Motor vehicles have become increasingly costly in recent years. Even professionals enjoying a competitive income may choose to finance a vehicle purchase because a cash purchase could strain their household budget.
Financing at least a significant portion of the vehicle’s value has become standard practice. As people prepare for divorce, they understand that they have to address both their assets and their debts. The financed vehicle represents both a high-value resource and a significant financial obligation.
How do divorcing couples address a vehicle that they do not yet own outright?
There are many solutions available
There is no one right way to handle a financed vehicle in a divorce scenario. In some cases, the spouse who currently drives the vehicle may not have the income to refinance the vehicle on their own. That can complicate the divorce, especially if they rely on the vehicle to get to work or to care for their children.
Spouses may have to consider accrued vehicle equity and the remaining balance owed on the vehicle loan as they attempt to divide their assets and financial obligations. In some cases, one spouse may agree to continue paying for the vehicle that the other drives. Other times, the spouses might use marital resources to pay off the vehicle loan.
It is also common for the spouses to agree that the person driving the vehicle should refinance it and assume sole responsibility for the remaining payments. They may then have to address the equity accumulated in the vehicle while addressing other marital assets.
Factors ranging from income and separate property to child support and custody arrangements can influence how divorcing couples handle high-value assets, such as financed vehicles. Identifying the assets that have the biggest impact on future financial stability can help people prepare for an upcoming divorce and the process of rebuilding their finances afterward.