Cosigner or not?

[daughtersrus]

DD (23) graduated college in Dec. She was lucky and was hired for a teaching position in Jan. She desperately needs a new car. DH is a dealer employee so it's better for her to get a new car than a used one with low miles. Anyway, we've worked through the numbers and she can get 60 months with 0% with a $500 rebate with a co-signer or a slightly higher interest rate with a $2500 rebate. The total paid would still be cheaper with the co-signer but is it worth it for her to pay a little more and build her credit by not having a co-signer? She's had a MasterCard since she was 18 and always pays it in full each month. She also has 2 store cards that get paid off when she uses them.

 

[akcire]

DD (23) graduated college in Dec. She was lucky and was hired for a teaching position in Jan. She desperately needs a new car. DH is a dealer employee so it's better for her to get a new car than a used one with low miles. Anyway, we've worked through the numbers and she can get 60 months with 0% with a $500 rebate with a co-signer or a slightly higher interest rate with a $2500 rebate. The total paid would still be cheaper with the co-signer but is it worth it for her to pay a little more and build her credit by not having a co-signer? She's had a MasterCard since she was 18 and always pays it in full each month. She also has 2 store cards that get paid off when she uses them.

I would not co-sign. Let her buy the car on her own. I would rather pay the difference in interest rate for her than risk co-signing. You never know what is going to happen. 5 years is a long time. She can also accelerate her payments to midigate the cost of the interest.

To tell you which mathmatically is the better deal, we need the purchase price of the car and the two interest rates so we can compare the over all deal taking into account to two different rebate amounts.

 

[OklahomaTourist]

I'd encourage her to go to the expense of pulling her own credit report with scores first. Also, see if her school district offers a credit union that might give her even better rates and/or no cosigner. And five years is a loooongg time to pay off that car. I know, I know, cars are $$$ these days, and credit folks like to sell 84-month notes, but if you can handle paying one off in 48 months rather than 60 you can get often get a better rate and shorten the debt load.

 

[Mrs.Malone]

Congratulations to DD on her job. It sounds like she is a very responsible person, but I don't think co-signing would be a good idea on such an extremely long term loan on something that depreciates as rapidly as a car. It's a recipe for strain on your relationship. Not worth it IMO. If you really want to help her get started and can afford to do so, you could pay DD the difference as a free-and-clear gift rather than co-signing. She will build her credit and you won't have the potential complications.

 

[It'sWDW4me]

Congratulations to DD on her job. It sounds like she is a very responsible person, but I don't think co-signing would be a good idea on such an extremely long term loan on something that depreciates as rapidly as a car. It's a recipe for strain on your relationship. Not worth it IMO. If you really want to help her get started and can afford to do so, you could pay DD the difference as a free-and-clear gift rather than co-signing. She will build her credit and you won't have the potential complications.

+1

 

[daughtersrus]

Thanks for the advice.

I think that she'll probably go with financing at a local credit union (1.99% for 60 months) and take the extra $2,000 rebate from Ford. In the long run, that is actually cheaper than going with the 0% financing. Knowing DD like I do, she will probably pay it off sooner but would like the lower payment because student loans will kick in starting in June. The credit union said that they're not 'risk based' so they would likely not have any problem giving her a loan.

I have to say that I'm proud of her not only for getting a job so quickly, but for wanting to be responsible with the purchase. She's looking at a Focus or a Fiesta, not a Mustang convertible.

Does it complicate the buying process when the financing is not done with the dealer? I'm not worried about price because the price is the same no matter what dealer she will buy it from. I'm just not sure how the dealer gets the money from the credit union.

 

[bigmamimia]

Sounds like from your daughters history she should have good enough credit to get the car on her own without a co signer. I had lack of credit at that age and my parents co signed a car for me. I researched and got the most inexpensive one year used car I could find that would last me a while. The total on the car was around $10,000 and my payments came out to $156 a month. My parents were very leary of co signing for me but I never missed a payment and actually paid the car off in half the time. It can work out well like it did for my parents and I but it could be awful and put a huge strain on your relationship. Make sure you remember that those students loans are only going to be deffered for a few more months before she needs to start making payments. Is she already working? Does she have a job lined up? Loans will be due and school won't be in session until September what will she do in the mean time?

 

[bigmamimia]

Going through a credit union will not make things harder. Just tell the dealership what credit union you are going through and they will take care of it.

 

[It'sWDW4me]

Thanks for the advice.

I think that she'll probably go with financing at a local credit union (1.99% for 60 months) and take the extra $2,000 rebate from Ford. In the long run, that is actually cheaper than going with the 0% financing. Knowing DD like I do, she will probably pay it off sooner but would like the lower payment because student loans will kick in starting in June. The credit union said that they're not 'risk based' so they would likely not have any problem giving her a loan.

I have to say that I'm proud of her not only for getting a job so quickly, but for wanting to be responsible with the purchase. She's looking at a Focus or a Fiesta, not a Mustang convertible.

Does it complicate the buying process when the financing is not done with the dealer? I'm not worried about price because the price is the same no matter what dealer she will buy it from. I'm just not sure how the dealer gets the money from the credit union.

It shouldn't complicate things. I bought a newer used car (it was 3 years old at the time) and I already had a prequalification letter for a car loan. The salesman was able to match my prequalified rate and term so I just went through the dealer's financing. I really didn't care who the loan was with as long as I got my rate and term that I liked.

Who knows, the salesman might even be able to beat the deal your DD is able to get through the credit union. Have her take along a letter from the CU showing the loan amount, rate, & term that they have offered to her.

 

[ccgirl]

DD (23) graduated college in Dec. She was lucky and was hired for a teaching position in Jan. She desperately needs a new car. DH is a dealer employee so it's better for her to get a new car than a used one with low miles. Anyway, we've worked through the numbers and she can get 60 months with 0% with a $500 rebate with a co-signer or a slightly higher interest rate with a $2500 rebate. The total paid would still be cheaper with the co-signer but is it worth it for her to pay a little more and build her credit by not having a co-signer? She's had a MasterCard since she was 18 and always pays it in full each month. She also has 2 store cards that get paid off when she uses them.

23??? I know we want to help out "children" but at some point they grow up and we should let them do things on their own. I thought this was a child that could not get a car loan. If she can get the car loan herself, let her. Yes, it may cost a little more but she will learn that as you build credit, and keep it "good" you are rewarded with things like lower interest rate.

Just my two cents.

 

[crayon3448]

My mom co-signed a car loan for me when I had just graduated college. I had saved up from working in college, so put 10K down on a new car. And I also had a job lined up. At that point I was on my parent's auto insurance, so my mother had to cosign to keep me on that (it was cheaper and I paid her every month for it). It depends on how confident you are in your daughter's ability to keep up with the payments.

 

[sissy_ib]

I was that age and I couldn't get my own car loan. They said I had a lack of credit. My father co-signed for me and it went on my credit report because my name was first. I know every family and every situation is different but I don't know why some people think a 23 year old should have everything perfectly in line. And yes, my car is now paid in full with me never having a late payment and I even managed to pay it off a few months early.

 

[Darcy03231]

We just went through this with DD. She's still in college and works part-time. She was able to qualify on her own (through Toyota Motor Credit) although the interest rate was slightly higher than it would have been if we co-signed. We all decided that it was better for her to get the loan on her own and build her own credit. It helped that she had a substantial amount saved to put down.

 

[Mic]

I co-signed for my daughter's new car after she graduated college, and had no qualms about it. My husband did not think it was a good idea, so his name is not on the loan, just mine and hers. She had been married for less than a year, had just started a job, and could afford the payments. Her husband is from Holland (she met him while doing the college program at Disney), so he had NO credit here in the US. She is very responsible and has never made a late payment, and we are more than half-way through the loan. (We actually purchased TWO new Hyundai Elantra's that day, one for my oldest and one for my youngest daughter.) My second daughter is graduating in May, and I am not sure if I am willing to co-sign for her...she is a little less mature than her older sister. She has said she wants to buy a car after she gets her first big-girl job to build her credit, and I won't be unhappy about her giving us our Jetta back...I am driving a Suburban around town right now and would rather have the smaller car since the kids are gone. I am glad I co-signed for oldest daughter, but I would not reccommend doing it for every child. OP's daughter sounds like a low-risk gamble, but not every child is.

 

[clh2]

I would absolutely help my DD by cosigning a loan if that is what makes the best financial sense. BUT...I would definitely get a life insurance policy on DD, "just in case".

If it makes a difference - DD is an only - so we would not need to worry about doing the same for siblings.

 

[TheRustyScupper]

DANGER . . . WILL ROBINSON . . . DANGER

1) I would never co-sign.
2) Even if you love and trust your child.
3) Too many bad things can happen
. . . they can turn irresponsible
. . . they can have an argument with you and stop payments
. . . they can lose their job
. . . they could get sick and lose work hours
. . . they could become disabled
4) Loan her cash money if you want, just do not co-sign

NOTE: We have helped out both of our daughters.
But, we steadfastly refused to co-sign loans.

 

[sweetdana]

DANGER . . . WILL ROBINSON . . . DANGER

1) I would never co-sign.
2) Even if you love and trust your child.
3) Too many bad things can happen
. . . they can turn irresponsible
. . . they can have an argument with you and stop payments
. . . they can lose their job
. . . they could get sick and lose work hours
. . . they could become disabled
4) Loan her cash money if you want, just do not co-sign

NOTE: We have helped out both of our daughters.
But, we steadfastly refused to co-sign loans.

agree with this.

I have worked in mortgages for nearly 10 yrs.. BAD THINGS happen to credit when co-signing happens. Unfortunately 3-4 late payments even over 2 yrs will change your stellar credit to huge interest rates. (OR WORSE) Deny people all the time for co-signer errors. (usually relatives).
Understand things, happen. a situation arose not 2 weeks ago for a client. Person how she co-signed for ( I think daughter) files BK on a debt, she was in an accident, ruined her car, an her ins had lapsed. She was barely out of college, and certainly didn't have 30K to pay for it.. so she filed BK.. THE CO-SIGNER is still responsible to pay. Meaning.. if this is you, you are still responsible.

Give her a down payment, give her a loan for the down payment. DO NOT co-sign.

 

[elcodfish]

I would not co-sign. Let her buy the car on her own. I would rather pay the difference in interest rate for her than risk co-signing. You never know what is going to happen. 5 years is a long time. She can also accelerate her payments to midigate the cost of the interest.

Do that. She also needs to work on her credit score and this can help. I have a friend who at 31 has 0 credit history and now is having a hell of time trying to buy a house

 

[AnnaS]

I co-sgined for each of my sons (they each bought a car a month from each other). Their interest rate was .09% if I remember correctly. They had each started their full/time job. I went with my gut feeling. They paid off their 5 year loan within three years - give or take a month.

The car and insurance was under their own name. Each week they gave me money for car payment and car insurance. I, in turn, sent the payment in. I was obviously never late.

They do have great savings habit - I will say, one a bit better than the other. If for any reason they would have not been able to pay, they each had savings to cover the car.

(My oldest son recently go married and bought a house with my dil a few months before they married. He carried a tiny credit card balance each month and he had a better credit score than my dil who carried no cc balance like me).

 

[daughtersrus]

Update

DD got the car on her own. $0 down and 0% financing!

It would have been a little cheaper to go with the larger rebates and 1.99% at the credit union but she decided the hassle wasn't worth the extra savings.

We're proud of her. Graduating college in Dec, getting a teaching job in Jan and now buying the car on her own.