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There is no requirement for the purchaser or person on the loan to be the primary driver of the car, however, that does matter greatly for insurance. The person who purchases and gets a loan on the car is also the titled owner of the car. This person must maintain insurance on the vehicle. Let's lay out the OP's scenarios:
1. OP uses his credit union loan to buy the car. He will then become the owner of title and the car would be registered to him. The OP must then carry the vehicle on his insurance policy and then list the son as a primary/authorized driver. The girlfriend should also be listed if she will at all be using this vehicle. The OP needs to check his insurance coverage to make sure it will cover the son even though he legally resides at a different address. This is technically sketchy, but as long as the insurance company is satisfied it doesn't matter one iota to the bank who is driving it as long as they get paid and the car is insured. TECHNICALLY the bank may be concerned and have the "primary driver" language in the contract, because they are concerned about the insurance company waiving coverage in the event of a claim. However, there is no reason why the dealer cannot process the transaction. The biggest issue for dad in this scenario is that he is exposing himself to liability if a major accident/claim were to happen.
2. The OP buys the car with his son as a co-borrower (co-signor is a misnomer these days, they are treated as co-borrowers). In this case, the car can be legally titled and registered to the son and the son can purchase an insurance policy in his name at his address for the car and have his girlfriend on the policy. Legally, this is the cleanest way to do it, even if it costs a little more. REGARDLESS of who is listed first, BOTH parties get the full benefit and bear the full consequence of having the car loan on their credit. Let's just assume all payments are made on time and without issue, the sons credit will benefit from the positive history as will the fathers. The negative impact to the dad, even if it is being repaid is that it will be considered an outstanding obligation even if the father isn't the one making the payments. Let's say dad decides to re-mortage his house or buy another car, that payment will count against him. If the payments aren't made on the loan, both parties suffer the negative effects.
A couple of observations on the dealership:
1. I doubt they have a serious legal concern over the son being the primary driver, but not listed on the loan, why? Plausible deniability. What they want is to maximize their slice of the pie by having you finance through them. They most likely can't beat the credit unions rate either way, so they are sticking to it being "shady" and "not the way we do business" to cajole you to using their financing. Technically, they are offering you the cleaner legal solution.
2. GAP insurance is not a bad idea even on a used car, but it doesn't cost anywhere near $800. Most dealer GAP packages cost the dealer around $150 or so. The best option is to purchase it yourself, negotiate heavily or just buy it through your insurance company. This is why they won't give you the $800 off the price in place of the GAP insurance through them, they are really only giving you $150 or so and just claiming that it is an "$800 value".
IMO, you have three options here:
1. Sign the loan as a co-borrower with your son. While you can technically make it work the other way, this is the far cleaner choice; eliminates any vagaries and also protects you from any liability if the car is titled, registered and insured in his name. Your son will also get the benefit of having the loan on his credit history.
2. Seek another financing outlet solely in your sons name. With a 700 score, 'solid' employment and no other bills, he should be able to get a subprime loan through a place like CapitalOne or another lender. I'm really surprised the dealership didn't go down that path. Have your son try putting in an application online at CapitalOne and seeing what they say. Most likely he will get a high interest rate, in the 8%+ range, but the loan will be all on him and you won't be involved at all. If he goes that way, he will get a packet in the mail that includes a check he will use for the purchase.
3. If you or your wife, have a credit card with a long and positive history, you can add your son as an "authorized user" on the card. Make sure you provide his social to the card company and this will instantly add that credit card and its entire history to his credit account. Let's say that you have had a credit card for ten years, it has a low or no balance, a healthy credit line and you never missed a payment. Add your son as an authorized user and BAM, he now has that exact same card with all of the history on his credit profile. This can add a ton of points to his FICO in the span of a couple of weeks. You don't even need to give him the physical card and you can remove him, or he can remove himself at anytime. For instance, let's say a year from now you and your wife want to make a large purchase on that card and your son doesn't want that obligation showing up, you can remove him. In the short term, it may give enough of a credit score boost so you won't even need to mess with co-borrowing and he won't be paying an obnoxious rate on a loan in his name.
There's no way of proving this though. As long as the son is listed as a driver on the insurance policy, what's to say that he's not just "borrowing" the vehicle from his father?
That's obviously one way of looking at it, and I'm not trying to tell people to do one thing or another, merely pointing out the risks of doing certain things.
It obviously also matters how dependable the son is, if he's the one who'll be responsible for the payments, all that said, there is a risk involved, and I don't see any reason not to co-sign with the son. It'll be good for his credit and the approval is likely the same whether he's on it or not. (Auto banks generally go by whatever score is higher, example: My wife has excellent credit, I have hardly any credit and occasionally show up as a "ghost". We still get approved at excellent rates.)
Quote:
Originally Posted by sinsativ
Just bought two cars, brand new 2011 in Jan. 12, actually traded in my friends Escape as downpayment, as long as no marriage, no need to be on app, or title, only insurance policy. Straw Purchase is a term for housing, mortgage. Since most cars are no more than 5 or 6 years, you take responsibility for the car. The second car, I bought, no questions either. I even had someone else drive me to the lot, same lot, I bought the brand new car from, they didn't qquestion whether it was for someone else.
And as far as GAP, yes, you can be upside down in a used car, but if you are, you have made a poor deal, depreciation after being brand new and titled once normally drops the value below what the insurance will pay in the need for total replacement. Just BS that dealerships want you to buy.
Anybody that buys GAP insurance is getting screwed. If you are going to pay for regular insurance to cover your car, why would you go out and buy a second policy to cover the difference that your first policy doesn't cover? Wouldn't it seem more feasible to buy enough insurance to cover the car in the first place? Poor negotiating and lack of knowledge about scams. Say all you want to defend secondary insurance, but its a scam, and anyone that falls for it is a sucker.
The bank wants to get payment, the only one concerned is the insurance company. I've bought 7 cars in the last 12 months, all in Texas, and explained to the people I was buying from, never once did I get questioned as to who the main driver would be by the finance company.
Oh, and I shopped around with 10 different lenders for the best rates, filled out 10 apps. Never once did they ask anything about anything except my finances.
If you had any idea how many people buy used cars, putting no money down or very low amounts down. Without GAP, it's VERY easy to end up being upside down, especially when you consider that the most common term is 72 months. Fact of the matter is simply this: A lot of people end up owing more money than the value they have in the car, a regular insurance company is not going to give you $20k for a $15k car, just cause you owe money on it, GAP insurance is an excellent product for those people. You obviously don't need it if you put down 5 grand, but hardly anyone does.
I obviously can't talk for every single dealership there is, but there are plenty who will ask who the primary driver is and require that they're part of the deal, if it's being financed. I know first hand that's policy for several nationwide lenders, both in the car as well as motorcycle market.
It would be a lot cheaper and easier to put another radiator in the car.
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I'd have to agree with this. For some reason people throw away prefect good vehicles due to one expensive repair. If taken care of a car can last 200k to 300k miles, old or not.
I was given a car by a relative that belonged to their kin who could no longer drive. I insured it and never had any problems when getting the annual license tag. There was no loan on the car, though. Later on, when I bought another car, I didn't trade the car, but, the dealership wanted to buy it. Since I didn't have the title, they said they could get one.
You can pay for a car for anyone you like,but you cant buy it for him without him proving he can legally own it. You can not sign his name on the title, HE HAS TO DO THAT AS HE PRESENTS HIS ID. You see if we didnt have this law one person might try to buy cars for some illegal aliens...They are not suspose to be owning or driving no stinkin cars.
I love it when people discuss ways to defraud banks and compromise the relationships a dealer has with said banks and in the same breath call the dealers con artists.
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