New Vehicle - helping a friend

Jaybird180

Jaybird180

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We are buying a new vehicle after exhaustive filtering options and choices, have it narrowed down to colors and preference of dealer. The dealer is trying to get it today.

We have a leased vehicle to dispose of and would like to help a very close family friend with it. He is in financial recovery from a recent divorce and child custody issue, so being approved with the lender to take over the lease payments is dreaming. We still want to help, even at moderate financial risk to ourselves.

If we allow him to give us the money for the monthly lease, we would be fine with this arrangement, and even if he defaults we would not be sore. I know the situation and he has good credit with me (borrowed a few times - always repaid on time).

Insurance is a separate matter. We are not comfortable with carrying anyone on our insurance policy (legally can't anyhow), and don't know how to allow him to drive the car without exposing ourselves to the risk of an accident where someone is hurt.

How do we help him?
 
Can he not afford his own insurance? Most policies cover (at least to some extent) whatever car the driver is in. It's why I always decline the optional insurance on rental cars.

I think the easiest thing is for (you and) your friend to talk to a trusted insurance agent. They will be able to provide options and advice.
 
There is still the issue of him dropping coverage voluntarily or involuntarily from non-payment.

I think what you're proposing is a slippery slope. My suggestion is help him buy a beater he can pay for with his own cash (no borrowing from you or other financial entity) and then work with the right insurance agent to get an affordable policy.
 
If you want to help,and I understand the sentiment, I like to help people too. If it were me, I would pay the lease off, sell him the car for a dollar so it is titled in his name. If he can't afford insurance and you want to help with that also, have the insurance in his name, and have the premium sent to you and you pay it. You are then covered liability wise and not only helping with a car, but also helping them with an asset. Just a thought.
 
I think Mike has the best idea - help him buy a car and he can pay you back.

A friend of mine and I did an arrangement similar to what you describe. He's one of my best friends and still is, but he definitely ended up abusing the situation and put me at a level of risk that he shouldn't have.

We are also in a similar situation with my brother-in-law who's been doing a lot of great things to get him ahead in life, but has had a lot of struggles including getting his truck stolen. So, we bought him another truck that he can pay us back when he's able to.
 
AggieMike88 said:
I think what you're proposing is a slippery slope. My suggestion is help him buy a beater he can pay for with his own cash (no borrowing from you or other financial entity) and then work with the right insurance agent to get an affordable policy.
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Another vote for the beater. Buy it and sell it to him for whatever amount he can scrape up. When he is done finally paying you back for it he'll have something he can use as a down payment on a newer car. This also takes care of any liability and insurance issues.
 
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I do not intend to fund his insurance nor will I rob him of his pride and independence. He's gainfully employed, just financially challenged right now. I proposed taking over the lease to him at the same payment we have (insurance and maintenance on him) and he was enthused until we discussed his credit situation. He has reasonable expectations to be able to afford the car but without help cannot buy THIS car. We don't do co-signs as a matter of policy.
 
Are there any issues with respect to the lease, titling or registration that would prohibit or complicate this?

If you are the person on the registration, the insurance will most likely need to be in your name. I suspect you will be unable to get yourself off the title/registration without consent of the lessor.
 
wsuffa said:
Are there any issues with respect to the lease, titling or registration that would prohibit or complicate this?

If you are the person on the registration, the insurance will most likely need to be in your name. I suspect you will be unable to get yourself off the title/registration without consent of the lessor.
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No issues. Lessor consent required.

I suppose we would have to grant an exception to our policy to make this happen.
 
AggieMike88 said:
There is still the issue of him dropping coverage voluntarily or involuntarily from non-payment.

I think what you're proposing is a slippery slope. My suggestion is help him buy a beater he can pay for with his own cash (no borrowing from you or other financial entity) and then work with the right insurance agent to get an affordable policy.
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If this were possible I think (hope) he would have come up with this idea on his own cognizance.
 
As a long time car dealer, I like your no co-sign policy, it seldom works out with family and never with friends!:mad2: I will echo the suggestion of buying a cheaper car and either giving it to him or more likely having him pay you payments on it. Make sure you put the title in HIS name with you as leinholder if you choose to finance it for him, or give him clear title in his name, do not just "hold" the title either open or in your name. ;)
It's a good thing to help a friend, just make sure it can't cost you more than you expect. :D


Jaybird180 said:
I do not intend to fund his insurance nor will I rob him of his pride and independence. He's gainfully employed, just financially challenged right now. I proposed taking over the lease to him at the same payment we have (insurance and maintenance on him) and he was enthused until we discussed his credit situation. He has reasonable expectations to be able to afford the car but without help cannot buy THIS car. We don't do co-signs as a matter of policy.
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Jaybird180 said:
If this were possible I think (hope) he would have come up with this idea on his own cognizance.
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I'd missed Mike's original bit about no loans from you or anyone else.

I think your friend's probably more in the situation like my brother-in-law, in which case if you trust him you could do like we did and loan him the money for something nicer than he could afford with his own money at the moment. How you work out the specifics regarding a lien or just verbally agreeing on payment terms is personal.
 
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If he is going to drive the car he needs specific insurance for that car. While insurance policies typically have inclusions for the named insured casually driving borrowed or rental cars or for other people driving the insured vehicle they definitely WILL NOT cover regular use of people/vehicles not on the policy.

As pointed out, the BANK will ABSOLUTELY require insurance on a leased or financed car. If you let it lapse, they will obtain it for you at a heinous rate.
 
I think letting someone use a LEASED car of yours would be a huge mistake. It's hard enough not to get screwed by a leased car deal as it is when your name is on the hook and you're the one driving it.

You'd be better off to help him buy a reasonable used car in his name.
 
You got the best counsel above; do not allow someone else to drive your leased car. Buy a car for him as a kindness, it will likely be repaid in some way, some day.

If it's leased, and reains in your name, many bad things can occur.
 
I vote to help him buy a beater. Free and clear. No chance of complications. Then your friend can pay whatever he can into an account as a maintenance reserve($50-$100/month) and if it gets him through the year, he can use that money to pay you back. Or you could "gift" him a beater and let him pay for basic liability coverage. There are plenty of companies that will give him liability coverage on the beater until he can own something better. In the meantime, he can save, improve his situation, pay you back or pay it forward. Anything that's not a cash deal can have complications and complications can sour the best of relationships. You obviously care about the guy so help him out without jeopardizing the relationship or your credit standing.

Oh yeah, and pay a mechanic a couple of bucks to accompany you when inspecting beaters so that you guys can make a good purchase.
 
jesse said:
I think letting someone use a LEASED car of yours would be a huge mistake.
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Yep. You are on the hook for that car, and damage to the car, excessive mileage or wear, and many many other things.
You aren't giving him your car, you are giving him the lease company's car. A car which you contracted for use, and for which you are responsible to the actual owner, the lease company.

You could arguably be in violation of contract terms, void insurances, and be liable for breach of contract. Because the car belongs to THEM, and you signed a contract for your use, not to sublease the car to someone else.
 
My above advice was based on that vehicle specifically. But I agree with all the others that say buy the beater for him. I am all for helping people, but you have to be careful to protect your family.
 
The lease deal is now expired. We turned it in last night, which gave us a reduction in sales tax on the new vehicle purchase (ouch - all the extras we bought!), so in a sense we came out ahead trading for a "loss".

If he asks, I may help in the future with cash toward his purchase at the time of his choosing. Until then, I'll not speak of it. Thank you PoA for giving me a moment of pause.
 
Jaybird180 said:
If he asks, I may help in the future with cash toward his purchase at the time of his choosing.
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God bless you for wanting to help, and being willing to do so.
A friend of mine is a vet who got wounded in Iraq. They went through a bad patch, and I loaned them my car for 8 months. It's the least I could do.

You're a good man.
 
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