Unusual Refinance Question in California

[Anonymous]

Hi all,

Longtime poster here on the credit card forum. First time venturing into auto loans and I could use some help.

My girlfriend purchased her first car last January, 73 months @ 8.17% APR. She had no credit at the time, so her good friend (not parent) offered to cosign on the car for her. Unfortunately, her bank put her friend as the primary signer and her as the coowner of the car.

She has now built up her credit, but no longer has a job, as she is living with me to go back to school. We want to refinance the car under her name with me as the cosigner (or vice versa), and went to our local credit union to do so. We were informed that this would be considered an auto sale, even though she is a coowner on the car and she is and has always been the primary driver on the car.

Even with the sales tax, it makes sense for us to refinance to a shorter term and a lower APR, but given the circumstances, it doesn't seem fair to have to pay sales tax considering the car is not actually being sold.

Does anyone here have experience with the matter? Is the lady at the credit union mistaken? Can the primary "gift" the car to her (I put gift in quotes because she hasn't paid a penny for the car). Any and all help would be appreciated.

[jeffm4688]

who's the car currently registered to? Assuming it's your GF sales tax shouldn't have to be paid ... (i'm not a lawyer and I've never dealt with CA) however in NY which is equally messed up sales tax shouldn't need to be paid if the registered owner is not changing. 

[Anonymous]

Thanks for the insight. I believe she's the coowner. Registration lists friend/girlfriend.

[jim44]

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@jeffm4688 wrote:

who's the car currently registered to? Assuming it's your GF sales tax shouldn't have to be paid ... (i'm not a lawyer and I've never dealt with CA) however in NY which is equally messed up sales tax shouldn't need to be paid if the registered owner is not changing. 

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+1,  IMO, I agree this is definitely a refinance regardless of he fact that you are dropping and adding a name to the title/loan.  However the CU make look at it differently as a sale due to this fact.   In that case, I'd have the primary owner sign off the car as a gift... depending on whether CA allows a car to be gifted from non-relatives and/or if CA has a gift tax.  Let us know what the end result is.    Thanks. 

[redbeard]

Did the rep at the credit union say it was a sale for the state, or just in the way they view the financing, it is a sale?

The rep may be saying it becomes a used car loan, not a refinance, which is true because the primary responsible person for the loan changes.

I doubt they care about sales tax issues, as long as the title is clean.

Dan