When financing a car, who holds the title?

In dealing with insurance while financing a car, one aspect that hasn’t been touched on is whether adding a co-signer impacts the insurance policy and title holding. When I financed my last car, I had a co-signer, which added complexity because the lender considered both credit histories and both parties had to be listed on the insurance. This can sometimes affect the rates and coverage options available. Yarn9, when financing, did you consider adding a co-signer and how did that play into your decision-making for insurance and title holding?

Just to add from personal experience, when selling a car with an outstanding loan, some buyers are actually willing to complete the transaction at the bank that holds your loan. This can provide peace of mind for all parties involved since the bank can facilitate paying off the loan with the buyer’s funds and transferring the title to the buyer directly, ensuring there’s no lien on the vehicle when they take possession. It’s a secure way to handle the sale and can be more attractive to buyers.

Yarn9, you mentioned the need for full coverage on the car for insurance purposes. Have you found that this requirement impacts your choice of deductible or any additional insurance options you might consider? It can sometimes be a balancing act between managing monthly costs and ensuring the coverage satisfies the lender’s requirements.

From my experience, having full coverage as a requirement by the lender does limit how high you can set your deductible, making your policy a bit more expensive. However, it’s important to weigh the risk of a higher deductible against the potential savings on the monthly premium. Sometimes lenders have a maximum deductible limit, so it’s worth checking their specific insurance requirements to strike a balance that works for your budget.

Something that hasn’t been mentioned yet is the possibility of gap insurance. This type of insurance covers the difference between what you owe on the car and its current value if the car is totaled. I found this particularly useful when I financed a new car, as the value drops quite quickly once you drive off the lot.

Yarn, while managing a sale at the bank is an excellent way to facilitate a transaction with a lien present, did you encounter any hurdles setting up that arrangement with the bank and the buyer? For instance, scheduling conflicts or the bank’s policies on such transactions?

When you finance a car, the lender usually holds the title as security for the loan. The title will be in your name, but the lender will be listed as the lienholder. This means you are the registered owner, but the lender has the legal right to repossess the vehicle if you default on the loan. Once you’ve paid off the loan, the lender will release their lien, and you can then obtain a clear title.

For insurance, you’ll need full coverage while there’s a lien on your car since the lender will want to protect their interest. If you think about selling the car before the loan is paid off, you’d have to pay off the remaining balance first or work out a deal with the buyer and the lender. Have you considered how you might handle this situation if you decide to sell the car before paying off the loan?