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If you're in need of access to a car but lack the financial means to purchase one independently, consider exploring co-ownership options. Alternatively, you could opt to sell a portion of your car to a trusted friend or neighbor, potentially expediting the repayment of your car loan. Regardless of your motivations for co-owning, it's crucial to establish a comprehensive agreement detailing how the car will be utilized and for what purposes. A thorough written agreement can help prevent disputes in the future.
Steps
Establishing Legal Co-Ownership
Add both names to the title of a new car. One method of co-owning a car is to purchase it jointly with another individual. Subsequently, you can include both of your names on the car's title. When completing the title, you'll need to specify the manner in which you and the other party hold ownership of the car. Typically, there are two options:
- Joint tenancy. In this scenario, the car automatically transfers to the other individual in the event of one co-owner's passing. To establish joint tenancy, list your names as 'Mary Smith or Michael Jones.'
- However, in some states, establishing joint tenancy permits one owner to sell the car without the consent of the other owner. To prevent this scenario, you can list your names as 'Mary Smith and Michael Jones, as Joint Tenants with Right of Survivorship.'
- Tenancy in common. Under this arrangement, you have the freedom to designate your share of the car to any desired individual in the event of your demise. To establish tenancy in common, list your names as 'Mary Smith and Michael Jones.'
Draft a Co-Ownership Agreement, if Necessary. If you're purchasing from a dealership and financing the car with a loan, the lender may require both co-owners to be on the loan. Alternatively, you might opt for a loan in one person's name but place both names on the title. In this case, you'll need a joint ownership agreement, which should include:
- A mutual agreement statement: 'Mary Smith and Michael Jones agree as follows:'
- Loan details, such as repayment terms and amounts.
- Confirmation of equal car ownership.
- Arrangements for non-loanee payments and buyout options.
- Ownership percentage adjustments in case of missed payments.
- A clause stating that any modifications must be in writing.
- Signatures from both co-owners.
Buy or Sell a Share of a Vehicle. Whether you already own a car or wish to acquire a share of someone else's, determining a fair price is crucial. Consult the Kelley Blue Book for accurate market values of used cars.
- Follow state-specific procedures for updating registration and title information, as regulations vary.
- Buying a used car may entail additional fees; contact your state's DMV for a comprehensive fee schedule.
Verify Existence of Liens. Before purchasing a share of a vehicle, ensure there are no existing liens. Liens may arise if the owner owes debts secured by the vehicle. Request proof of current loan status and inspect the car's title and registration for lien details.
- Obtain the vehicle identification number (VIN) and request a car history report from the DMV to detect any outstanding liens.
- Avoid purchasing if multiple liens exist beyond the primary lender.
Obtain Lender's Approval, if Required. In most states (41 out of 50), obtaining the lender's consent is necessary before adding a co-owner's name to the title. Contact your state's DMV for specific procedures. Some states may handle the request to the lender directly, while others require direct contact.
- No permission is needed in the following states:
- Kentucky
- Maryland
- Michigan
- Minnesota
- Missouri
- Montana
- New York
- Oklahoma
- Wyoming
- You may also need to settle debts with other lienholders, such as mechanics who performed unpaid repairs. Ensure compliance with your state's DMV requirements.
- Exercise caution when co-owning with individuals facing financial difficulties due to multiple liens.
Establish an Informal Agreement. Consider an arrangement where only one person's name appears on the car's registration and title, with shared vehicle usage. However, be aware of potential drawbacks:
- Insurance coverage may be restricted for the second driver if not listed as an owner or family member, potentially voiding coverage in accidents.
- Oral agreements are challenging to enforce in court due to lack of documentation, leading to credibility issues. Consider formalizing terms in a written contract.
Establishing Usage Guidelines for the Car
Discuss Terms with Co-Owner. Before formalizing co-ownership, hold discussions with the other party to establish usage rules. Address:
- Scheduling and duration of car usage.
- Permission for extended trips.
- Passenger policies.
- Ownership of car accessories and items.
- Car usage regulations such as smoking, pet transportation, and food consumption.
- Responsibility for refueling and maintenance expenses.
- Agreement on insurance coverage and contribution amounts.
- Cleaning responsibilities.
Formalize the Agreement. Document agreed-upon terms and draft a formal agreement. Refer to Write a Legal Contract for drafting guidance.
- Provide detailed terms to minimize potential disputes, ensuring mutual understanding and compliance.
Execute the agreement. Formalize the contract by signing it, preferably in the presence of a notary public. Notaries can typically be found at courthouses or major banks. Locate a notary using the American Society of Notaries website.
- Ensure you bring adequate personal identification for notarization, such as a valid driver’s license or passport.
- Provide a copy of the agreement to the other co-owner for reference in case of disputes.
Resolving Conflicts
Arrange face-to-face discussions to address issues. Promptly resolve any car usage disputes by meeting in person. Direct communication helps prevent misunderstandings that can arise from written communication, which lacks non-verbal cues that account for about 90% of communication.
Listen attentively to the other party. Practice active listening by maintaining open body language, making eye contact, and refraining from interruptions. Seek clarification on their needs and concerns to ensure understanding before responding.
- Keep calm to facilitate effective problem-solving and avoid escalating tensions. Maintaining composure helps convey your perspective without appearing confrontational.
Bring a copy of the agreement to the discussion. Use the agreement as a reference point to gently remind the other party of the agreed terms. If disagreements arise over unauthorized usage, calmly refer to the contract without resorting to confrontation.
- Remain composed to foster constructive dialogue and prevent conflict escalation, enabling mutual understanding and resolution.
Update your agreement. Your initial agreement may become outdated and require adjustments to accommodate changes in both co-owners' circumstances. For instance, changes in employment status may necessitate revisiting usage terms for the shared car.
- Modifying one aspect of the agreement may trigger adjustments in other areas. For example, if one co-owner needs to use the car more frequently, the distribution of insurance and repair costs may need to be recalibrated accordingly.
- Once a revised agreement is reached, it should be documented and signed by both parties in the presence of a notary public.
Explore mediation. Intractable disputes may require professional mediation. A mediator, acting as a neutral third party, facilitates constructive dialogue to reach mutually acceptable resolutions.
- Mediators do not adjudicate or assign fault, emphasizing the importance of honesty during mediation sessions. Typically, each co-owner presents their perspective in the presence of the other, followed by private meetings with the mediator.
- To locate a mediator, inquire at your local courthouse for mediation programs or court-approved mediators. Additionally, contact your local or state bar association for referrals.
Prevent litigation when feasible. Lawsuits entail substantial costs and time commitments, even in small claims court. Prioritize resolving disputes with a co-owner through mediation or direct negotiation.
Seek legal assistance. If legal action becomes inevitable, enlist the support of an attorney, especially if the opposing party has legal representation. Despite concerns about attorney fees, various avenues exist to mitigate costs.
- Utilize your court's self-help center, where staff assists self-represented individuals. Contact your local courthouse to inquire about available self-help resources.
- Explore local legal aid organizations offering free legal services to financially disadvantaged individuals. Visit the Legal Services Corporation's website and utilize the 'Find Legal Aid' tool by entering your zip code.
- Inquire about 'unbundled' legal services, allowing attorneys to undertake specific tasks as agreed upon. This arrangement enables cost-effective legal assistance tailored to your needs.
Guidelines
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Signing as a co-borrower doesn't grant you co-ownership rights. Without your name on the title, legal ownership might not be yours.
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Consider the risks before investing in shared car ownership. If the other party defaults on payments, repossession is a real possibility. Reclaiming the vehicle means covering their debts.
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If you only require occasional car usage, explore local rental services. Reach out to them for rates. Opting for rentals can spare you the complications tied to shared ownership.
