What’s a Car Straw Purchase?

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - September 19, 2018

A car straw purchase is when someone who qualifies for an auto loan finances a vehicle for someone else who wouldn’t qualify. This is fraud, and is illegal. The reason why is because the documents on the loan list the primary borrower as the primary driver, and if anything were to happen – such as repossession – and the lender is unable to find the car, they can take legal action against the primary borrower.

How to Avoid a Car Straw Purchase

If you know someone who needs a vehicle but doesn’t qualify for a car loan, how can you help them out? There are two options to consider:

  1. Be a cosigner on a car loan – If the primary borrower has bad credit, they typically need to find a subprime lender to work with. Many times, these lenders require that they have a cosigner in order to approve them for financing. There are specific cosigner requirements you need to meet, but as long as you have good or excellent credit, you should qualify.
  2. Finance through a BHPH dealership – If you don’t qualify as a cosigner, car buyers with enough income and a down payment can look for a buy here pay here (BHPH) dealer. Unlike traditional lenders, BHPH dealerships loan in house, which means a borrower can buy a vehicle and finance it all in one place. These dealers typically don’t run credit checks, and use income to determine what a buyer qualifies for.

It’s important you sit down with the borrower before discussing these options. Determine how much they can afford, and how you can help them – without taking out a straw purchase auto loan. Also, if the person you want to help is your child, you can purchase a car in your name and let them drive the vehicle. Because you’re family, the lender won’t care if your son or daughter ends up driving the car most of the time.

Don’t Know Where to Start Searching?

The bottom line is that a straw purchase on a vehicle is illegal. You should never attempt to get a straw purchase auto loan for someone who needs a car. Instead, talk to them and explore different financing options. You never know what a lender is willing to offer someone dealing with credit issues, especially if it’s a subprime lender.

Ready to help someone you know find financing? Let them know to start here at CarsDirect. We work with a nationwide network of dealerships that have the lending resources available to help car buyers get the financing they need. All they need to do is fill out or simple and free auto loan request form, and we’ll get started on finding the right dealer for them.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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