Selling a Car to Unmarried Couples
It's not uncommon to sell a car to unmarried couples who purchase together. If you do so, be aware that selling a car means entering into a series of contracts that may cause confusion in the future as the status of their relationship may change. It's important to understand and explain the vehicle ownership rights and responsibilities before you allow any customers to jointly purchase a car or make other irregular payment or registration arrangements. Here are some of the common legal considerations when discussing shared ownership of a car.Sole Ownership. If the customers intend that the vehicle will be titled to only one partner, you should register the vehicle in one person's name only. The vehicle registration and any loan documents will be in the name of only one party. However, if one partner elects to advance part or all of the down payment on behalf of another person without being on the title or as a co-signer, the borrower(s) should consider signing a written contract to repay each other among themselves. A dealer could also ask the parties to provide a release of the dealership regarding payments and title as to avoid any “interest” or rights in the vehicle. Parties often create informal payment arrangements that suddenly change when the relationship sours. Be careful when allowing one party to make payments on behalf of the other absent written agreement. Remember that you can only take instructions from the titled owner or repo a car that is default of the borrower. A dealer cannot pick up a car at the request of the non-owner…even if they have been making regular payments.
Insurance If only one person will own the car, but you know both parties will be driving the car, you may want to be sure that both partners are included as an “additional driver” on the car insurance to protect all parties against the insurance company possibly denying a claim.
Joint Ownership and Co Signers. If you intend to sell the vehicle jointly, you'll need to include both parties on the vehicles title and any loan documents. This can be especially confusing if only one party is on the title, but both customers on are on the note contributing toward its repayment. When trading, selling, or exchanging a vehicle titled in two names, the Texas Transportation Code Chapter 501.031 requires that “ownership of the vehicle may only be transferred by all the persons acting jointly, if all the persons are alive”
Rights of Survivorship Agreement. When you register the vehicle with two names, Texas Transportation Code Chapter 501.031 also provides that the parties may include what is called a “Rights of Survivorship Agreement” that is acknowledged by both parties that the other party may make payments or retain title depending on the situation. These types of provisions may be helpful to avoid probate court if one party unexpectedly dies. On the death of one of the persons, title may be transferred by the surviving person or persons by transferring ownership of the vehicle, in the manner otherwise required by law, with a copy of the death certificate of the deceased person.