By: Revanche

Train Talk: A car in any other name is … taxable?

July 15, 2006

So I have my own car, which I bought in my pre-Fatwallet/PF Blogging days. I have to say that though the buying process was not as bad an experience as it could have been, I definitely could have done better for myself. Don’t get me wrong, she’s a great car, with great gas mileage and she will be kept forever, but I still could have struck a better bargain, gotten a used car for much less money against my parents’ wishes, or not fallen for a couple of the finance department’s little “deals.”

Older and wiser, I had my chance to do better, though not for myself, last year when the family/Sibling needed a new car, preferably a new truck. As the person in the family with no debt to her name and excellent credit to boot, I was asked to consider financing the truck in my name to get the lowest rate possible.
I was hesitant for a few reasons: this was another chunk of debt.
This was asking me to trust Sibling to get his act together and make the payments.
This was asking Sibling to get it together, and be responsible FOR A LONG TIME.
This was making myself vulnerable to Sibling’s irresponsible ways for at least 4-5 years.
This was putting my hard-earned credit at risk.

Frankly, I didn’t think it was a good idea. But the primary reason I caved was because I knew how to play the Fax attack game, I knew I could be more aggressive than the rest of my fam, I couldn’t bear the thought of them going out and getting scammed by unscrupulous car salesmen and because if I didn’t do it, my parents would be the ones to shoulder the burden of collecting from Sibling. And I’ve learned that it’s far easier for Sibling not to follow through on promises to my parents than to me.

So I caved. Not without stipulating that this chance was his last chance to do right by me. Not without emphasizing that any missed payment sans communication regarding the situation that caused the missed payment would immediately force me to confiscate the keys and sell the truck I didn’t want, need or couldn’t afford. And certainly not without clearing stating that until the truck was paid in full, I would treat it as a lease to him. So long as he made his payments, he would have use of a car. This burden, I realized, could be an opportunity to improve the strained relationship between myself and Sibling’s spendthrift, careless ways. Or it could be a terrible mistake.
Still, I caved.

The rate offered through the dealership was pretty unbeatable, considering my relatively short credit history: 1.9% APR for 4 years. My credit union that financed my original loan could not match it. Month by month, Sibling managed to pay in full. Month after month, I started letting myself hope a little more than this could possibly last.

Last month, there was a period of radio silence from Sibling, lasting about 2 weeks. I panicked. Although I normally have a small surplus of cash intended for misc. bills and extra savings, my increased 403(b) contributions had just taken effect – I had no extra money to cover the $400 payment he’d been making, not after he’d borrowed a couple hundred to pay Dad immediately rather than driving 2 hours to make a cash delivery. I got very upset that he’d reneged on his promise to come through by Monday and was fuming at myself for trusting him by Wednesday. Things turned out ok by the end of the week, though, as Dad drove down to his apartment to find that he hadn’t returned anyone’s calls because he was sick and didn’t feel up to talking.

Amidst this stress, a train friend wondered why I didn’t just refinance the truck in Sibling’s name to get it off my credit. My reasons at the time were that his credit was so bad, the interest rate was sure to go through the roof and he would not be able to make those payments, and that for him to follow through on this loan was very important to reestablishing any amount of trust in him.
Having said that though, I have to wonder how long this peace will last, and if it does, how I’m going to transfer the truck to him. Since he’s making all the payments, including repaying the down payment my parents put down, he’s going to “own” the truck when it’s paid off. But legally, I’m not sure if I can just transfer ownership without any money changing hands? Would that be considered a gift that may be taxed as a gift worth more than the 10 or 11k that is allowed per year tax free? Would it be wise to refinance it in his name towards the end of the loan simply to have the title issued to him by loan’s end?

3 Responses to “Train Talk: A car in any other name is … taxable?”

  1. Kira says:

    If the truck is worth more than $12k (current gift limit) then the extra would be your tax burden. But you could sell it to him for a very low amount that still looks reasonable for a car (like $5k) and then it wouldn’t be a gift.

    You are a much braver person than I. As has been said many other places, you are taking a risk on your brother’s loan that a professional lender would not make. I would have him refinance this car into his name as soon as humanly possible – and he should treat the rebuilding of his credit as a non-negotiable item. If he misses a payment on ANYTHING else, you should get pissed, because that is setting him even farther back from the day when he can refinance it. Good luck and Godspeed on that.

  2. I think that, if I can’t refinance it in his name a little further down the road (*fingers crossed*), “selling” it to him would have to be the way to go.

    He’s not likely to have the credit to beat my rate even if he is perfect from here now on but if we can match it that’d be great. It’d be preferable to having to sell him the truck he’d been paying for. He IS making the payments on the truck through me, though legally it would probably make little difference in arguing that it actually belongs to him. I’ll ponder this and strongly consider/pursue the refi option.

    Kira, I’m not brave at all. Honestly I’m afraid that he’s going to drop the ball, lose it, misplace it, forget about it or any number of excuses that are all too convenient. He’s the boy who cried broke, sick and any number of selfish things, and he just amplifies my financial neuroses. Of course I’m angry at him for refusing to grow up and be an adult. But I’ve spent years being angry at him, day and night, and that hasn’t changed him one bit. So, unfortunately, short of putting my parents in a very painful situation in which their children are estranged, I try to walk the line between disinterested observer and rarely lifeline so that he realizes he really really does have to become responsible for himself.

    Believe me I’d much rather have it otherwise. But, baby steps.

  3. Kira says:

    Yeah, I wouldn’t have taken “I was sick” for an answer of why he wasn’t picking up the phone. He is really taking you for granted. If he was so sick he couldn’t get up to go to the phone, then he should have been in the hospital. Not in the hospital, then he’s able to pick up the phone.

    If the truck is in your name and all of the papers have your name, let your brother know that if he fails to make payments you can have it reported stolen. I’m sure this will motivate him.

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