Co-Signing a Loan: Just Say No!

Back in 1997, I’d just left University and stepped into what people over 25 call the “real” world. As I’ve mentioned in the past, I landed a job, which I still hold to this day, that paid $6/hour.

At the time, I didn’t have a car. For the first couple of weeks, I was carpooling with my mother, where I’d drive her to work, drop her off, speed back to my job, work the day, then drive back to her work to pick her up, and then we’d head home.

Put a lot of miles on the minivan, not that that mattered much…it was just a lot of wasted time, for both of us.

I think it was my mom’s doing that sent me and my father out to buy a car one weekend. I knew I wanted a VW Jetta and went to the local dealership. We also checked out Honda Civics and even stopped by a Ford dealership, but I never test drove either.

The Jetta it was. The base model, the Jetta GL, in green with a moon roof. No one in my family had ever had a car with a window on the roof before. It was like I was breaking new ground or something.

Then we sat down with the obnoxious car salesman, who was probably the same age as I was (not that it’s important, I’m just sayin’), and went through the numbers.

On $6/hour, and no savings, it became apparent that there was no way I could afford to buy a brand new vehicle. I’m not sure if my Dad knew that going in, or if he wanted me to learn it for myself, but I’m not sure it worked.

You see, the dealership had HUGE posters all over the place advertising “red carpet leases” on Jettas for $179/month. Now that… I could afford.

The inexperienced salesman went through the numbers again, this time with it set-up as a 4-year lease. (Crazy, I know, to lease a car for 4 years?!). In the end, he got the payment down to $223/month. Hardly $179, but still do-able.

Apparently the discrepancy was due to the fact that I wasn’t putting down the money required to get the $179/month payment. Makes sense, as those numbers they advertise in car commercials are always sketchy. I learned that this day.

Anyway, everything was looking great, they stuck us in the little office of the “Accounting Person” and I filled out the super long piece of paper filled with legalese.

Turns out, I needed a co-signer to qualify.

Thinking back, I’m not really sure why. I’d had a credit card for some time, so I must have had some credit history. The few bills I’d had in university were always paid on time. I’m not really sure why I needed a co-signer… Maybe it’s because I’d been in Canada for the past three years?

Either way, to get this car, and likely ANY car, I needed a co-signer.

I could tell by the look on my dad’s face that he was hesitant — like I wasn’t going to pay my bills or something. I was offended slightly at the thought, but now I can understand his delay. He did end up signing it, and away I drove in my brand new Jetta.

My dad never mentioned the co-sign thing to me, or that he was uncomfortable about the whole thing, or putting pressure on me to pay, or whatever, and I appreciated that. Evidently he didn’t see me as a lazy low wage non-bill-paying idiot.

Later in the year, when I realized the 10k miles per year I was allowed on the car wasn’t going to cut it, I looked into buying it outright rather than continuing to leasing it. Now that my job, through overtime, was bringing in more money, I re-financed it through GE Capital.

Fast forward two years later… my dad suddenly starts taking advantage of every “FREE” offer he comes across and one of them was for a free credit report.

The report comes in and he’s going over it and he asks my mom what this “GECAL” debt of $4k is? They can’t figure it out. I’m sitting idly by, thinking nothing of it — and then it hits me, “Hey, that’s about what I have left to pay on my Jetta!”

It blew my mind, and his, that even when I’d refinanced it in my own name, through the Volkswagen website mind you, that my dad’s name was still attached to it.

Now I’m not sure if that was a mistake on their part, or if that’s how it always happens, but now I know that I’d be unlikely to co-sign for anyone other than my wife.

I appreciate that my Dad co-signed for me back then to get me into a new car, but to think, what would have happened if I’d traded that VW in for my BMW — would my dad’s name have been attached to that?

That would have been a big debt to have ninja’d on to your credit report…and that car took me nearly 7 years to pay for. I’d have felt awful to be responsible for something that would linger on my dad’s credit report for that long.

So, from my VW experience, I’ve learned not to co-sign a loan with anyone other than my wife OR to ever lease another car.

Thankfully, no one got burned financially.