New answers tagged

9

Your question seems to be based on an incomplete understanding of the mechanics of how banks pursue loans when things go poorly. I'm saying this because of they way you described the situation here: In a unlikely case of my friend not paying the car, I suppose the bank will use the lien and will sell the car first and will ask me to pay any difference or ...


2

Your $ risk exceeds the cost of the car and may include your net worth and possibly future income. If your friend does something dumb while driving that car, injures someone, and is not properly insured you could be held liable. This was learned when someone close to me applied for an umbrella policy. Those that cosign a car are considered owners of the ...


1

The first cost is that until the loan is completely paid off the outstanding balance of the loan will be counted by lenders as a current debt. The required monthly payment of the loan will be considered as your responsibility, and if you are applying for other credit, for example a car loan for you, or a mortgage for you, then this car loan will be part of ...


15

You asked: In a unlikely case of my friend not paying the car, I suppose the bank will use the lien and will sell the car first and will ask me to pay any difference. No. If your friend does not pay the loan installments, the bank will come after you for the whole loan, or at least whatever part your friend hasn't paid off. The bank does not want a ...


0

If you want to limit your downside exposure to $2000, Buy the car yourself and lease it to him Whatever the down payment is, you make him pay that to you as a "lease origination and right-of-buyout fee". Require him to carry full insurance not only to protect the official lender, but also a rider to protect you. Then you require him to make the ...


-1

What, I understand from the posts that this kind of arrangement does not exists. But if it exists there are lots of benefits to all the parties involved, I will try to explain. Benefit to Car Dealer: Dealership will be able to sell a car that is worth 12, instead of a car that is suppose 8K. Benefits to Loan Company( let us call bank): The bank will ...


4

My rule is very simple: If you have the money and want to give it to your friend, give him the money. If you don’t have the money, or don’t want to give it to your friend, don’t give him the money. Never co-sign. It breaks your bank, and it breaks friendships. If you want to, you can give your friend a $2,000 loan. Or a present. Possibly with money you ...


8

No. No lender is going to touch such a weird deal, because it breaks all their risk models. Further, it doesn't work like that. The usual bad outcome is blam, suddenly there's a rather bad mark on your credit report. It's completely out-of-the-blue. Some days later you'll get a nasty letter in the mail. The damage is done. It turns out your friend ...


1

NOTE: I do not know for sure if car financier would routinely allow for a "limited cosigning" as the one requested by the OP. Since my answer proposes an alternative approach, I will assume that such an agreement would be possible just to compare it with my proposed idea. The different interest rate for you and your friend is due to your friend being ...


9

The bank would usually give the money to the dealer directly, possibly via a check you give to the dealer as payment. Ask your bank, they can tell you how they do it. It's exceedingly unlikely the money will ever go through your personal account though. Depends 100% on your bank, you'd have to ask them. It's paid off however your contract says it's paid off. ...


1

Your added scenarios simply highlight the core problem here. Ultimately, in a scenario as narrowly defined as yours, it comes down to residual value. When you lease, you lock in to a known residual value - and outside of blatantly damaging the vehicle, going over mileage, or other significant issues, there's basically no way either party can change that ...


0

Buying is the better option. When you lease a car, you are still paying interest, in the sense that the lease payments add up to more than the amount the car depreciates during the lease term. Over three years, your $812 payments add up to almost $30k. With a residual of $36k, that's $10k in interest you're paying over just three years on a $56k car. ...


1

Once you have settled on the car and the price you can ignore it. You have written a check to buy the car, which makes your balance negative. You need to solve that problem. You are borrowing a sum of money (which happens to be about the price of the car) for three years. Three years from now you will receive some money from selling the car. This can be ...


1

One problem with getting a 3 year (36 months) loan is that my payments are very high. The typical advice is, don't buy a new car, and don't keep a car for such a short period of time. It is not financially prudent. Buying used and running it into the ground will almost always be That said, the math will be based on interest rate and depreciation over 3 ...


4

There are a handful of things to consider when trying to determine term for something like a car loan. For the purpose of keeping this on topic and about finance, vs personal preferences or decision making about cars in general, let's assume you've chosen a vehicle, or a type of vehicle at least, and you have an idea of about what the purchase price will be -...


6

A car is not an investment. Cars drop in value over time, so you should not put yourself in a position to ever owe more than the car's worth. Most new cars drop in value by 20-30% in the first year, and 10% per year after that. Many experts recommend buying a car that's at least 2-3 years old and never financing a "new" car. That means that you should put ...


8

The general advice for this site the shortest loan period and the largest down payment; this makes sure you aren't under water and your interest costs are low. This means that the best loan options are for 0 months and 100% down. The advice is to purchase a car that isn't new. The idea is to get those cars coming off lease after two or three years. It is ...


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