Selling vehicle

[Arif]

OK I have a dilema with a vehicle I no longer use and wanted to sell. The depreciation is horrendous as it is a domestic SUV. I currently have two options on the table:
1. Sell to a stranger for $16,200 (below blue book) for cash
2. Sell to a friend for $17,000 but the catch is I would hold the note and they would pay me monthly payments for 2 years and 4 months (the balance of my original loan). The reason we explored this option was my interest rate is very low and they would like to keep the lower rate. I am not worried about them paying the loan back but I am wondering if the $800 difference is worth the hassle.

BTW the blue book is $17,800 and I am looking to selling it before I head back to Panama on Tuesday.
OK break out your financial calculators

 

[shiny]

Is it 17k plus interest over the 2+ years or just a straight 17k?

 

[Arif]

They will make my payments until the loan ($16,500)is paid off plus $500 down. So they will make my payments of $572 for 29 months.

 

[Nords]

I am not worried about them paying the loan back but I am wondering if the $800 difference is worth the hassle.

I'd hesitate to risk a friendship over $800... especially when you can get $16,200 and run to a place where it goes a lot further.

Would this vehicle by any chance be used to run a Schedule E or corporate rental-property business?

 

[Arif]

Would this vehicle by any chance be used to run a Schedule E or corporate rental-property business?

Damn you're good. I took the complete writeoff upfront. I might have to recapture some of that on the sale since I didn't own the vehicle through the entire depreciation period. I'll get with my CPA once the dust settles.

 

[shiny]

Well, my first instict is to take the money from the stranger, pass the title to them and be done with it. Even though I figure this will cost you almost $900 (factoring in interest on the $500 down payment)

These are the worries that would keep me from taking the money: 1. The legality of the loan/title - it will be complicated for insurance, tags, taxes, etc. Your friend will have to get those things and the car loan people may call in the loan because most times these things are not transferable. Plus, if there is an accident it would really be a bad situation for you and the complicated title/loan situation. 2. Even the most solid relationships are often tested by loans. My brother just finished paying off a loan to me and I'm very happy to be through it with our relationship unaffected.

So, even though my calculator says one thing - the friend. The former lawyer and current worry-wort in me says another - the stranger.

 

[Nords]

Damn you're good. I took the complete writeoff upfront. I might have to recapture some of that on the sale since I didn't own the vehicle through the entire depreciation period. I'll get with my CPA once the dust settles.

Thanks! Too many years of punching vehicle data into TurboTax.

As long as you're talking to the CPA, I wonder if the friend's loan can be written off against the rental business in some way. But this goes way beyond anything I've ever learned from Schedule E...

 

[AltaRed]

Agree with shiny. Too many possible risks that you cannot comprehend today. At the very minimum, you need to get clear of any implications of title, lienholder, etc.

 

[Lakewood90712]

Take the cash.

 

[Patrick]

If you really like the friend and want to help him out, you could sell to him without liability. Just put yourself on the new title as a lienholder. The friend will register the vehicle in his name and you hold the title (which shows him as owner) until he pays you off. He is responsible for maintaining the insurance on the vehicle and liable if he should hit someone. If he defaults, you file a form with the DMV saying you are repossessing the car and they issue a new title in your name. Keep a set of keys so it's easier to repo the car, if necessary.

Be sure to keep a ledger of all the payments that have been made and the remaining balance owed. Have him pay you only by check so that there is a paper trail.

 

[Arif]

I decided to go with my gut rather than my wallet. That extra $800 is not worth the headache of over 2 years in dealing with money and friends.The stranger will buy the truck on Monday with a cashier's check for $16,200. I head back to Panama on Tuesday so this will be cutting it close. Thanks for those that posted with their advise.