to mine), on the registration, and the car would be on their policy. I would never drive it and it would be parked at their address. The reason I would like to avoid it, if possible, is because I am a single male in his 20's. I wouldn't want to drive their insurance rates up, if not necessary.
It's probably not a problem if it not a problem with the insurance company. I worked insurance claims for 31+ years and it came up occasionally but it was to protect the person that was not an additional insured to make sure their name was on the settlement check. That should not be a problem with your parents.
 

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My parents would feel the same way. They will probably fight me every step of the way. However, I think they will give in after we talk it out. Its not something I am doing just to be nice, but rather something that is partially being done out of necessity. My mom drives a car that is almost 20 years old and has almost 300k miles on it. If/when it is on its last leg, they will try to buy something that is probably close to 10 years old and in the $5-7k price range, which could need big repairs or need replacing in the next 5 years. They wouldn't do this to be frugal, but do this because that is all they can afford to do. Even that would be a huge burden on them. They don't make a ton of money and are supporting my teenage sister while trying to take care of my elderly grandmother and disabled aunt. I, on the other hand, don't have a family to support and make 3-4x what they do. I don't have any debt other than a modest mortgage. They sacrificed a lot for me when I was in high school and college, so that I could graduate essentially debt free. A new car is a very practical need that they have and I am really excited that I am in the position to do this for them. They sacrificed to take care of me when I was younger, now its my time to return the favor.

I went ahead and talked to my financial institution. They said I could finance the car under my name only, and just add my parents to the title as co-owners. They would have legal ownership of the car (at least partial) without legal responsibility to pay for the car. I confirmed with the DMV that their names would be on the registration using this method, and I talked to the insurance company and confirmed that they could insure this car on their own policy. I think this is the route I am going to go. While I could get an unsecured loan or home equity loan, the rate on an auto loan is the best by far (current rate 1.8% for up to 72 months). While I plan on paying it off within a couple of months after buying it, it gives me a little extra flexibility and security should something else happen. Also, it would allow me to purchase the car a little earlier if for some reason the one dies or needs a major repair between now and Christmas.

Thanks to everyone for taking time to provide input. I really appreciate it. I am going with another family member to test drive the new CR-V (and maybe a few other things) later this week. I want to go ahead and get my ducks in a row in case I need to pull the trigger earlier than anticipated. Plus, looking at and testing driving new cars is fun. :)
Then there is another consideration. If your name is on the title you could be held responsible for any damage caused by the car. So, should your parents have a horrific accident that costs more than their insurance limits, both your's and their personal assets could become in danger if you are sued for the excess cost above the insurance limits.

Admittedly this is always a risk. Insurance will only pay up to the policy limits and the responsible parties are responsible for the rest. So, there is virtually an unlimited risk in anything we do up to the point of bankruptcy. And, we all have such a responsibility for ourselves. But, it may not be a good idea to accept such a responsibility for someone else, even our parents.
 

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Then there is another consideration. If your name is on the title you could be held responsible for any damage caused by the car. So, should your parents have a horrific accident that costs more than their insurance limits, both your's and their personal assets could become in danger if you are sued for the excess cost above the insurance limits.

Admittedly this is always a risk. Insurance will only pay up to the policy limits and the responsible parties are responsible for the rest. So, there is virtually an unlimited risk in anything we do up to the point of bankruptcy. And, we all have such a responsibility for ourselves. But, it may not be a good idea to accept such a responsibility for someone else, even our parents.
I was a claims adjuster for over 31 years and ran into that issue a few times. It happened when the guilty party had minimum policy limits or they were extremely wealthy and a target. The minimum limit currently in Virginia is 25K per person, 50K per accident for injury and 20K for property damage. That is almost nothing in today's world and the only people who could justify that is someone who just needs tags and has no other assets. I have a single limit half a million dollar liability limit. Many of us have an umbrella of at least a million dollars but they require high underlying limits ( which I recommend).
 
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