by familiar1985 » Tue May 11, 2010 09:05 am
I have a car on which i still owe 18k to the bank. I have converted it into a race car so it will never be used on the street in its lifetime. All that is left from original is the chassis and engine. My problem is that im still paying insurance. How can i cancel the insurance? Anyway to explain to the banks the car i purchased from them is a chassis and an engine that will never be on the streets?
Posted: Fri May 14, 2010 01:33 am Post Subject:
Exactly! Thanks, tcope.
An acceleration clause is not in the insurance contract, it is in the loan contract.
Acceleration clauses help to define the terms of the loan covenant. There are a number of terms that can be included in an acceleration clause. For example, the loan covenants may prohibit the buyer from reselling the property without the express permission of the lender. This ensures that the lender is able to secure payment of the outstanding balance in the event that the borrower wishes to end the business relationship. Another example of terms that are commonly found in an acceleration clause is the disposition of the collateral used to secure the loan. Prohibiting the sale of collateral for the duration of the loan also helps to make sure there is some sort of assets to collect in the event that the borrower defaults in some manner.
from http://www.wisegeek.com/what-is-an-acceleration-clause.htm (admittedly the discussion there is directed at mortgages, but the principle applies to any secured loan.Posted: Fri May 14, 2010 07:44 am Post Subject:
ok, so what i'm getting is that car must be insured one way or another and be worth over 18k until it is payed off. What if i was to use the car for display in my shop?
Is there insurance for non registered cars in storage or display?
Full built car worth well above 40k with insurance should satisfy banks. Also is there anyway i can insure the car myself? I'm willing to pay any and all damages the car can incur. Would i have to start an insurance company?
Posted: Fri May 14, 2010 07:44 am Post Subject:
ok, so what i'm getting is that car must be insured one way or another and be worth over 18k until it is payed off. What if i was to use the car for display in my shop?
Is there insurance for non registered cars in storage or display?
Full built car worth well above 40k with insurance should satisfy banks. Also is there anyway i can insure the car myself? I'm willing to pay any and all damages the car can incur. Would i have to start an insurance company?
Posted: Fri May 14, 2010 08:44 am Post Subject:
Glad to see you're finally coming around to the reality of your dilemma.
so what i'm getting is that car must be insured one way or another and be worth over 18k until it is payed off.
Well, the car must be insured according to your loan provisions, but your modification has probably taken the value to $0 as far as the lender is concerned, and restoring it to being worth $18,000 is, for all practical purposes, an impossibility -- from the perspective that it would probably cost you more to do that than $18,000, so if you have that kind of money, you could just as easily pay off the loan.
There's always Lloyd's of London and a few other specialty risk underwriters. But don't expect the coverage to be inexpensive.
What if i was to use the car for display in my shop?
It might get you some additional work, but it will make no difference to your lender -- you most likely violated the contract, which is their only concern.
Full built car worth well above 40k with insurance should satisfy banks.
Are you asking about substitute collateral? If the substitute vehicle can legally be driven on the public roadway and can be covered for collision and other-than-collision risks, that might very well be acceptable to them.
But, understand, they don't have to agree to it, and if they did, they could essentially force you to accept far less favorable terms, like a significantly higher interest rate, a shorter payment period, or both, which would drive up the monthly payment substantially.
Also is there anyway i can insure the car myself? I'm willing to pay any and all damages the car can incur
Well, not having any legitimate insurance = being self-insured, which means you would be personally liable to the lender for their loss. But you're already in that situation, essentially. So when the lender realizes that, that's when you'll learn what they will or will not agree to.
If you're asking, "Can I write a contract of insurance -- like copying the language of the policy I currently have -- and hand it to them?" The answer to that is, NO! You are not an insurance company, and to attempt to represent yourself as being one is a misdemeanor in most states. In CA, the fine for that can be up to $100,000 and a year in jail.
Would i have to start an insurance company
Perhaps, but you would probably never meet the financial and regulatory requirements to accomplish that -- not the least of which is having at least $1,000,000 of capital reserves.
If you have that, then you have the $18,000 to pay off your loan and be done with the whole mess you've created. And that would be faster, cheaper, and much less trouble than trying to create an insurance company.
Posted: Fri May 14, 2010 03:58 pm Post Subject:
You still have some other issues.
I'm not trying to get into your business but the odd part is being able to put $30k into a vehicle and not paying off the $18k loan. Paying off the loan would solve all of these issues.
The typical personal lines auto policy is going to exclude many of the items you've added onto the vehicle. They are going to be charging you a premium for the value of the vehicle prior to the add ons. So the coverage given by the policy if going to reflect this premium. This does not have to do with the loan but if the vehicle is stolen or damaged, you stand to loose that $30k or so that you put into it.
If you have a shop then you may be running a business. If so, you may want to look into a Business Owners Policy in order to cover your business. Part of that can include coverage for vehicles. Many people use their personal vehicles as a part of their business so they insure them all under the BOP. I'm not an agent but I think you can get auto coverage with a specified limit (a sort of Stated Value coverage). If you insure a few vehicles on the same policy then the liability coverage you'd be paying for would would probably cost less on this race car.
My recommendation is to either pay the loan off and/or set down with a local agent that writes personal and commercial lines policies and find a good way to address this situation. But I'd try to keep this race car info from your current carrier for the time being.
. Also is there anyway i can insure the car myself? I'm willing to pay any and all damages the car can incur. Would i have to start an insurance company?
The issue is two fold... liability coverage (for the state) and 1st party coverage (for your lien holder). You can probably post a bond with the state to address the liability coverage. The problem with this is the bond might be $300,000. This does not address your liability though. If you kill someone with the car be prepared to fork over a few million to settle. Or you can simply kiss everything you own goodbye. You then also still have the issue of maintain 1st party coverage on the loan. It would be much cheaper to pay the $18k. You're coming up with all of these possible solutions that cost _way_ more then $18k.... you could simply pay off the loan and be done with the lien holder.I think you really need to speak to a local agent to determine the best way to obtain insurance.
Posted: Fri May 14, 2010 04:03 pm Post Subject:
"Well, the car must be insured according to your loan provisions, but your modification has probably taken the value to $0 as far as the lender is concerned, and restoring it to being worth $18,000 is, for all practical purposes, an impossibility -- from the perspective that it would probably cost you more to do that than $18,000, so if you have that kind of money, you could just as easily pay off the loan. "
Ok, forget everything i said earlier i think its confusing you with my current question.
What i meant by the car is a chassis and an engine is that those are the only original parts that the bank owns left. Everything else is owned by me and my partner. As is, car can be sold for well above 40k. There is a market for race cars. No need to convert it back. The bank doesnt own the whole thing but i dont mind them thinking they do since i will get car when payments are done within 2 years. Contract is NOT violated.
Lets say i have 40k car i owe 18k on to bank. Bank is fine with the car and agrees that it is worth over 40k i agree to give them car if i dont pay payments. Car will be sitting as a display non registered.
Can i get storage or display insurance to satisfy banks insurance requirement?
Posted: Fri May 14, 2010 04:18 pm Post Subject:
tcope
You guys are right its easier to pay off the 18k then some of those other options. However I prefer not to pay off loan at end of term. I will if i have to.
I think storage insurance is the solution. I looked online briefly and found they do have storage insurance. Would storage insurance satisfy banks?
Im assuming it would be much cheaper then road insurance.
Posted: Fri May 14, 2010 04:27 pm Post Subject:
The bank doesnt own the whole thing but i dont mind them thinking they do since i will get car when payments are done within 2 years.
That is tour opinion. If you defaulted on the loan I can assure you...the bank would take possession of the vehicle as it is right now. They would then sell it and refund back to you any excess amount not owed. I won't pretend to know the legality of it all but I'm willing to bet if you replace item for item (engine for engine) that the item is then considered part of the vehicle and therefor part of the car and the collateral. Look at it this way... if a person puts new tires on a vehicle, those tires are now part of it. It the vehicle is repo'ed the bank takes those tires as well. I understand with the amount money you put into the vehicle this does not work in your favor but don't think you can simply strip the vehicle and give the bank a chassis. If they take it... it's theirs... in it's current condition.I think the point you are trying to make in your post post is that the bank should not require insurance as the vehicle is worth much more then you owe. What you are not thinking about is such things as theft. How much will the vehicle be worth to the bank if they don't have it?
Can i get storage or display insurance to satisfy banks insurance requirement?
I don't know of any insurance coverage called this (I don't think it exists). It's really called comprehensive coverage. But your bank is also going to require collision coverage. I doubt that they are going to let you remove this coverage but you can ask. Keep in mind that collision coverage does not just address the collision when the vehicle is being driven. It addresses most accidents that are not considered under comprehensive coverage. For example... the vehicle rolls over, something rolls across the ground and hits the parked vehicle. There are still collision risks out there that could cause damage to a vehicle that is only parked. Having comp/coll on the vehicle is probably going to be cheaper then any "display insurance" that may exist so there would be no difference (and it probably why display insurance probably does not exist).Posted: Fri May 14, 2010 04:32 pm Post Subject:
"I'm not sure how you need to address this. Asking the insurance company would most certainly result in a cancellation of your policy (rightfully so... they should not be collecting a premium for something they know they won't pay out on) and asking the bank might get the car repo'ed (nothing protecting their vehicle and a _huge_ risk that it's going to be totaled)"
My insurance company is fine with the car the way it is. I'm not sure what turns car into race car on paper that makes it illegal but aside from exhaust everything else is street legal.
Insurance companys wont cover if you crash on track. Even then i have seen people tow their car and get covered.
Posted: Fri May 14, 2010 04:47 pm Post Subject:
"I think the point you are trying to make in your post post is that the bank should not require insurance as the vehicle is worth much more then you owe. What you are not thinking about is such things as theft. How much will the vehicle be worth to the bank if they don't have it?"
No, i was trying to make it clear to Max that bank does not think car is worth 0. The car's worth is not ruined and worth 40k+ in current condition. The Bank agrees.
Also i would never default on my payments. I imagine anyone with a head on their shoulders would take off their expensive parts before giving up the car if they were ever in such an unfortunate situation.
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