Non-owner car insurance and registration

Question

Given the following scenario for my wife, what should I be watching out for?

Specific to the United States - her father, along with his friend, bought a car to give to her, with traditional 72-month financing. His friend was the primary applicant on the loan, and he was the co-applicant. They have not and do not ever drive the car, only my wife. His friend was involved to help build up his own credit history (not my idea, and I wouldn't have approved of this, but this was before my time).

The car registration is in her dad's friend's name, but I am paying the registration each year. Her dad is paying the bill on the car loan as a gift to her.

I have car insurance for both of us on the car, under our names, and pay that bill myself - it's a good policy, definitely enough coverage to satisfy the terms of the car loan.

Are there any issues here? I've read that the owner has to actually be insured, but I don't know if that's true. I also don't know if there's any issue with driving a car that someone else owns and registered, without any specific written permission to do so.

I know one solution would be that I can buy the car from him, so he can pay off his loan and I can take out a new loan and registration in my name, with her dad continuing to pay the bill. But if everything is kosher, I'm content leaving things as-is.

Answer 1

this is a bit unusual, but not unheard of. i have known more than one car whose owner was not its driver. besides the obvious risk that the legal owner of the car will repossess it, this seems fairly safe. your insurance should cover any financial liability that you incur during an accident. even if the car is repossessed by the owner, you are only out the registration fees. i would suggest you avoid looking this gift horse in the grill.

her father on the other hand might be in for some drama and financial mess if he has a falling-out with his "friend". this arrangement reminds me of divorces where one spouse owns the car, but the other drives it and pays the loan. usually, when the relationship goes south, one spouse is forced to sell the car at a loss.