Tips on Buying Cars: buying a car, car question, car owner

Question
QUESTION: Hi Jeff
Thanks for taking my question - I am planning to buy a car from a private party - the person I am buying from still has a loan on the car - how do you see this transaction proceeding - I am guessing that the bank will contact me and ask me to pay off the remaining loan in exchange for the the title ? But the remainder of the agreed selling price is due to the owner ?

Also the person I am buying from is in a different state - once the title to the vehicle is signed over to me does he get to remove his plates and can I drive it home without any plates ? or will I be driving home with his plates and returning them once I have registered the car in my name ?


ANSWER: 1) It depends on how that state handles liens and titles.  Some states require the bank to hold the title until the loan is paid off, while others (like here in New York) give the title to the car owner with a lien printed on it.  Once the loan is paid the bank issues a lien release letter, which shows the car is now free and clear.  I personally would want paperwork that shows all loans have been paid by the current owner, rather than becoming responsible for paying the loans myself.  What if there's more than one loan on the car?  It's the owner's responsibility to provide you with a clear title.

2) Most states will provide you with some form of a temporary plate so you can drive the vehicle home.  The current owner would keep the plates and turn them in, or you'd turn them in to get the temporary plate.  You would NOT drive home on his plate, as he'd be responsible if you were in an accident.  It's the state in which the car currently resides that you'd get the temporary plate, not your home state.  (Unless you live in Massachusetts, where they do it completely different from the other 49 states.  If you live in MA, contact your motor-vehicle bureau before going any further with this transaction.)  Once you get home, you'd then apply for your own permanent plate.

---------- FOLLOW-UP ----------

QUESTION: Jeff

Thanks for answering my question - the seller contacted me and mentioned he would meet me at the bank which holds the title to the vehicle - he mentioned the cheque would be made out to his name and the bank would handle the transaction and hand over the title - is this the way its supposed to be processed ?

Also I have asked him for a bill of sale what kind of things should I expect him to include ? Can I have him include a promisary note that to the best of his knowledge the car has no defects etc ?

Thanks again
Ghulam

Answer
First check with the state motor-vehicle department in which you're buying the vehicle.  They may have an on-line bill of sale form they may require be filled out before they'll issue the temporary plate.  They may also require proof of insurance, so be prepared for that.  (Here in New York, the only thing they'll accept as proof of insurance is a special letter prepared by your personal insurance agent, faxed to the appropriate office.)  Short of that, you should definitely have him fill out and sign a bill of sale, showing what you purchased, when, and how much you paid.

As for his bank, if they hand you a clean title, then that's really all you need to know.  If the bank has a problem with his check, then they won't give you the title.  But I'd worry more about what you'll need to give the motor-vehicle department in that state in order for you to drive home.