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I'm 75. My grandson is 19 and trying to establish his credit. He would like to buy a 2017 Ford for about $17,000 but needs a co-signer. Should I take the risk?

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No. How about his parents? Steer him towards a credit union.
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Yes. You should. Why not? You're 75 years old and he is your grandson. I'm assuming that you can afford to make the payments on the car if for some reason you had to.
19 is a kid and good for him being responsible and wanting to establish credit.
Do this wonderful thing for your grandson. I think it's great that you're considering helping him get a start in life. God bless.
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Hello there Krikit! You can leap frog over your dilemma and ask yourself if you can afford to assume the loan. If you can afford it and you're willing to pay any remaining debt at any time, there isn't much risk. If you cannot pay the loan at will then I think there is too much risk. You sound like a thoughtful grandparent! ~ VV
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Establishing credit is not a reason to buy a car.

You establish credit by taking out a small personal loan at the local credit union and pay it back with your earnings.
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Clairesmum Aug 2022
having one credit card and paying the balance monthly also helps. Along with steady employment.
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This is really going to depend on your family dynamics and how much faith you have in his ability to make the payments. My mom went one step farther than that and loaned one grandson the money to buy in on a family cottage and it worked out just fine.
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MargaretMcKen Jul 2022
But think about the asset backing and family support!
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Age 19 and wants to buy a car? He should be getting the cheapest set of wheels that he can afford himself.

Age 19 and wants to establish a credit rating? This is not the only or best way to go. See Barb Brooklyn’s suggestion.

Age 19 and wants you to co-sign for a loan? Dangerous idea, particularly if you aren’t sure about the insurance, or whether he (or any young driver, particularly male) will incur fines or damages claims.
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Depends on whether you can afford to pay the car off or not. Male age 19 is not a good credit risk.

How about buying a less expensive car?
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anytown Jul 2022
'How about buying a less expensive car?'

yes, starting with that
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If you can afford to assume the loan if he defaults, then go ahead. I co-signed for cars for both my kids. I also told them that if they defaulted I would personally repo the car for myself.
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There are many variables here, your financial situation (can you afford to lose 17k, without a blink of an eye?), his parent's financial situation, his transportation needs, your relationship with him, whether this was his idea, or you thought of it.

That said, just speaking for myself in our family, I had a great relationship with both grandmothers, but I would have *never* asked either of them to do that (nor would my parents have permitted it), nor would I have bought (what would have been back then the equivalent of) that expensive of a car at that age. Someone that age should be spending half that, tops. (if that). It can also build a sense of entitlement. At that age, you want something, you should figure out how to get it yourself, and be patient. Those skills, can serve him better than a more expensive car.
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MargaretMcKen Jul 2022
And at 19, an expensive car can mean a ‘show off’ car, which is not a good place to start from.
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Only you can answer such a question, not a bunch of internet strangers who have no idea your personal financial situation, your relationship with your grandson, or what type of character he has!!! If it were my grandson, I'd probably go for it. But that's me, and I would already know the answers to the questions I'm posing to you.
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Nope.

The way to establish credit is 1. Have a job, 2. Get a credit card with a small limit 3. Pay it off every month.

My first credit card was with Sears. They sent an application to everyone in my university, so everyone I knew applied for it, got it (with a $200 credit limit), and went out and bought something, then paid it off. No one actually had a desire to shop at Sears, but we did it anyway.

My kids' first credit card was a student Discover Card. They were all approved, even without jobs, so I recommend he tries that route first.

He also needs to look at cars that cost a LOT less. Sorry, but you don't get to have your dream car at 19.

Now, if you want to loan him the money for a (much less expensive) car so he can get a job, establish credit by getting a credit card, and eventually buy the car he'd like himself, that might be an option. However, do not ever loan money with the expectation that you'll see it again, and unless you can afford to buy him a $17,000 car (plus interest), expect that outcome as well if you do decide to sign for him. That should be your very last option, however.
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A good way of establishing credit would be a secured credit card with a reputable bank. Make the payments on time & the bank reports to the credit bureau.
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AliBoBali Jul 2022
That's a good idea.
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As one who has co-signed for cars, this is the quickest way to establish credit. My one daughter, who was about 19 or 20 with a job, we set a limit of 10k and this was the mid 90s. She got credit for the payments. I was not working. 2nd daughter, we bought her first car to go back and forth to school. It was totaled sitting in front of our house by a drunk neighbor. She had a good downpayment but needed a co-signer so we did it. I was working and so was she. She lived with us at the time so paid off the car in a year and got credit for it. Then comes my grandson who has worked since age 19 but no credit. Needs a car and just started a new job. (The one who was operated on for epilepsy. Out of work and no unemployment or disability coming in) He figured out what "he could afford" and we co-signed. He paid the car off in a year. He now has a decent credit rating.

The main thing here is "what can HE afford". A car costing 17k at a 2.25% loan is $300 a month for 5 yrs. Believe me, someone with no credit will pay a much higher interest rate. I think my gson paid 5 something % and that was based on me being a co-signer. One finance company wanted a LOT more in interest. If he cannot afford the payment, he should not be buying a 17k car, thats what it comes down to. At 19, he only needs a car to get from A to B. My grandson bought a 2010 VW, one time owner. Gets him where he is going for now. Saving for a good down payment on another car that he will need no co-signer for.

So, co-signing depends on if he has the money coming in to make the payment. Also, can your afford the payment if he cannot continue payments? Your credit will be effected if he misses one payment or even late on a payment. As a retired grandmother, I personally would not co-sign for a $17,000 car for a 19 yr old. If you can afford to do it then do it but make it clear this is his responsibility and that payments need to be made on time. That it will effect your credit standing if he defaults on the loan. Also be aware, if the car gets repossessed and it sold for less than the loan balance, you or him will be responsible for the difference. So, if he owes 12k and the car sells for 8k, you or him are responsible to the finance company for the difference of 4k and now your credit is s _ _t.
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No.

I've raised 3 sons who each had varying degrees of money-smarts.

First, I will acknowledge that the market for used cars right now is a seller's market. Prices are way higher than normal for used ones.

Second, does this 19-yr old have a full-time job? Will he only be working the summer and going back to school in the fall? The vehicle seems like something that's probably not really in his budget. Good used cars are Lexus sedans because they are very low maintenance, very reliable. We bought a used 1998 Lexus 300SE for my son to commute to college in 2011. Had 175K miles on it. Bought it for $3800. We recently resold it last winter with 300,000+ miles on it (and a pretty shabby body) but it still ran reliably: $750 and we had many many calls on it.

If he can't pay cash for the car, I think he can't really afford it. Gas is pretty high, insurance will be quite high for someone his age. And there will be some maintenance. All of this is his responsibility.

A newish driver like him should have something that's safe but "disposable" -- my eldest son totaled 3 cars before the age of 20. My middle son drove like a grandpa (sorry) and my youngest son inherited the Lexus and was glad to have a beater because the University dorm was in a very bad neighborhood with car theft and catalytic converter theft, etc.

Does your grandson pay for his own phone bill? I'd start to build credit with that. He can apply for a very low limit credit card, like $500 is probably the lowest. He needs to work his way up to a better car, but needs to earn it himself and then he'll appreciate it more and take better care of it. No reason to start at the top. He'll get over it when you say no.
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JoAnn29 Jul 2022
You brought up some good points.
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No.
You would be depriving him the opportunity to learn to provide for his own needs.
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Judge Judy says, "No way!" :)

I'm a big Judge Judy fan, and half her cases deal with cosigns gone wrong. Your grandson will find another way to establish his credit, and he will learn something in the process. For his sake and yours, I'd say don't do it.

While your grandson will be thrilled with a nicer vehicle, if something prevents him from paying the note, then your relationship with him could become strained. If you can pay the 17k and not be too upset, then go for it. I don't know many people who wouldn't be upset by that, though.

Someone else mentioned starting with a secured bank card. That's a good idea. The limits are fairly small, and as long as payments are made on time, then credit limits will quickly increase. No one is ready for a 17k car note at 19yo, IMHO.
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At age 18, I purchased a $16,000 truck for my nephew's "college graduation present". I registered it in my name, paid for the insurance and most of the maintenance. The deal was as long as he stayed in school and made good grades the truck was his to drive and when he got a degree I would sign the title over. There were a couple of times we came close to ending the deal (if you get one more speeding ticket we're going to have to park the truck because I'm not going to be able to afford the insurance). But 4 1/2 years later I did get to sign the title over.

I preferred this way over co signing because I maintained more control. We established his credit with a cell phone and utilities on his college apartment.
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Krikit,
Here is an interesting question, as an aside.
Did anyone ever cosign a car for you?
Did you ever lose a car because you could not afford the payments?

This will not matter either way, but I was wondering what your life experience with co-signing has been.

You certainly have a Grandmother's heart! 💖
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krikit Jul 2022
No one signed for me..but my first car came from a junk yard back in 1965. It was a different time..better than now..things were so much cheaper back then!
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Do you have other grandchildren? Will you be doing the same for them?
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krikit Jul 2022
Yes..there are three others and no I cant afford to cosign for them..so it really isnt fair to sign for him alone. But he really needs a car ..he's only just 19 with no credit history..working two jobs so not lazy..I still can't help but feel its a bad idea
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Krikit

So what was your decision?
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krikit Jul 2022
Still agonizing over it...really dont want to
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Can you afford to do the same thing for all family members who come a-begging? If you just have the one grandson, and you feel this is the right thing to do--go ahead. But know that many a 'good relationship' has been ruined over such financial issues such as this.

We made sure each of our kids had a safe, running car that we made available for them as long as they were A: in school and B: working PT. If they wanted a 'better car' that was up to them. 2 od them bought a 'better car' based on their own credit ratings. We did cover insurance as long as they were in school and working.

Lessons were learned, the hard way, but when one of our daughters got married, she had a great credit rating and based on that alone, she and her finace were approved for a condo payment. We didn't have to do a thing. Her fiance didn't have so much as a debit card! His parents had him under their thumbs, financially and he didn't have a clue how to 'adult'.

Flash forward 16 years and he is a doctor, VERY well paid, and my daughter is running the 'financial show'. Had we just handed her cars and CC's and such--I don't think she would appreciate how important things like independence are.

My parents picked and chose which kids they'd 'support' and it has caused a LOT of bad feelings.
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Krikit, I see in your to JoAnn29 that you don't want to do this. Follow your gut. As you know, co-signing means YOU are on the hook for the loan if your grandson defaults and you have NO right to the car.

If your grandson is trying to establish his credit, he can sign up for a credit card under his name only.

Here's my own tip that has served me well over the decades when I face a dilemma: A month from now, a year from now, a decade from now, what could I regret?
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NO! Never cosign. Full Stop.
co-signing is not a sign of love or compassion for the grandchild, it is enabling a childish mentality of instant gratification.
The request is more commonly the beginning of further financial abuse against the elder.
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I’d heavily encourage you to decline. I watched this blow up in my dad’s case. He felt sorry for my niece, his granddaughter, and co signed for her on a car. He did it for pure motives, being concerned that she wouldn’t have transportation to school and work. Within months she was failing to make the payments and my dad’s lifelong excellent credit was at risk. He paid the car off, thinking she’d then repay him over time. Years went by and he passed away never seeing that money again. He wasn’t wealthy by any means, just a retired teacher who lived within his means, and got very hurt by his own family. I’ve heard it said that Thanksgiving dinner tastes better when no one owes anyone. I hope you’ll choose to lovingly decline
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Krikit, if you don't want to do it, please do not co-sign. Anything that creates agonizing is your bodies way of telling you bad idea.

Tell your grandson to buy a car he can afford and get busy finding ways to build his credit without putting anyone else on the hook.
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I have co-signed on car loans for my son and grandsons over the last 18 years. Never had a problem or a late payment and it didnot lead to any type of financial abuse by them or open the gates to ask for more financial assistance. I have also co-signed for apartments and houses.

I never wanted any of them to drive unsafe or unreliable cars or live in questionable neighborhoods. My husband did the same for his sons when they were in college or just starting out. Currently my son and stepson have active POA's for me and handle my financial affairs. they discuss with me and I trust them completely.
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No.
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The other problem I see is if he is in an accident and the car is totaled. I would check Kelly Blue Book and see what they say the car is worth retail. Is it way under what the dealer is asking? Don't co-sign. Lets say he had made payments so has gotten the loan down to 13k. The car gets totaled. The insurance does not pay the car off, They give you what the blue book says its worth and that may not be the retail amt but lower lets say 10k. That means grandson is in the hole for 3k which he needs to give the bank to satisfy the loan to keep his credit standing.

Again, if I was going to co-sign I would set a limit, no more than 10k. If you get any flack you tell family the money is urs and at your age, you need to hang on to it. Cost of living is on the rise. Yes, I did co-sign for Grandson but I do have a husband who would help if needed. If I was single I may not have done it. Why won't his parents help?
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I’d never co-sign for a loan for anyone. It’s up to people to
manage their own financial affairs, and I’ve been stung before with loans that weren’t paid back even though we had a signed agreement. The worst story I’ve heard about something like this was with “Martha” (not her real name). Her son was married and had a wife and kids. When Martha’s husband died, they thought it would be best if she spent the insurance money to build her a cottage attached to their house. She took care of the kids, cooked for them, and everything worked out great until the son’s home was repossessed by the mortgage company. Martha had no idea he and his wife weren’t making the payments. Her home was part of the repossessed house so it was gone too. She lost her home, had no more insurance money and her life savings were gone because she’d put them into her cottage. I don’t know what happened after that because she was a friend of my parents and she disappeared after that. May have gone to live with other relatives.
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I have continued to read this post and feel that since you have not made a decision yet, you really are wary of doing this.

Me? I would be, especially since his parents do not want to cosign, that is a red flag to me.

I have helped family members before in my working years, now in retirement I would not. I may have the money today, however, I may not tomorrow and longevity runs in my family, my mother is 97, her sister just died at age 100. The men also live into their nineties, one was 98!

Some have repaid others have not, however, I never have cosigned and would not consider doing it for that big amount. Too many what ifs, especially with a 19 year old.

Let him work and save, perhaps later if he is diligent enough to save and he reaches a certain amount, you could match the amount or contribute a set amount, having him sign a personal guarantee so he understands that the money is a loan, not a gift.. If he really wants this, he should have to work for it.
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