Buying Out Mothers Auto-Loan

Submitted by DirkGOAT10 t3_10ooqf3 in personalfinance

Hey Folks,

Wanted to run this by the community to make sure i'm not going to run into any tax headaches for this situation.

My moms lease is ending and she wants to purchase a cheaper used car moving forward. I did some research on her trade value, and realized she could net $4K if she bought the car and then traded it to Carmax (could make more with a 3rd party which we might do).

Problem is she doesn't have that sort of cash on hand so i'm happy to help step in so she can make an easy $4k and apply it towards her new car purchase.

So the plan is

  • Pay off my moms auto loan
  • Take it to Carmax and sell it
  • She pays me back the loan value minus profit

Will I run into any issues?

Thanks!

7

Comments

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DirkGOAT10 OP t1_j6fxy99 wrote

Replying to [deleted] (#1,598,134)

I feel so silly - Quick google search shows Carmax will in fact buy your car even with a loan attached.

Thanks so much. So sounds like I would only need to do the whole process if i try to sell to a 3rd party

9

SolutionLeading t1_j6g2kj1 wrote

Replying to DirkGOAT10 (#1,598,196)

Make sure you follow up with them and make sure they correct the title and everything. I sold my (paid off) car to them and they missed filing some paperwork, and I didn’t realize until months later when I got a registration renewal notice for my old car!!! They fixed it after I called them

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Jaded-Wolverine-686 t1_j6g2ri0 wrote

Who is the lease provided by? There are different processes for each lienholder.

3

nails_for_breakfast t1_j6i05w1 wrote

Wait, is her current car leased or financed? You're mixing up terms here and it would make a big difference

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Jaded-Wolverine-686 t1_j6jbkzb wrote

Replying to DirkGOAT10 (#1,620,830)

Keep in mind that her payoff excludes tax, title, license and any lease fees. Additionally, if she purchases the vehicle directly, she’ll have to wait for a physical title before she call sell her vehicle. (Can potentially take several weeks)

Purchasing and selling doesn’t seem worth it to me in this situation.

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Jaded-Wolverine-686 t1_j6p3ba9 wrote

Replying to DirkGOAT10 (#1,666,475)

All Toyota leases I have seen have excluded sales tax on the payoff. Maybe you’re think of dealer inventory tax?

Also, keep in mind that your vehicle will have to be reappraised once you actually receive the title. Turn around time is closer to a month +.

1