Should I co-sign a car installment contract for my son? He needs a car and is very responsible, but he has no credit score. I don’t have time to drive him around.
No. Over the years, I have represented too many parents and others who wanted to help out their child or friend purchase a vehicle and establish credit, only to end up on the wrong side of a debt collection lawsuit for the vehicle deficiency and negative credit history for their generosity. Remember the adage, the road to hell is paved with good intentions. If the typical installment contract is four to six years, can anyone reasonably expect that all payments will be paid timely over 72 months?
If you have already made this mistake and the vehicle is about to be or has been repossessed, please read my legal guide on Avvo.com which explains your rights under California law, following repossession at: Legal Guide.
Why should you throw caution to the wind and expose your years of diligent payments towards earning a good credit history? Whether it be the “good son” or someone who is more mature and has a positive track record, it is much more of a risk than the lenders are willing to accept, so why should you? If your son needs a car, he can borrow, call for a taxi, or ride with someone who has a car, and take the time to save for a good down payment and establishing his own good credit history with a small credit limit credit card or two.
Also, many new vehicle dealers offer first-time car buyer programs, consisting of favorable interest rates and terms. Such programs may not apply if there is a co-signer who has previously financed a vehicle. Verify this program by phone or online, before you set foot at any dealership. Of course, many car dealers will take advantage of the young buyer, so be sure to send him or her with an experienced relative who will help avoid price gouging and other underhanded practices and who will resist co-signing.