Uncommon Reason for Co-signing an Auto Loan

[Anonymous]

I've searched quite a bit for answers, but I can't seem to find anything to help. Here's the situation:

I'm considering the purchase of a new car and have been told I won't need a co-signer for the purchase (supposedly my score is 800+). However, one of my fiancee's parents works for the car company, and thus I will receive a substantial discount if she co-signs the loan. Currently, her credit score is likely to be a lot lower and she already has a car payment. Assuming we did co-sign purely for the discount, are there any downsides to this? Will they consider both of our credit histories if she co-signs, potentially increasing the APR I'm offered or liklihood of getting the loan, or do they ignore all but the highest score?

[casmith1980]

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@Anonymous wrote:

 Assuming we did co-sign purely for the discount, are there any downsides to this? Will they consider both of our credit histories if she co-signs, potentially increasing the APR I'm offered or liklihood of getting the loan, or do they ignore all but the highest score?

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This sounds really strange that in order to get the discount she needs to co-sign.  Typically the person with less than stellar credit is in need of a person with a higher score...

Here's the situation from my DH and his disgusting EX:

he co-signed for a car for her because her credit was poop...he had perfect credit, she had crap credit.  He was still able to get her into a 0% loan because of his high score....so, to answer your question, I don't believe you will be stuck in a higher APR because you have a person with a lower score on the loan.

[Anonymous]

Hi Frugalstudent, and welcome to the myFICO Forums!

I agree that it seems odd that your fiancee's Mom would have to co-sign for you to get the discount. Typically, where automotive OEMs & their "A Plan/Employee pricing" discounts are concerned, co-signing isn't at all necessary. Typically, employees receive some type of code to provide to family, friends, suppliers (whomever is eligible, under the OEMs guidelines) to use for the purchase.

[Anonymous]

Since there is some confusion over why the co-signing is necessary, I'll explain the details in a second. First, I had one other question. Given my fiancee already has one auto loan (with 2 years remaining), could co-signing another damage her credit? She has a relatively short credit history (~2-3 years). We assumed that long-term it would probably help her, which would be good once we start looking at mortgages 5-10 years down the road. The car will be paid off in under 3 years, so I would think that any negative impact would be temporary.

To clarify the discount/reason for co-signing, there are actually two types of "employee" discounts offered by Ford: AZ plan and X plan.

X plan is as you say, a "friends and family" discount where a generated PIN# can be used by anyone. Typically, the X plan bumps the vehicle cost to around $100 above invoice price (before rebates).

For the AZ plan, only immediate family members may use the PIN (this includes in-laws, so I could just wait for our wedding next year to gain eligibility). As a non-family member you are ineligible, but the AZ discount can be applied with a family member's name on the loan. That's why my fiancee (or her parents) would need to co-sign for the discount. Using the AZ discount saves ~$1200 over the "Friends and Family" plan. Combined with the assumption this will improve her credit score long-term, it seemed to be worth it.

It's really an odd loophole which I doubt comes up very often, considering the risk that is carried with co-signing a loan. Hence why I could find very little that would answer my questions, as people aren't typically co-signing when they are able to secure a loan independently.

[kjm79]

I would say you need to look at what the savings on the discounts would be vs. the interest you MIGHT pay if you do end up getting a slightly higher APR by adding your fiance or her mother.   

Whichever person you use, you don't inherit any of their credit history.  As long as you take on the responsibility of making the payments and you make them on time (sounds like you do with your score) then you don't need to worry about them dragging you down score wise.  Depending on their credit profiles, a new account might lower their AAoA of accounts.  With your fiance's short history, I would say this would hurt her the most.  But if she's not planning on applying for any new credit for a few years, don't worry about that.  Your future m-i-l most likely has a longer credit history and her AAoA shouldn't suffer as much.  But that depends on what their credit profiles look like.  In the long term, you'll be helping out whoever you co-sign with.  They just have to maintain their own credit profile to receive the benefit of the positive car loan.