Guaranteeing auto lease

Anonymous · ‎03-12-2014

My nephew wants to lease a car but has poor credit. I want to help him out if I can but I dont want it to affect my credit score. If I guarantee his auto lease will that affect my credit score. I would prefer that his lease obligation not be included in my credit report. If I co-sign his lease is it correct to assume that it would included in my credit report. I assume that I can provide a guarantee on the lease as opposed to co-signing the lease.

Remember0 · ‎03-12-2014

Generally this is not a good idea. There's a reason why they want you to cosign and won't finance just him. I've seen too many horror stories of people's credit (and lives) being ruined by cosigning. Please don't do it...rather help your nephew rebuild his credit so he can get it on his own.

If you're going to do it anyways, it'll appear on your credit report. I've never heard of a situation where it doesn't. Maybe someone here with experience of this can chime in if it didn't show on their report...It's not the loan (if paid on time) that'll damage the credit score. It's going to be delinquencies (consider that a study found that >60%...I think, you can google it...of co-signers make payments on the loan they didn't expect to/are left holding the bag).

Are you prepared to make all of the payments on this lease and keep track to make sure all payments are being made on time (you NEED to call once monthly)? If you can answer yes, only then should you co-sign.

Anonymous · ‎03-13-2014

Thanks for your response. My nephew is a "solid citizen", and I am quite comfortable that he will make pyments on time and/or will inform me if there's a problem before ir becomes a delinquincy. Moreover, the lease is only $220/month for 3 years and if necessary I would be prepared to assume the obligation.

My questions are: 1)would this additional lease obligation affect my credit score since I already lease a car. 2) If I don't actually co-sign on the lease but instead provide a separate guarantee for my nephew's lease can I avoid having it appear in my credit report.

Remember0 · ‎03-13-2014

Haha, okay. I tried though. I would recommend you at least independently check with the finance company every month to make sure the payment's there. People are often quite embarrased if something goes wrong (esp if they can fix it say next month) and I think that phone call is worth it vs. crying over spilled milk. Heck, even tell him you're doing it, not because you don't trust him, but because you want to make sure both of your credit histories remain pristine.

1) Not much. I'm assuming you're a prime customer here, but just a new account won't be harmful too much. Yeah initially your FICO may drop a bit, but it's like 5 points max. After a while of good payments, it'd probably help your FICO to be honest. If subprime, my only worry would be that if you went to buy a car (after your lease is up), two loans might bring up some questions for approval, but wouldn't pose a problem once the explanation (co-signed) is given.

2) Not that I know of. Maybe someone else with experience will chime in. But I personally have not heard of that with auto loans.

Creditaddict · ‎03-13-2014

I have never heard of providing a guarantee but not be co-signing??

If you sign for the lease it will be on your credit... the upside is that it's a lease so it will only show the balance of the $221 x 36 months as total high amount borrowed vs. say a $25k loan for the entire price of car.

I'm also not a big fan of the 36 month lease if at all possible to go 24, I feel like the high end cars that have good returns on value are all 24 or 27 month leases and the cars that don't hold value so well are on 36 month leases (of course we are also in a 36 month lease on our Kia and I regret it SO MUCH!)

StartingOver10 · ‎03-13-2014

@Anonymous wrote:
Thanks for your response. My nephew is a "solid citizen", and I am quite comfortable that he will make pyments on time and/or will inform me if there's a problem before ir becomes a delinquincy. Moreover, the lease is only $220/month for 3 years and if necessary I would be prepared to assume the obligation.

My questions are: 1)would this additional lease obligation affect my credit score since I already lease a car. 2) If I don't actually co-sign on the lease but instead provide a separate guarantee for my nephew's lease can I avoid having it appear in my credit report.

It is going on your credit report. There is no such thing as a separate guarantee unless you are talking about some sort of collateralized account where all the payments sit and the company drafts from that account - and I'm not so sure you can do that even.

The whole point of asking you for the guarantee (from the lessor's POV) is to put it on your cr report for leverage for future payments.

Yes, the tradeline will affect your credit. It affects DTI if you are going for a large purchase (house/car/boat etc) during the lease period.

I co-signed for my daughter and had her make the payment to me directly and I made the payment to the lender. Then as soon as she was able, she refi'ed into her own name. Of course that was a auto finance and not an auto lease. But still, it was a way to keep track of payments to ensure they were made timely. I generally do NOT recommend doing it in any way where you don't have proof of payment clearing each and every month on time.

coterotie · ‎03-14-2014

If your nephew went to a bank for a LOAN you could do a guarantee that would not appear on your credit report. However, the lease is going to show up. Additionally, remember what you are actually guaranteeing when you sign on the lease:

That the payments will be made on time (you already know this one)
That he will maintain insurance, if he doesn't they will "force place" the insurance at a figure roughly 5 times the normal rate. This is tacked onto the loan balance with interest that you will have to pay when the car is turned in. This will cover only damage to the car, not to anyone else. As a guarantor and potential deep pocket you could be on the hook for personal injury damages etc. Gap insurance is relatively expensive so be aware here as well.
That he won't do anything to the car during this time to detract from the value in the eyes of the appraiser you turn it into. Any modifications or dings will be on his (your) dime.
That he won't exceed any of the mileage restrictions. If he does he (you) will be on the hook for the charges. I have seen these run into the thousands. The dealer always low-balls the antiipated number because this is a big profit center for them.

If you just gotta do this, make sure you have all the logins etc. set up reminders and check it each month to make sure the loan/insurance etc. are being paid. Have you looked at his creditkarma or something to see why his scores are low and why they need a guarantor?

@StartingOver10 wrote:
@Anonymous wrote:
Thanks for your response. My nephew is a "solid citizen", and I am quite comfortable that he will make pyments on time and/or will inform me if there's a problem before ir becomes a delinquincy. Moreover, the lease is only $220/month for 3 years and if necessary I would be prepared to assume the obligation.

My questions are: 1)would this additional lease obligation affect my credit score since I already lease a car. 2) If I don't actually co-sign on the lease but instead provide a separate guarantee for my nephew's lease can I avoid having it appear in my credit report.
It is going on your credit report. There is no such thing as a separate guarantee unless you are talking about some sort of collateralized account where all the payments sit and the company drafts from that account - and I'm not so sure you can do that even.

The whole point of asking you for the guarantee (from the lessor's POV) is to put it on your cr report for leverage for future payments.
Yes, the tradeline will affect your credit. It affects DTI if you are going for a large purchase (house/car/boat etc) during the lease period.

I co-signed for my daughter and had her make the payment to me directly and I made the payment to the lender. Then as soon as she was able, she refi'ed into her own name. Of course that was a auto finance and not an auto lease. But still, it was a way to keep track of payments to ensure they were made timely. I generally do NOT recommend doing it in any way where you don't have proof of payment clearing each and every month on time.