Buying a new car can at times be a complicated process, but it is undoubtedly exciting. We at HotCars love anything and everything that has an engine and runs on wheels. Hence, we can relate to the joy that buying a new car brings. If you're planning on buying a new vehicle, you need to get a few things right. For example, details about the car you're planning to purchase and how it bodes against some of its competitors. And of course, car insurance details. Because there are plenty of things that a buyer might be unaware of when it comes to car insurance.
While it's important to make sure your prepurchase is well planned, it is equally important to ensure you don't get embroiled in murky waters. We're talking about something that is known as 'Straw Purchase'.
What is Car Strawing? And is it illegal? Let's find out.
What Is Car Straw Purchase?
In layman’s terms, straw purchasing means getting someone with a good credit history to buy a car for you. This applies to both new as well as used cars. People often end up doing this very casually without actually realizing what it is and the legal implications it might have. In other cases, they’re lured into it by some agents but at the end of the day, it isn’t the best practice for both the buyer and the driver.
Purchasing a car is a complicated process and it’s important that loan documents if any, contain the details of the person who’s actually buying the car. It’s a legal procedure and the buyer needs to assume complete ownership of the purchase as well as the vehicle. Twisting around names in such legal processes is like opening a can of worms. Something we can all do without.
Is It Illegal?
By now, it should be obvious whether or not car strawing is legal. But let us put it out there in explicit words: straw purchasing a car is illegal. Period. Hold on! What about straw purchasing two cars? Well, that’s illegal, too.
The whole straw purchase process is shady and is rightly considered to be a fraud. If legal authorities find you guilty of straw purchasing, you’re very likely to face legal implications. Also, if the lender figures that you’ve straw purchased a car, they have the legal right to sue the relevant parties, including the borrower. Imagine, paying for the car and eventually getting caught up in a legal battle just because you indulged in something that is illegal. Not very pleasant after all.
The key factor behind straw purchasing is an unhealthy credit score. While we agree that it can be disheartening to be unable to purchase your favorite car because of your credit score, turning to straw purchase is not the solution. Depending on the place you live in, legal implications for a straw purchase could result in hefty legal fines, repossession of your car, or revoked licenses for both the buyer as well the driver involved.
What Are The Legal Alternatives?
If at all, you’re unable to land your favorite car due to a bad credit score, it is not the end of the road. There indeed are legal alternatives to get your hands on your favorite car if your credit score is holding you back.
One thing you can do is find a subprime lender. The idea is to work with a lender that can offer loans through special finance dealerships. These lenders also understand credit situations better than your average dealer. In most of these cases, as long as you meet certain financial conditions, you shouldn’t face any hassles for being considered for an auto loan. These financial conditions normally include your income and employment requirements. If you manage to get a cosigner with a good credit score, it will further boost your chances of getting your auto-loan purchase approved. A cosigner attaches their name and credit in addition to your name in the loan. This particularly helps in scenarios where the original buyer is unable to continue with the loan payment, the cosigner is obliged to pay on their behalf. Again, this is completely legal because you’re adding a cosigner in your loan purchase rather than just outright ‘straw purchasing’.
What if your income is limited apart from your bad credit score? Well, there’s still a solution. If you have a spouse that meets the limited income criteria, you can add them as a cosigner to the loan purchase. You and your spouse can both enjoy the responsibility as well as the privilege of owning the vehicle.
You can also opt for the "buy here, pay here" option that small dealerships offer. It’s essentially a dealership loaning you a car (without a credit check) and giving you the option to make payments in monthly installments. This process can, however, be a little tricky, because the interest rates can be very hefty compared to standard bank loans.
Whatever you do, avoid straw purchasing at all costs. Car purchasing, despite the legal complications, should be a fun experience. One wrong move can ruin it all and turn your car buying experience into a nightmare.