Be very careful when helping finance someone else’s car

Attorney Dennis SchaeferAuthor: Attorney Dennis Schaefer

It is rather common to be asked by a friend or a relative to help them finance a car. Sometimes the reason is questionable credit, insufficient income or some other factors. The requests are many and varied but the danger in agreeing to do so is always the same.

As a rule the finance departments are always willing to take a second signer on a car because it makes the sale that much more likely. If the request is made and accepted to have a second signer on a car loan numerous papers must be signed by both parties. Historically, the finance departments put both signers on the paper work as “co-owners”. The vehicle is registered and co-owned by both parties. It is the “ownership” that creates the problems for the person assisting the real purchaser.

Helping finance a car does not create potential liability for the second signer. However, finance companies and dealerships placing the second signers name on the ownership of the vehicle creates the liability. The reasoning used is that they are trying to protect the second signer’s financial interest by keeping them on the ownership papers. The explanation given is that it is in the best interest of the person assisting the purchaser.

This could not be further from the truth. Once your name is on the paper work as a owner, you become instantly responsible for liability created by that car. In Florida, the primary party responsible for any damaged caused by an automobile is the owner. The driver is secondarily liable. Of course, you can protect yourself with car insurance. However if the insurance is too little to cover an accident or the policy has lapsed, you and the other owner become equally liable for the balance of the loss.

Frankly in most cases you are much better off to give you friend or relative cash to put down on the car, or not get involved at all. If you “have no choice” but to assist someone in financing a car, make certain that your name is not on the ownership. The risks are potentially far too great.

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