Buying a car from a friend or relative can be a great deal. After all, you know who’s owned the car, how it’s been treated and serviced and whether or not it’s even been an accident. What you don’t know, however, is how this business arrangement might affect your relationship with the other person.
There are different considerations you need to make based on whether or not your friend or relative will be financing the car. In either case, consider how you and the other party will feel if the car develops a major repair problem shortly after purchase. Will they feel guilt? Will you feel anger? The best way to avoid this is to have the car looked at by a mechanic before purchase. This will assure you both that the car is in good working condition and that there’s nothing either of you could have foreseen.
In addition, consider whether or not the seller will really be able to let go of the car? Different people develop different levels of attachment to their cars. Will the car be yours once it’s bought or will you be subjected to questions like, “How are you taking care of my car?” for the entire time you own the car. If you know from experience that the person in question can’t let go of things or might regret their decision, it may be better for your relationship to buy a car elsewhere.
Financing a car with a friend or relative is a whole new can of worms. If you can arrange other financing, do so. If not, it’s a good idea for the two of you to commit your arrangement to writing, perhaps even drawing up a formal contract that outlines things like payment terms, interest rates and any collateral you arrange.
If you’re purchasing a car from a friend or relative, you need to agree on a purchase price, whether or not there will be interest on the purchase and, if so, how much and how frequently payments are to be made. You need to decide whose name the car will be in during the term of the loan and who will be responsible for paying for the tags and insurance. Who will be responsible for maintenance and repairs? Decide ahead of time what will happen if you miss a payment or if your financial circumstances change drastically. For example, if you lose your job and are unable to make payments, what happens then? Do you keep the car and resume payments when you can or does the car revert to its previous owner? Once you’ve made all of your decisions, you can draw up the paperwork yourself or have an attorney draw up the necessary documents for a small fee.
These are all decisions you need to make before any purchase is finalized. There are many relationships that have been ruined over hurt feelings surrounding a business deal. Depending on the nature of your relationship and how much losing that relationship would impact you, you may be better off buying your car from a stranger.
