auto loan transfer

No legal issue / problem is involved in the facts/ query posted by you. It is financier's policy.

The existing owner (financial company) has to transfer the registration certificate of the auto along with the loan clearance certificate to the buyer. This process has to be initiated by visiting the RTO (Regional Transportation Office). They will help you in transferring the ownership of the vehicle to the buyer. The RTO will levy charges on the transfer process. Once the background check is done by the lenders and other documentation processes are completed, the new owner is issued a 'Registration Certificate on buyer.

It depends on powers of the Directors or those officials that are dealing with the case. In a case for recovery, if the loan is in default, and some other person steps in to take that auto in his name, there is nothing wrong in recovering such an overdue amount from the new borrower, and transfer the loan. The loan exists in the books of the company, but not in the name of the old borrower and it may be in the name of the new borrower. Unless such rights are with the company as per the agreement between the old borrower and the financier, such rights can not be exercised. This is beneficial to the company, as there is no need to incur extra expenditure for confiscating the vehicle, auctioning and other procedure involved in Auction.