• Hello there guest and Welcome to The #1 Classic Mustang forum!
    To gain full access you must Register. Registration is free and it takes only a few moments to complete.
    Already a member? Login here then!

Sold a car to a friend...

S

sigtauenus

Active Member
Dave,
A little over a year ago my wife and I sold a 98 Pathfinder to a young man at church as a good deal. The price on the car was $2400, he put down $200, we drew up a loan document for $100 a month with no interest for 22 months. Its been a year now and he still owes $1000 on the car. Apparently last night he was #4 in a 4 car pile up and may have totalled the car. The young man comes from a poor, broken home and we were trying to help him out. I know, I know, never loan money to somebody that you aren't willing to write off if you value the friendship.

I am out of town traveling this week, so it is premature to speculate on if the car was covered for collision (I suspect not) or if the car is ugly but repairable or really totalled.

Assuming the worst, that the car had minimum coverage and is indeed totalled, do you think I should force him into a life lesson by making him pay back the $1000 on a totalled car or tell him to not worry about it and write the loss off on my taxes?

Honestly, we didn't really need the money when we sold him the car, we wanted to help him out and teach him a little responsibility. He pays in cash and we usually use it to go out to dinner once a month. If we write off the loss, its annoying, but not an excessive hardship on us, whereas making him pay will impose a hardship on him as he still needs to find and pay for another car and he barely pays us as it is.

My gut feeling on this is to sit down with him and explain that very few situations in life will leave him in this situation, but that we are able to release his obligation, and for him to not expect that in the future. It is also a lesson for me in that I did not think to require him to have full coverage, although I should probably check the loan document we drew up to see for sure.

So Dave, what would you do here?

Lastly, since I had a lein on the title and have the title in hand, does anybody know the process by which I reclaim ownership of the vehicle and then go about writing off the loss of the vehicle value for tax purposes?
 
Since it may be a while for Dave (it is Friday night), I'll throw in my $0.02. In NC (don't know about your state) you have to carry collision insurance on a car if you are paying for a car. ie lien The only way you can carry liability only is if you outright own the car. In this case, his insurance company would be responsible to pay you. If your state is the same, or if he had collision, the insurance company will reimburse you for whatever amount they deem appropriate (I know) minus the deductible. Throwing all that out and getting to the worse case scenario...tough call. To me, it would really depend on the kid. Also, if it is totalled and there is no insurance to cover it...and you are the lien holder...the car is yours. You are still the rightful owner of the car if payment is missed or agreement is broken. No real process to speak of.
 
"sigtauenus" said:
My gut feeling on this is to sit down with him and explain that very few situations in life will leave him in this situation, but that we are able to release his obligation, and for him to not expect that in the future.
Click to expand...

Personally, I think your gut feeling is right. You are a good man.
 
If it were me, I'd probably let him off the hook.

I haven't seen one in a while but I believe a non business bad debt goes on Schedule A as an itemized deduction for tax purposes. I don't have my tax handbook handy at the moment but Turbo tax probably has a section for it or if you use a CPA just let them know about it.
 
"sigtauenus" said:
My gut feeling on this is to sit down with him and explain that very few situations in life will leave him in this situation, but that we are able to release his obligation, and for him to not expect that in the future
Click to expand...

You might preface this by asking him how he feels about the situation and what he thinks would happen "in the real world", before you let him off the hook.

Frank
 
Sounds to me that up to this point, he's acted responsibly and paid the note on time. If at the end of the day, the car is a lost cause, then I would let him off the hook. Sounds like he's a pretty responsible kid. I guess a discussion about life's REAL ramifications would be in order, but I would cut him some slack. BTW, very nice of you to be looking out for the young man!
 
I would let him sweat it a bit. Don't make getting out of things to easy. Make him sweat the money as bit, maybe even go so far as him paying you but then you back off and talk with him. By doing that, you make sure he understands the real results.
 
Thanks for the comments guys.

I really am trying to look out for this guy, so the money is really not an issue to me. What I really wanted to do was help him out, and for him to learn a life lesson about responsibility and the reward for doing the right thing (my wife and I had actually discussed giving him a check for $2400 when the car was paid off to use for college). That said, I don't want the life lesson here to be that if you are in a sad situation that your problems magically just go away.
 
He needs to understand what happens in the real world. Then he should see the generosity that people still possess regardless of real world circumstances. Kinda like "pay it forward" AFTER a little life lesson. Sounds like you're gonna do the right thing.
 
it's almost funny but my wife and I have done this now a couple times. Many years ago we sold an 88 Silverado to a friend in the same boat. He was going to College, working his way thru himself. We sold the truck with the agreement he would have full coverage. He was invovled in a "no fault" accident in an unmarked intersection (no stop signs or yeild for either driver). He had let the insurance lapse so he was uninsured but just happened to still have the insurance card showing a valid date. Neither driver was ticketed and the other driver's insurance said since it was a no fault, each party would be responsible for their own driver. So he was off the hook for any legal issue like a ticket or fine but had a totalled truck. He still owed $800 to me. We agreed to let him pay us what ever he could when he could get on his feet. Well we figured we would never see a penny and for nearly 15 years we didn't and in fact forgot about it as we eventually lost touch with him. One day out of the blue he called after some search to find us since we had moved many times, he said he was sending a check. He did too. I couldn't believe it! Anyway, good luck and good for you to help others!
 
"sigtauenus" said:
Dave,
A little over a year ago my wife and I sold a 98 Pathfinder to a young man at church as a good deal.
Click to expand...


You sold a car.


since I had a lein on the title and have the title in hand, does anybody know the process by which I reclaim ownership of the vehicle
Click to expand...


How do you still have the title if you sold the car? It can't be both ways. If you sold him the car, he HAS to have the title for registration purposes. The car CANNOT be titled in your name and registered in his.

he still owes $1000 on the car.
Click to expand...


You're damn right he does!


Assuming the worst, that the car had minimum coverage and is indeed totalled, do you think I should force him into a life lesson by making him pay back the $1000 on a totalled car or tell him to not worry about it and write the loss off on my taxes?
Click to expand...


I don't think you're assuming the worse.... worse would be if he never registered the car in his name (because he doesn't have the title) and has been driving around on your now expired registration in a completely un-insured vehicle. This would be worse since it is technically still "your" car.... that YOU let the registration on lapse.... and the insurance on expire.... that rear-ended someone in an accident.


So Dave, what would you do here?
Click to expand...


Difficult to say as I never would have gotten myself into such a mess. Pray?


anybody know the process by which I reclaim ownership of the vehicle and then go about writing off the loss of the vehicle value for tax purposes?
Click to expand...


Unless the vehicle was donated to an officially recognized charitable organization, which I doubt he is.... it CANNOT be claimed as a loss on your taxes unless it was a BUSINESS vehicle, which it wasn't.


Somebody here is getting a life lesson.... not sure if it's you or him.


Poor people are poor for a reason. Avoid them or you'll be joining them. The opportunity exists in this country to make anything of yourself that you're willing to work for. Poor decisions play a bigger part than anything else when seperating the rich from the poor. Be careful that your zest for lending a helping hand doesn't jeopardize your wealth.
 
Actually Dave, you can sell a car to an individual the same way as if you go to a dealer and finance one. You sign the title over to the person BUT list yourself as the lien holder. The title then comes back to you with them listed as the "owner" (so to speak) and you listed as the lien holder. As soon as the lien is paid, you sign off as the lien holder and hand them the title. Paperwork at the dmv gets the insurance stuff in order. Who holds the title if you finance a brand new car? It's not the dealer. It's the finance company.
 
"blue65coupe" said:
Actually Dave, you can sell a car to an individual the same way as if you go to a dealer and finance one. You sign the title over to the person BUT list yourself as the lien holder. The title then comes back to you with them listed as the "owner" (so to speak) and you listed as the lien holder. As soon as the lien is paid, you sign off as the lien holder and hand them the title. Paperwork at the dmv gets the insurance stuff in order. Who holds the title if you finance a brand new car? It's not the dealer. It's the finance company.
Click to expand...


Okay, I'm with you.... that's just not how I read the situation. If that's the case then there's not as much to be concerned about.
 
"RustyRed" said:
As far as the deduction goes...here's some "light reading" for you.

http://taxation.lawyers.com/Deduction-f ... Debts.html

I've not researched it to any great extent but you can read up on it and see if you can make it work.
Click to expand...


From your linked article....

Worthless Debt
To be deductible, the debt must be totally worthless. Unlike business bad debts, you can't take a deduction for partially worthless non-business bad debts. For example, in January 2008 you loaned your brother $1,000 with the understanding that he'd repay it, with interest, in two equal payments due in June and December. He makes the June payment but not the December payment. You can't deduct the unpaid portion because the entire debt is not worthless.


The unpaid balance is therefore not deductible.
 
Update on the title: we had him list us as a lein holder as described above, so the DMV sent us the title that shows him as the owner and me as the lein holder.

Update on the insurance: liability only

Update on the money: he came up to my wife last night and handed her $50 and said even though the car was totalled, he was still going to pay us the money he owes us.

Dave, I hear what you're saying about the poor, but this is a good kid and all he needs is a chance to break free from his past, or more appropriately, from the past his parents created. He's still going to have to lift himself up by his bootstraps, I'm just giving him a spot.
 
Wow Sam, sounds like the kid has somewhat of a head on his shoulders. If it were me, here is probably the path I would take. I wouldn't say anything to him about writing it off so to speak. He is obviously willing to make good. Let him. There is a lesson there. If he is in a tough situation beyond his control, adjustments can be made. Let him pay you the $1000 he owes and stick it in a drawer. Once he gets it paid, hand him the money back. That is taking into account the circumstances you describe are accurate. You could even cut it short once he gets to $500, tell him the rest is not to worry about and decide if you want to just give him a break on the last $500 or the whole $1000. I personally would not approach him until I saw him make an effort to pay. I'm doing the same thing right now for 2 people but have not run into the situation you are in. If I were, I'd help 'em out as much as I could without putting myself in a bind. With that being said, I would never do this in a situation where a) I didn't have confidence in the person or b) I had to rely on the money.
 
I sat down with him this morning and asked him what his plan was moving forward. He said he understood he still owed us money and was going to keep paying us. He said his schedule is off of his brothers by an hour, so his brother could drop him off at work and pick him up and he would read or something to pass the time when he had to wait for a ride. I asked him how long he expected to do this and he said a long time, based on having to pay us and save up for another car.

I had already thought of the idea of having him finish paying us and giving the money back, but having some idea of his financial situation, I chose not to. I told him that he didn't owe us any more, and for him to use the money to start saving up for another car, and some basics on insurance.

I don't want to deviate this to a political tangent, but I made a personal choice based on my knowledge of the kid, my assessment of his character, and his place in life and decided to bail him out of a crappy situation. As opposed to being forced via my tax dollars to bail out somebody who made much worse choices.

And Dave is right, I did learn some lessons here myself.
 
Very cool of you to do that. I'd be willing to bet that this kid has already learned a couple lessons that will follow him through life.
 
You must log in or register to reply here.
Back
Top