Consequences of Co-Signing a Car Loan

Author: Attorney Dennis Schaefer

Many people try and help out their friends or relatives by co-signing a car loan. This is a very common occurrence. It is frequently the only way that the car can be purchased by the intended user of the vehicle, because of bad credit issues. It is also not uncommon for the consequences that the co-signor is potentially faced with go unexplained.

Florida law states that the owner of a vehicle is primarily responsible for the damages which that vehicle might cause in an accident. The driver is secondarily responsible. This also means that a co-owner of a vehicle is just as responsible from a liability stand point as any other co-owner. This amount is not proportioned. All owners or co-owners are potentially responsible for (100) one hundred percent of all damages.

As a matter of course, car dealers almost always place a co-signor in a co-ownership capacity. The usual thinking is so the co-signors can protect the money they have loaned. Without them being a co-owner the person who borrowed the money can sell the car without the lenders approval. With them being a co-owner, if the other owner or owners do not keep proper insurance the co-signor/co-owner is at risk of loss.

Most people who co-sign loans have no idea that they are also co-owners. The ones that do know they are co-owners have no idea that they are at equal risk with the intended user of the vehicle, should a loss happen. Our advice is do not co-sign loans on cars. If you must, make sure you are not a co-owner. If you need to be in order to protect your loan, make sure there is always enough insurance on the car and that you are a named insured. Otherwise don’t be surprised by significant consequences of your decision.