Joint auto loans are different from someone who took on a car loan alone. If you need to sell a car that has two names on the title, here’s what you need to know.
Co-Borrowers and Joint Auto Loans
Most people have a co-borrower on their auto loan so they can qualify for a larger financed amount since co-borrowers can combine their incomes together to meet the lender's income requirement. Along with combining income, co-borrowers share equal responsibility for the loan, and both own the car equally.
Even though you both own the car, you may not both need to be present when you sell or trade the vehicle. When you need to sell the car but the co-borrower can’t be there, you may be able to sign over the title without them, but you can't do it without their permission.
Can I sell the vehicle without telling my co-borrower? You can’t sell a car without your co-borrower’s permission. They have legal rights to the vehicle, too, and they could take action against you. If you’re simply looking for the convenience of selling the vehicle alone (without making the co-borrower come with you), it could be possible depending on where you live and how your title was drafted.
How is your title setup? With two names on the vehicle title, there’s a modifier between the names. Review your title and see which of these three is listed on it: and; or; and/or. Here's the difference between the three modifiers on your car title:
- “Borrower” and “Borrower” – With the modifier of “and,” it means that both borrowers must be present for the sale of the car.
- “Borrower” or “Borrower” – With the modifier “or,” either of the borrowers can sign the title to sell the vehicle.
- “Borrower” and/or “Borrower” – With the modifier of “and/or,” both or only one of the borrowers needs to be present for the sale, depending on where you live.
Trade-in rules vary by state. In all cases, both co-borrowers can be present for the sale, but in some cases, it’s required that both borrowers be there. In some states, regardless of what the title says, both co-borrowers must be present for the sale or trade of the vehicle. Be sure to look up your state’s regulations. If you’re trading in a car at a dealership, the dealers are likely to know the proper procedure when it comes to trading in a vehicle with two names on the title.
If you don’t have your title and you still have an active loan, you’re likely in a title-holding state (41 states are). This means your lender holds it until your loan is complete. You can contact the lender and ask what’s on the title. If you’re in a non-title holding state – Arizona, Maryland, Michigan, Minnesota, New York, Kentucky, Oklahoma, South Dakota – you should have gotten the title in the mail shortly after you purchased the vehicle.
Can I Remove a Co-Borrower From the Auto Loan?
You can remove your co-borrower from the auto loan and title by refinancing the car. When you refinance, you’re replacing the loan with another one. However, you need to qualify in order to refinance your vehicle.
Common refinancing requirements include:
- The car is less than 10 years old with fewer than 100,000 miles
- The loan is at least one year old
- The vehicle has equity or the value is equal to the loan amount
- You're current on your payments
- Your credit score is better than it was at the start of the loan
These are just general guidelines for refinancing a car, and lender stipulations vary.
If you think you can qualify for refinancing and handle the loan by yourself, then it could be a good solution for removing the co-borrower from the loan. Just remember that you need their permission to refinance, just like you need it to sell the car.