I think everything in your case is just simply missing one important rule of how credit works.

Essentially, your MIL cannot get a loan. You can. YOU ARE MAKING HER A LARGE LOAN THAT SHE CANNOT GET HERSELF. That is all. That is the essence of what this deal is. It is not without interest - she makes a financial contribution toward your son, you get the deal in 2 years assuming she doesn't default (she will), etc.

Imagine it this way: you are sitting in the dealership with the dealer and your MIL. She wants a loan to pay for the car. The dealership says, "you are way not credit worthy." So your MIL says, "why doesn't my son-in-law take out the loan instead?" Now the dealership says, sure, that's fine. From the dealer's standpoint, every other part of your arrangement is irrelevant - boring, even. The only magic trick is in who takes the loan out, no other difference.

You're letting your MIL pull a car out of her sleeve like a magician, and in taking the deal you're believing her.

This sentence:

I am pretty sure that the ex-MIL will not let me down (I've loaned her large sums of money before and she always promptly repaid).

is everything. You're making a rather large bet that the things that can go wrong in two years - including any situation involving your wife's welfare - are rather miniscule. And furthermore, that the few times she's paid you back - that did NOT convince banks and dealer she is more creditworthy - justifies her good creditworthiness.

Is the interest worth it? Do you really believe that your MIL needs to wring a car out of you before she would consider contributing to her grandson's well-being (which is, essentially, the interest)?

But wait, it's NOT everything.

Her daughter (my ex-wife) would drive it for 2 years and then turn the car over to our son.

Even if your MIL is creditworthy, the woman you described as follows:

Her daughter, though, is a loose cannon.

Will be holding and returning the collateral in this deal. Things she can do include:

• destroy it for fun because she's mad at you for something, with no legal way to retaliate or punish or hold her accountable
• anything you would do with a car you knew for a fact you would not have in 2 years

So I'm arguing two points:

1. That you're getting the wool pulled over your eyes in your high estimation of your MIL's creditworthiness, because you missed how credit was moved in this situation.
2. That you're missing the fact that the collateral on the loan belongs to someone who you would not trust in a loan.

Obviously my opinion on this is clear. I hope I did a decent job of explaining where the components of this deal (credit, interest, collateral) play out in the eyes of a dealer or bank, and get lost in the mechanics of the rules you worked out with your family.

I think everything in your case is just simply missing one important rule of how credit works.

Essentially, your MIL cannot get a loan. You can. You are making her a large loan that she cannot get for herself. That is all. That is the essence of what this deal is. It is not without interest - she makes a financial contribution toward your son, you get the deal in 2 years assuming she doesn't default (she will), etc.

Imagine it this way: you are sitting in the dealership with the dealer and your MIL. She wants a loan to pay for the car. The dealership says, "you are way not credit worthy." So your MIL says, "why doesn't my son-in-law take out the loan instead?" Now the dealership says, sure, that's fine. From the dealer's standpoint, every other part of your arrangement is irrelevant - boring, even. The only magic trick is in who takes the loan out, no other difference.

You're letting your MIL pull a car out of her sleeve like a magician, and in taking the deal you're believing her.

This sentence:

I am pretty sure that the ex-MIL will not let me down (I've loaned her large sums of money before and she always promptly repaid).

is everything. You're making a rather large bet that the things that can go wrong in two years - including any situation involving your wife's welfare - are rather miniscule. And furthermore, that the few times she's paid you back - that did NOT convince banks and dealer she is more creditworthy - justifies her good creditworthiness.

Is the interest worth it? Do you really believe that your MIL needs to wring a car out of you before she would consider contributing to her grandson's well-being (which is, essentially, the interest)?

But wait, it's NOT everything.

Her daughter (my ex-wife) would drive it for 2 years and then turn the car over to our son.

Even if your MIL is creditworthy, the woman you described as follows:

Her daughter, though, is a loose cannon.

Will be holding and returning the collateral in this deal. Things she can do include:

• destroy it for fun because she's mad at you for something, with no legal way to retaliate or punish or hold her accountable
• anything you would do with a car you knew for a fact you would not have in 2 years

So I'm arguing two points:

1. That you're getting the wool pulled over your eyes in your high estimation of your MIL's creditworthiness, because you missed how credit was moved in this situation.
2. That you're missing the fact that the collateral on the loan belongs to someone who you would not trust in a loan.

Obviously my opinion on this is clear. I hope I did a decent job of explaining where the components of this deal (credit, interest, collateral) play out in the eyes of a dealer or bank, and get lost in the mechanics of the rules you worked out with your family.