Odd Situation with Financing Car for Daughter's Use

[Paula0925]

Hi, everyone - maybe you can help me out here.  We decided to buy (and finance) a Jeep Liberty for our daughter's use.  Everything was going fine until my husband mentioned that we were surprising her with the car for Christmas.  Screeching halt!  They insisted that there is a law that says you cannot purchase a vehicle for someone else's use.  The driver must be on the financing application, etc.  Well, we refused for two reasons:  1) our money and we can do what we want with the vehicle and 2) if she had to complete paperwork, it wouldn't be a surprise! We just didn't want this on her credit report because WE are paying for it - not her.  

So my husband changed his tune, and said it was a misunderstanding - the car was for family use.  Well, they dug in their heels and refused to finance the vehicle without her on the paperwork.  We ended up just paying cash but I'm really frosted here!  We've bought four vehicles for her over the years, and no one has ever questioned it.  We have several vehicles and we all drive them at various times.  And this is our sixth Jeep!  Has anyone else encountered this? 

Many thanks for any info!

[amp0804]

The information they gave you is completely incorrect. It is none of their business who is driving the car its your insurance companies business. If you finance/purchase a car under you and your husbands name and you daughter is driving it makes no difference. I'm sure you would want to let your insurance company know that your daughter will be driving the car or have her insured under an older car you own under your insurance.

[Paula0925]

Thank you for the response.  Yes, we had informed the insurance company that she would be driving the vehicle.   I'm still totally confused by all of this.  My husband is calling the dealership this morning to speak with the general manager.  At this point, the car is paid in full, but we still don't understand what happened. 

[Anonymous]

Someone at the dealership being a pain. I would have said ok you finance without her or we will go down the road to Joe Bobs Jeep and buy it from him. That would proabably have changed their tune if you took the sale to another dealership. If already bought a mute point now but I would steer clear of their dealership in the future unless the GM makes it right with you somehow. Let us know what happens.

[Anonymous]

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@amp0804 wrote:
The information they gave you is completely incorrect. It is none of their business who is driving the car its your insurance companies business. If you finance/purchase a car under you and your husbands name and you daughter is driving it makes no difference. I'm sure you would want to let your insurance company know that your daughter will be driving the car or have her insured under an older car you own under your insurance.

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Incorrect.

With varying degrees of intensity across different states, municipalities, and lending institutions, it is illegal for a finance department to finance/title/register a vehicle on one person's name when it has been stated, is known that the vehicle in question will be exclusively used, and or paid for or maintained by another party who is nowhere on the paperwork.

Its called a "straw deal"

Its a huge issue.

If your declarations have lead the dealership to believe its a straw deal they cannot proceed. proceeding can be considered both a criminal and civil violation.

If you are not financing the vehicle, but paying cash it is no problem.

If you are financing the transaction,. then the dealership as adhoc agent for the financial instituion has an obligation to look out for the interests of the banks they use and their parameters of lending.

Once the dealership believes a straw deal is in effect they are stopped, the legal ramifications are too great. It is being party to "fraud."

[Anonymous]

usmc58555, that is a very enlightening post! 

This is something I would have probably argued about at the dealership. 

I was watching this thread for a solid answer to this situation, thanks for providing it!  I learned something today.

[Anonymous]

However, and generally speaking, when a parent is purchasing a vehicle that will be used by a dependent child, there usually isn't such a stink.  The real issue is related to "straw borrowers" such as USMC metioned, which usually means an unrelated or uninterested party acts as the borrower when in fact it is another person who is the borrower and is actually responsible for its use, maintenance, payments, etc.

But in the case where a parent is purchasing the vehicle, will be responsible for the payments and insurance, is related to and interested in the dependent, then the straw borrower provision doesn't have to apply and the lender is merely being overboard and technical.

Straw borrowers are the fraudulent use of credit and and name only, where the income and assets of that person are not actually intended to be relied upon for payment.  This is similar to adding an AU to a CC account where there is no legitimate relationship and is solely for the FICO boost and is designed to present a credit scenario to lenders that is not correct, thus is fraudulent in nature, having an intent to deceive.

HOWEVER: there are federal positive identity and use provisions that are not related to straw borrowers, ie: can you say patriot act.

Message Edited by txjohn on 12-23-2009 05:25 AM

[Anonymous]

txjohn, am I understanding this correctly...had the OP pointed out the distinction (family relationship/dependant status of the daughter) to the dealership, the paperwork for this financing could have proceeded in the parents name only?

[Paula0925]

My thanks for explaining what was happening.  We have had further discussions with the dealership, and have found that the sales staff is livid with the finance department for this behavior.  I believe you are correct in that the finance department assumed it was a straw deal, and simply wouldn't budge on their position.  We've bought three other vehicles for her over the years.  In all three of those instances, she test-drove the car, decided she wanted it, and then we did the paperwork to purchase it.  So each dealership was well aware that the car was being purchased for her use.  This time, we did the transaction without her knowledge as a Christmas surprise.  I did NOT want to comply with their demand that she be placed on the financing deal.  We are pursuing it with higher levels of management locally, and I have also contacted the senior vice president of sales for the entire U.S.  Yes, we already have the vehicle and the financing is old news now.  But we believe that the rudeness and poor business relations from that finance department should be looked at closely. 

[Anonymous]

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@Anonymous wrote:
txjohn, am I understanding this correctly...had the OP pointed out the distinction (family relationship/dependant status of the daughter) to the dealership, the paperwork for this financing could have proceeded in the parents name only?

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depends on a lot of factors:

is the child an in school dependent

is the child based out of the parents address

what does the financial institution involved think/do/have policy on.

your 18 yo son living with you  while going to school is one thing, your 22 yo daughter that is going to pick the financed vehicle up for christmas and take it from Ohio to Arizona and use it exclusively there, with it never coming back to Ohio is completely different.

Something was said, at some point, that triggered a F/I guy to be wary of this deal.

A dealership makes money buy selling cars, not by doing paperwork and denying the sale.

In TXJOHN's poinrts, you also have to consider the reason for the parents buying the car, if the person the car is being bought for has bad credit, could not get the loan on their own, going through a divorce or legal issues, there could be actual aspects of true fraud on the transaction.