There are many reasons you may be driving a car that's not in your name; you may have inherited the vehicle, you could be a caregiver using the patient's vehicle, or it's in your significant other's name. Trading in an old car as a down payment lowers the amount you're financing on your next auto loan. And, a lower loan amount could help you qualify for a car loan if you have bad credit.
But, if you need to trade a vehicle, it has to be in your name. If the car isn't in your name and you attempt to sell or trade it this is typically considered theft and can have many unintended consequences.
If the car you drive isn't in your name, you have some work to do before you can trade it in – namely getting the car titled in your name since you can't legally sell a car that's not in your name. Here's what you need to know about trading in a car that's not in your name.
You Can't Trade in Someone Else's Car
If you're not the owner of a car, you can't trade in the vehicle. And, if your name isn't on the car's title, even if you're the primary driver, you're not the owner of the car. However, the owner can trade in the car themselves, or sell you the vehicle you've been driving. Once you own it, it's yours to do with as you please.
In order to buy the vehicle you're driving from the owner, you have to go through a private sale. This means paying the agreed-upon price of the vehicle and doing the paperwork to take ownership of the car. You'll have to prove you purchased the vehicle by bringing your bill of sale to your local Secretary of State office or DMV and applying for a title transfer to get your name on the title.
But, if the person whose name is on the title has a loan out on the vehicle, then they're technically not the owner yet, either, and can't sell the car.
If there's still a loan on the car, the lender is listed as the lienholder on the title and you can't do anything with the vehicle until the loan is paid in full. Once the vehicle is paid off, the owner is sent a release of lien letter, and/or the title. Then, they can sell you the car and you can go about doing what you need to do to get another vehicle.
This process typically takes a few weeks to complete if you're waiting on a physical copy of the title. Be aware, though, that most states now participate in electronic lien and title or ELT, where the information is stored and transferred digitally, rather than the state issuing a paper copy of the title.
Once You Own the Car
As the owner of the fully paid-off car, you can trade it in as all or part of your down payment on another vehicle. But, as a bad credit borrower, you may face some stipulations, such as length of ownership. So, be sure to get all the details before heading to the dealership.
The trade-in process is pretty simple when you get down to it. Just bring the car to the dealer for an appraisal, and since you don't owe anything on the car, the whole amount of value can be used to offset the cost of your next auto loan.
States vary in their requirements when it comes to selling or trading a vehicle. Additional documents also have to be completed, depending on your state, such as an odometer disclosure, an emissions test, and a bill of sale. Some states include these on the title, as well. Your dealer is likely familiar with this process and can walk you through it.
Auto Credit Express Tip: Be sure to shop around for the dealership that's offering the best deal on your next car, as well as one that's offering a decent amount for your trade. If you rate shop within 14 days, all hard inquiries on your credit count as just one.
