Can you claim ownership of someone else's car if you paid it off?

Most drivers in Australia will have a car loan at some point in their lives. It’s a great way to help you to finance the car that you want and allows you to pay back small amounts each month over an agreed loan term.

If you’re in a position where you are paying off someone else’s car loan, it’s really important that you understand the risks involved and the importance of having a formal agreement in writing. This will help to clear up misunderstandings or disagreements when it comes to the question of who owns the vehicle when the loan is paid off?

Why pay off someone else’s car loan?

There could be a number of reasons why you are paying off someone else’s car loan. Maybe it is a family member or friend who has unexpectedly found they can’t make their repayments and asked you for help. Perhaps you offered to get the car loan under your name to get a better rate of interest or lower fees.

Whatever the situation, it’s essential that you understand that this can be a risky situation. Your credit score could be damaged if the loan is not paid off in full or even if you’re named on the same loan as someone with bad credit.

Who owns the car?

This will depend on the type of car loan. Generally though, the lender will own the car until the loan is paid off in full.

When the loan is paid off in full, regardless of who has made the repayments, the ownership will lie with the person on the car finance agreement and vehicle registration documents. This could mean that you have helped to pay off the car loan but have no legal entitlement to it.

So, can you claim ownership to a car if you have paid off the car loan?

It may sound unfair but you won’t have any legal ownership of the car unless you have pre agreed written documentation to say that when the loan is paid off, you’ll be taking on legal ownership. It’s essential if you decide to pay off a car loan for someone else that you make sure you have written agreements and legal paperwork to back up any verbal contracts made with the person for whom you are making the repayments.

Registration documents for the car will act as the proof of ownership so it’s vital that if you want to take ownership, you get all details amended and everything placed in your name. It’s worth getting external legal help to do this effectively.

Ask for expert advice

Asking for help from a qualified lawyer is the best way to ensure that you don’t encounter misunderstandings or disagreements when it comes to ownership of a car. If you’re thinking of paying off a car loan for someone else, you need to know exactly where you stand, in terms of ownership, before the car loan comes to an end.