I'm doing something that I don't normally do: Mix friendship with business. I'm purchasing a vehicle from a friend but can not pay the full amount. We've agreed to have me put a down-payment for the vehicle and I'll pay it off over a year with 0% interest. He wants to hold the title for the vehicle until the entirety of it is paid off which I can understand to cover his own butt.

To ensure we keep this transaction mutually beneficial, what would be the proper procedures/forms to utilize for such a transaction?

EDIT: Nebraska, USA

  • 3
    It is now June 2013. If your friend holds the title for the vehicle on May 2014 when you have paid him all but 1/12th of what you owe him, who is covering your butt in May 2014 should something happen (to you, your friend, or your car)? It is much better to have the title transferred to your name with your friend shown as a lien holder, as littleadv suggests, and the loan agreement should include a clause that the lien will be released when the loan is paid off. Note also that your friend, as owner holding the title, can be sued for things that you do with the vehicle until June 2014. Jun 18, 2013 at 20:36

2 Answers 2


The Nebraska DMV web site has a neat page about this. It seems to be fairly simple, and not costly to record a lien and later release it. Just go there with the title and the sales agreement that details the terms, and pay the $7 fee.


Step 1:

Draft up a promissory notes. Have a lawyer do it use one of those online contract places if you have simple needs. Your promissory note need to cover

  • Who the parties are (address, names, contact info)
  • Time frame (when must it be fully paid)
  • Amount of sale
  • Monthly payments
  • Due dates for the payments
  • The specific car being sold (VIN)
  • What will happen if you don't pay as agreed
  • What will happen when you do pay as agreed

Be specific. There are probably a lot more items that can be included, and if a quick internet search is any indication it gets deep fast.


Step 2:

(Like @LittleAdv says)

Head to your DMV with the title and the promissory note. The title is signed over to you and held by the DMV. When you pay up, the seller informs the DMV and they send you the title. If you don't pay up, the seller can legally repossess the car. All butts are covered.

Step 3:

Pay the note as agreed. When you are all paid up, your friend notifies the DMV who then mail you the title.

Butt Coverage Wrap-Up

Your butt is covered because your name is on the car, you can insure it and nobody can take it from you (legally) if you are paying the note as agreed.

Your pal's butt is covered because if you stop paying half way through, he can keep whatever you have paid him and get his car back.

  • So if a lien is recorded for the title transfer, the DMV holds the title correct? Jun 19, 2013 at 14:59
  • That is correct. They hold the title, but it is in your name. They hold it in case they need to give it back to your buddy.
    – MrChrister
    Jun 19, 2013 at 15:47

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