So you’re in the market for a used car – great! What if the seller still has a loan balance – will you also have to “take over” the car payments?   Â
With the way that new car prices are rising, it’s no surprise that used cars look much more enticing! Besides the lower prices, used cars also depreciate much slower since cars lose most of their value in the early years. However, if you’re buying a used car from a private seller – like a family friend, acquaintance, or someone online – there’s the possibility that they still have a pending loan balance.  Â
Can you “take over” these car payments and make things smoother? We break everything you need to know.Â
Unfortunately, the concept of “taking over” someone’s car loan payments is a gross misnomer. A car loan (or any loan for that matter) cannot be transferred from one person to another because the contract is between the lender and the original owner.  Â
The owner won’t be able to transfer ownership of the vehicle to another person without the lender’s approval. This is because the lender is the lienholder (the party that has the right to repossess the vehicle in case of default). There needs to be a legally binding contract that stipulates that the new owner is responsible for the car payments – which should be agreed upon by the lienholder.Â
However, this can only happen after the lender conducts their due diligence – which is very thorough. Very few lenders are ready to negotiate with both parties and allow such an agreement to go through.Â
Simply put: car loans are not ‘assumable’ (transferable to a third party). Therefore, it is very rare for someone to ‘take over’ used car payments from the original owner. However, there are longer, more tried-and-tested ways to do so – like refinancing your car to add a co-borrower and then removing yourself from the loan.Â
Can you drive a used car and simply pay the owner the monthly amounts?
Some would say this is the optimal arrangement. You may be able to make an agreement with the used car owner to take the vehicle off their hands immediately and use it for your needs while paying them the monthly amounts needed for them to pay off the loan. Once the loan is repaid and they become the full owners, they can transfer the title and registration to you.  Â
While this is a great solution when buying from someone you know, it can quickly go awry when buying from a stranger.Â
- What happens when you hit a financial crunch and miss a payment?Â
- What if you get into an accident, and the insurance company files a claim?Â
- The owner will be held responsible for any unpaid parking tickets, speeding tickets, and other fines you rack up.Â
Should you take over someone’s used payments?
In most states, it is illegal to transfer ownership of a used vehicle to someone else without the lender’s approval. Even in states where the lender can make a negotiated transfer to a third party, there are several risks involved, as mentioned above.Â
Therefore, we don’t recommend that you take over car payments when buying a used car. Instead, you can choose any of the several alternative options to ‘take over’ car payments when buying a used car.Â
The proper way to ‘take over’ car payments from someone
1. Ask the seller to talk to their lender
Even if the seller is okay with you taking over the loan, nothing can go forward without the lienholder (lender). The lender may agree to negotiate a transfer, but if that falls through, you may have to look at alternatives.
The seller may have to pay off the loan before you buy the car, or you may have to take out a loan yourself and buy the car from the lender for a new APR.
2. Keep your supporting documents ready
It’s likely that the lender will not agree to a transfer unless you have all your documents in order. They will likely check your credit score, income proof, residence proof, driver’s license, and more.
3. Contact the seller and be sure of their intentions
Before you take on any car payments, meet with the seller to understand the details of the loan. You don’t want to realize only much later that the payments are too expensive! And as a general rule, do not send the seller any money before finalizing the details.
4. Try to negotiate a deal with the lender
If your credit scores and payment histories are compatible with the seller’s, the lender may allow a direct transfer of the loan as a rare case. In such a case, the lender will remain the lienholder, but you will have to sign a deal to transfer the responsibility for car payments to yourself. You will then become the primary borrower and own the car once your finish paying off the loan.
Alternative to taking over used car payments
Auto loan refinancing is one legal way to transfer ownership of a car from one person to another. However, it can often be a long process, which is why you should choose it only if you are willing to wait at least a year.Â
Here’s what you should do: Â
1. Ask the seller to refinance the loan and add you as a co-signer/co-borrower
The seller needs to have a better credit score than when he applied for the loan. However, if that condition is satisfied, he can easily add you as a co-signer or borrower. The refinance lender will check your credit score and if you qualify, the vehicle title will be updated to include you as a co-signer.
2. Refinance a second time to remove the seller from the loan
When you refinance a second time, try to wait for at least 6-12 months. This is because your credit scores need some time to build up. As long as you find a lender willing to refinance your loan again, you can remove the original owner and become the primary borrower of the loan.Â
Things to ask before taking over car loan payments from someone else
Is the car worth the loan payment?
You may need a used car badly, but consider whether the loan payments are affordable enough to take over. Often, sellers may be desperate to get a car off their hands because of high loan payments. You don’t want to jump from the frying pan and into the fire!
Do you have the financial means to continue paying for the remaining term?
The exhilaration of getting a used car may not last very long if you are seasonally employed or have an unstable income. It’s best to ensure that you have enough money in the bank to pay off the loan in the remaining term.
Frequently Asked Questions (FAQs)
Can you take over car payments?
You cannot technically ‘take over’ car loan payments from someone else directly. The car owner will need to get permission from the lender before transferring a loan to anyone else. However, lenders rarely allow such a transfer because the loan terms were set based on the original owner’s credit profile and payment history.
How do you take over an existing car loan?
One way to take over car payments from someone is by negotiating with both the used car seller and their lender to arrive at a common ground. In very rare cases, the lender may accept you taking over car payments – especially if you have a good credit score.
If that’s not possible, you can ask the seller to refinance and add you as a co-signer. After a few months, you can refinance once again and remove the seller from the loan. That will make you the sole borrower of the loan and will be equivalent to ‘taking it over.’
Who would want to take over my car payments?
It may not be easy to find someone to buy your used car, especially if you still have an open auto loan. The process to ‘transfer’ a car loan to another person is very long and complex – not to mention that you aren’t guaranteed success. Refinancing your car to add another person and then re-refinancing to remove yourself from it is the best way to sign over your car loan to someone else.
What do you do with insurance if you let someone take over your car payments?
Auto insurance is supposed to be paid by the current owner of the vehicle. So if you let someone take over your car payments, you are no longer the legal owner of the car – the responsibility of auto insurance lies with the new owner.
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