How to Pay off a Vehicle That’s Financed

As a LightStream affiliate, we may be compensated if you use their services through the links on this page. LightStream did not commission, sponsor, or fund this post.

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So, there is a question we end up getting a lot here at Dirt Legal: “I want to register my car in Montana under the LLC program, but can’t because the car is on a loan and the bank won’t allow it. What can I do?”

That’s a really good question. To register under an LLC, you cannot have the vehicle financed. Well, many people have financed cars, especially more expensive ones, which would be beneficial to register in a tax-free environment. Fortunately for you, some other loan options on the market today can help you buy your car but not appear as ‘financed’ on your title. How? Let’s find out.

Note: We are enthusiasts, not attorneys. This is not legal or financial advice.

I Don't Have Cash. What Are My Options?

A famous financial counselor uses the tagline “Cash is King.” Who can argue that? 

Unfortunately, cash purchases aren’t always achievable for all auto and vehicle purchases (although we all might rethink that $25k UTV if we fronted the money for it, or at least haggle a little harder). Well, there actually are some options on the market that will fund auto loans (or just about any other kind of recreational loan, for that matter), but instead of financing the vehicle, they front you the money as a cash deposit, so you can buy the vehicle outright as a cash purchase. 

I Can't Register Under an LLC Because of the Financing

Our favorite service is through a company called LightStream. LightStream is a lender specializing in recreational loans, but they don’t finance in a traditional sense. I want to establish right now that we are not being paid by LightStream to say this, and there are other companies that do the same thing, but we've had a good experience with LightStream, and it's the most widely known example of what we're exploring here.

But to explore this different way of financing, we need to know how vehicle financing typically works.

Simply put, an auto loan is a standard installment loan that is used for vehicle purchases. These can either be for new or used vehicles and usually range in length from 24 to 84 months, depending on the lender and the loan amount. 

The bank is the lienholder, meaning they are basically holding the title as collateral in case you default before the loan is paid off. 

Generally speaking, this doesn’t cause too many issues because your local DMV is used to working with thousands of cars bought on loans. And it is not that the financing causes issues with a Montana registration; it's the Montana LLC: the LLC cannot have any vehicle or asset with a lienholder.

Which does make sense. An LLC is for the asset owner to keep their assets in, but you are not actually an owner of anything besides monthly payments if it’s on a loan, at least a traditional loan. In that case, the bank is the true owner of the vehicle. So how do you get a loan for a vehicle registered to your business?

Image by Markus Winkler from Pixabay

I Want to Build a Fleet and Register Under a Montana LLC. How?

Montana is very attractive if you want (or need) to build a fleet of vehicles for your business ventures. But the problem is that even though the LLC will handle as many assets as you want to put in it, they have to be owned outright. 

Of course, we mean that you must hold the title, which you can’t if you own your vehicles under a typical loan.

There is another way, but first, let’s crunch some numbers:

Let’s say you are building up a fleet of sprinter vans for your courier business. Pretty savvy move. Ok, a new Ford Transit box van starts at $43,455. So, for instance, if you need five of them to service an area with ten percent sales tax, you’ll owe a hefty $21,727.50 in sales tax alone. Holy guacamole. 

I mean, that’s half of another truck for your fleet. 

But here’s the thing: you can’t finance this fleet through traditional methods and still take advantage of our Montana LLC Service. This is a legal requirement with the LLC itself, not our rule. 

So, to hold the titles, you either have to come up with the cash upfront (about a quarter-million in this case for five trucks) or an unconventional financing method. Enter LightStream. 

How Does LightStream Work?

For you, the end user, there isn’t much or any difference between a LightStream loan and financing through a bank. 

But first, an aside. The loan industry is due for a shakeup. It isn’t altogether equipped for the modern age. There are many high-ticket items in the world that aren't covered by any traditional forms of financing, which include things like

• Pre K-12 education loans

• Aircraft loans

• Jewelry

• Fractional ownership loans

• Timeshares

• Equestrian/horses

LightStream bridges these gaps with unique loan options, but they also have a suite of loans for automobiles and vehicles. Notably, LightStream provides loans for some types of cars and vehicles that are hard to finance. 

One that stands out is for classic cars. Classic cars are notoriously difficult to finance because they don’t seem to fit any sort of box used to measure the value of a car. Why is this information important? 

A classic collector car is hard to finance, but they are also highly valued. A classic Vette can fetch up to $82,000, depending on the year and features, and that's for a far more common C3 variety - imagine what the super rare ones bring.

LightStream gives you two advantages here: they will finance a hard-to-finance car, and it will reflect as a cash purchase, allowing you to register the car under a Montana LLC. And as you probably know by now, that could save you up to $8,200 in sales tax on that 'Vette, and even more with that fleet of sprinters from earlier.

Won't It Still Be A Loan?

It is still a loan, but LightStream will not take over the title for collateral. 

If you are in the middle of a traditional loan for your vehicle(s), LightStream also handles refinancing. Yes, it will still be a loan, but you can pay off the lien with your bank using cash, and now you get to hold the title. This way, you can register your vehicles in an LLC, should the benefits of that thing interest you. 

The Dirt Legal Advantage

Dirt Legal is the best way to save dough on your cars. Stuck in a state with terrible sales tax, Ad Valorem tax, or state inspections/smog inspections?

We get it. 

But there is a way out. If you need to get yourself out from under the lien, LightStream will loan you cash to crush the lienholder info on the title so you can hold it in hand, and we’ll handle the rest through our Montana LLC Program.

What you’ll get from Dirt Legal: 

• Montana title, license plate, and registration. If your vehicle is 2011 or older, the plate is permanent so you never have to renew it. If your vehicle is 2011 or newer, you will have to renew the plate online each year or we can handle renewals for you.

• New proof of ownership. You will receive a new Montana title for your vehicle in the name of your LLC that we will set up on your behalf.

• Dedicated agent support. We'll guide you through the process and answer any questions about paperwork, state-to-state transfers, required parts, etc.

What we’ll need from you and for you to do:

1. Proof of ownership: To qualify, you must have a Title or MCO (Manufacturer’s Certificate of Origin). This is the documentation we need to show the vehicle is yours.

2. Checkout: Click Add to Cart and complete the checkout process. You’ll receive an email confirmation with your receipt and order number.

3. Vehicle information: Fill out the vehicle info form that appears after you checkout. As long as you have proof of ownership and a Vehicle Identification Number (VIN), we can legalize any vehicle regardless of state.

4. Documents: Keep an eye on your mailbox. We’ll send you a checklist for the materials we need to handle the conversion on your behalf, including your proof of ownership, copy of ID/social, notarized power of attorney, and sales tax (if not already paid).

5. Send it in: Mail everything to us using the pre-paid envelope we’ve provided to make it as easy as possible for you. Congrats, your part’s done! Now simply wait to receive your license plate in the mail! We will email you a tracking number once it's on the way.

Tl;dr

If you have a financed vehicle, you can’t register it in Montana under an LLC. We don’t make the rules. But you can go back and pay off that lien using LightStream. LightStream is a lender who advances you cash, so your car purchase (or refinancing) is a cash purchase, taking the lienholder off of the title. Once that is done, you can register your car in Montana through our Montana LLC Program because you hold the title, not the bank!

LightStream isn't paying us to say this, and there are certainly other options out there, but this is the one we know and trust, along with many other companies worldwide.

Dirt Legal is your first stop for financing your vehicle in Montana, where you can ditch the state sales tax and kick annual smog checks to the curb. Also, we can accommodate many title issues and get your OHVs street legal!