Tips on Buying Cars: Buying auto from private party who is still making payments, bank finance, company thanks

Question
I am trying to buy a 2007 auto from a private party that says he does not want to make payments anymore. This tells me that he does not own the vehicle. If I am writing him a check, how am I protected on receiving the title in my name? What is to keep him from cashing the check and not paying off the finance company?

Thanks
Carl

Answer
1) Find out which bank, finance company or credit union holds the note on the car (make sure there's only one; it is possible to have more than one loan on a single vehicle).
2) Call them and get written verification (written letter, e-mail or fax) of the amount needed to pay off the loan.
3) When you buy the car, write two checks: one made out to the bank for the loan payoff, and the rest made out to the current owner.

For example, if the selling price is $24,000, and he owes the bank $18,500, then the bank gets a check for that amount, and the seller gets a check for $5,500.  That's the amount he would net from the deal anyway, and this way you protect yourself.  If the seller balks, then something isn't right and I'd look for another car.

On the other hand, if the seller owes MORE than the selling price, then the bank will require two checks: one from you for the selling price, and one from the seller for the difference.  If this is the case and the loan is with a local bank, then the two of you would need to go to the bank together to pay off the loan, to ensure that you get a clear title.  If the bank's out-of-town, then you need some verification that the seller is going to pay off the balance.  I'd suggest he use a money order, bank draft or cashier's check for the difference, give it to you and then you can mail both checks.  Do NOT let him use a certified personal check: that only ensures that there's enough money in the account to cover the check- he could still stop payment on it.