If you're someone who has a good income and a high net worth, you may occasionally get calls for financial help from family members and friends. One phone call that you might receive is a request to cosign for someone's purchase of a used car. Agreeing to this request won't necessarily cost you anything. If the buyer makes all of the payments on time, you won't have to open your wallet. However, if the buyer fails to pay, you'll be responsible for paying. This isn't a decision that you should take lightly. Here are some things to assess before you agree to cosign for someone's vehicle purchase.
The Person's Responsibility
One of the biggest things to think about before you agree to consign for someone buying a car is how responsible that person is. For example, the person may not have a high income, but is he or she someone who budgets effectively and stretches his or her money? Similarly, is the person someone who avoids making frivolous purchases so that he or she always has enough money for bills and essential purchases? If you feel that the person succeeds in these areas, it can be a good sign as you consider cosigning for the vehicle purchase.
What The Person Owes
You shouldn't shy away from asking the person financial questions before you agree to cosign for the vehicle purchase. For example, you'll want to know what the person owes. If the person doesn't owe anything but just has a low income, it's a better sign for you than someone who has a low income and owes to a variety of lenders. In many cases, the person will need to take care of a number of monthly payments on these loans, which may put being able to make car payments in jeopardy.
The Person's Career Choices
You should also give some thought to the person's career choices, as they can play a key role in what the person earns in the months and years ahead before the car purchase is fully paid off. Perhaps the person is young and straight out of college, but has an entry-level position at a big company with a good chance of upward mobility. This is the type of person you shouldn't worry about cosigning for. Conversely, someone who has spent long periods out of work and tends to bounce between jobs may not be the best person to help in this manner.