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SVTPerformance's Chain of Restaurants
Road Side Pub
Owner financing
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<blockquote data-quote="Klaus" data-source="post: 15929965" data-attributes="member: 190070"><p>Don't. But since you did not ask "should I?" I will not try to convince you not to.</p><p></p><p>By doing so, you are no longer selling a car, but selling a car + assuming his credit risk + assuming the cost of enforcing your rights as lender. You should be paid for that.</p><p></p><p>The credit risk is substantial since you are dealing with a guy that cannot afford to buy a used car and cannot finance it through traditional means. So the principle amount that you are financing should be market value of your car + premium for this. I would start at market value + 50% and would not settle for less than market value + 35%.</p><p></p><p>Next is term. Keep it short, less than one year. Include a prepayment feature to incent him to pay you off early. If he pays you off w/in 6 months you reduce principle by 3% or something like that. If you are financing beyond a year charge a rate of >25% per year.</p><p></p><p>Make sure your rights as lender and his as borrower are very well defined and also that it is very well defined what happens if he violates them. He has x days to pay you after payment date to pay you or he is in default. If he defaults you have right to repossess the car. Until car is fully paid off he must maintain it to your satisfaction or contract is nullified. Structure as a deed in lieu so that if he defaults all equity reverts to you. Put a GPS tracker in the wheel well in case you need to repossess it.</p><p></p><p>Keep in mind, proper contracts are written for a third party in mind (i.e. judge), not the two parties to the contract. I would pay the few hundred bucks to a lawyer to draft this up for me if in your shoes, as it is not <em>if</em> there is a dispute, but <em>when</em>.</p></blockquote><p></p>
[QUOTE="Klaus, post: 15929965, member: 190070"] Don't. But since you did not ask "should I?" I will not try to convince you not to. By doing so, you are no longer selling a car, but selling a car + assuming his credit risk + assuming the cost of enforcing your rights as lender. You should be paid for that. The credit risk is substantial since you are dealing with a guy that cannot afford to buy a used car and cannot finance it through traditional means. So the principle amount that you are financing should be market value of your car + premium for this. I would start at market value + 50% and would not settle for less than market value + 35%. Next is term. Keep it short, less than one year. Include a prepayment feature to incent him to pay you off early. If he pays you off w/in 6 months you reduce principle by 3% or something like that. If you are financing beyond a year charge a rate of >25% per year. Make sure your rights as lender and his as borrower are very well defined and also that it is very well defined what happens if he violates them. He has x days to pay you after payment date to pay you or he is in default. If he defaults you have right to repossess the car. Until car is fully paid off he must maintain it to your satisfaction or contract is nullified. Structure as a deed in lieu so that if he defaults all equity reverts to you. Put a GPS tracker in the wheel well in case you need to repossess it. Keep in mind, proper contracts are written for a third party in mind (i.e. judge), not the two parties to the contract. I would pay the few hundred bucks to a lawyer to draft this up for me if in your shoes, as it is not [i]if[/i] there is a dispute, but [i]when[/i]. [/QUOTE]
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SVTPerformance's Chain of Restaurants
Road Side Pub
Owner financing
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