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Can a dealer use their own person automobile loan to finance you?

Can a dealer use their own person automobile loan to finance you?
Is it legal for a dealer to use their existing car loan as financing for a customer? EX. The customer buys the dealer’s personal car, just continuing to make the dealer’s payment. Can the dealer call this financing???? Is this legal? The dealer owes more on the car, than the customer owes the dealer. Legal issue? Shouldn’t some type of paperwork be involved other than the customer applying to the dealer for financing? The financing is through a credit union.

Answer: What you’re describing is usually a lease take over (check out sites like swapalease.com, leasetrader.com, etc). The finance company has to approve the transfer and then sends both parties transfer documents to sign.

I haven’t heard of this happening with financed vehicles, however. Whereas leasing a vehicle is simply renting the vehicle, a financed vehicle bestows the person with a sense of ownership (although, until it is paid off, the lien holder owns it). In the event that they don’t want the vehicle anymore, they will sell the vehicle.

A lease transfer works because the lien holder (finance company) doesn’t care if the payee is swapped; just as long as the new person is credit worthy. I mean, it’s their vehicle that they’re renting out.

Anyway, to return back to your question, it is not really financing. Financing is when funds are provided, such as a finance company paying the dealership for you (and then you owe the finance company). In your case, the dealer isn’t paying off the vehicle; he’s only acting like a middle man. This can cause issues for either party. For you, unless you have a written contract, the issue will be that he can just yank the vehicle from you since you won’t have a claim to ownership of the vehicle. Once it is paid, the finance company will give the dealer the pink slip. Another issue is that since you weren’t financed, it won’t show up on your credit report (and thus can’t help you).

Your question is a little ambiguous, though. Upon reading it again, is it really a “transfer”, or is he using his business to sell you his own vehicle? If you are applying to a credit union for financing, then the case might be that the credit union will pay the dealer for the vehicle, and then the dealer will use that money to pay off his debt to his finance company. However, if he’s selling the vehicle for less than what he owes, the finance company won’t release the lien until the debt is paid in full. That means the dealer will have to pay the difference.

The situation seems kind of iffy to me, though. To make it simpler, just imagine the dealer is an ordinary guy who is trying to sell his personal vehicle. He’s using his business to get you to apply for financing through him, so maybe he can get a cut. I would probably go apply with my own credit union instead.

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