Full question:
I am purchasing a car from a friend. The friend has been leasing the car. If I give the friend a check to pay the vehicle off, what legal forms should I obtain? The friend wants to apply for the title and then sign the title over to me when received. Can I legally get insurance on the car before the title is in my name. Also the friend lives in one county and I live in another, both in TN.
- Category: Automobiles
- Subcategory: Lease
- Date:
- State: Tennessee
Answer:
The lease on the car will spell out whether or not the lease is transferrable or if your friend can end it early by paying off the balance (sometimes called an early buyout). The lease also should be reviewed for provisions regarding obtaining title to the lease when it is ended. Not all lease contracts allow buyouts before the lease expires and some contracts impose restrictions on when the lessee can exercise a buyout option.
Title to the car cannot be changed away from the lender (as lien holder) until the buyout is complete. There is a certain amount of risk in paying money in anticipation of the title being released by the lien holder.
If your friend is successful in getting the leasing company to accept the payoff and transfer title to him, then it is not complicated for him/her to sell the car to you. This typically is done through a bill of sale and then a title transfer from the government agency where the car is registered. The bill of sale would be proof of ownership that allows the title to be registered with the new owner.
Most automobile insurers will not issue a policy on a vehicle to someone other than the owner or lessee. Therefore, it may be difficult to obtain insurance for a car you do not own. However, your friend's policy may cover you if you are operating the vehicle with his permission. He should consult with his insurance carrier for more information.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
