DON'T DO IT!!!!! Aside from the credit issues above, don't do it and here's why:
1) If he has scores (I assume from myFICO or from a lender) of 700+ then he should have ZERO very few issues in getting a loan from any lender (ETA...I know that getting an unsecured loan is harder than a car loan). He is either lying about his credit or #2 comes into play:
2) His income is too low in relation to his monthly obligations (DTI)...If it isn't his credit and he's 100% truthful, then he just doesn't make enough money. Think about the logic for a second. If money was OK and if income was OK, then why can't he get a loan??
3) Aside from DTI or credit, why can't he shop elsewhere? If there only one bank where he lives? If not, go to a different bank or lender. Tell him to shop around in other places if needed for another CU, There is absolutely no reason why he can't get approved if #1 and #2 are OK.
4) Let's say you sign for him anyway. I talked about the credit issues with applying, now I'm going to mention the credit issues of not paying or not paying on time. You've seen it before on here: someone cosigns for someone else and that someone bails. Here's what will happen if you cosign and he defaults:
a) if late, lates can appear on your CR. If lates appear on your CRs, your score will go down and AAs can occur via your existing CC relationships (CLDs, rate hikes I think (not sure how the new law plays into it now)).
b) If late to a point of default, you will have a repo report, lates, and eventually a CO. One day a CA might pick it up and report too. Finally, a judgment can appear because the creditor can sue you as the cosignor.
c) You lose a friend.
5) If you cosign for him, and if, God forbid, he gets in an accident and the car is totalled, you and he must PIF the loan balance immediately. Sometimes insurance can be slow or maybe he lacked GAP and you both must PIF the difference immediately. You can't put it on a payment plan. If you don't PIF immediately, it goes as a CO, CAs, possible PR, etc. You get the picture.
6) If you cosign, is his income guaranteed? Are you 100% certain he won't get canned at work tomorrow? How would you guarantee the payments? Could you pay the monthly loan amount without the assistance of your friend? Things happen. People can get sick, disabled, fired, or other that might prevent him from making the payment or even paying late.
7) Cosigning will put a strain on any friendship, even if he's on time 100%. Cosign and you'll see what I mean.
8) Let's say you do cosign, and I'm not advocating you do, and I'd never cosign for anyone, not even my kids, but in lieu of the above at least consider doing the following:
a) Before cosigning, have him shop around elsewhere for a better rate. Sounds like his credit and/or his income is bad and that's why he can't get a loan. You and he might be stuck with a higher rate at the place he's at already. At least get it down.
b) Make him pull both FICO reports from myFICO.
c) Inspect his certificate of insurance to make sure it is adequately covered.
d) Make sure he gets GAP insurance.
e) Have him mail you proof of the payment each month and make sure he does it online. If he is late once, you make the payments and have him pay you.
f) Make a contract and include all of the above.
g) Include a default provision saying that he'll pay for your attorney fees, extra money for aggrevation for credit repair, and if he's late more than twice, then he must get his own loan and refinance the thing at his cost. Extreme? If you and he's confident that any loan can be repaid as promised, then this shouldn't phase him.
9) Rethink his $$$ issue. You said that $1,100 is crazy. I think it is too. But if you are saying that you/he wants to pay it off in one year, what kind of car is he getting? If you are paying $1100 per month that's $13,200 per year. If that's too much money, and if you/he wants to PIF the car within a year or so, then it looks like he's buying a clunker.
Let's say you both decide that it can be paid off in 2 yrs vs one. That's a max of $26,400 in payments to the car, insurance, gas, etc. Within that, there's interest. Let's say he has to get gas during those 2 yrs. Oil costs is at the rising to the same level as when our last president was in office: $85/gal. It's easily at $3/gallon at the pump. If he limits his miles and uses only $20/week in gas, would that be fair? That's $20 x 52 weeks x 2 yrs or $2,080 for the 2 yrs. So, the balance bumps down to $24,320 assuming he continued to spend a crazy amount of $1100/month.
Now for car insurance....assuming he has no tickets, accidents, and isn't going to allow others to drive it with records, then you can conservatively assume that the monthly insurance on an economy car is $120 per month. Maybe I'm too low with that figure if you go with a major company like Geico, but there are some smaller carrier that offer cheaper. That's $120 x 24 months or $2,880 per the 2 yrs. Assuming he's going to keep the $1100 level, then he has $21,440 left between the principal and the interest on that car.
Interest on a 2 yr note, but using a reverse calculator, you can determine how much principal would be on that car and how much interest there would be. A loan for exactly $20,000 for 24 months would be $895.45 per month at 7% or $21,490.80 for the 2 yrs.
Do you see where I'm going with this? Assuming the $1100 was still acceptable and not that crazy, and assuming he still pays that for 2 more years vs. one, he still would have a small car or even a small car if you guys were trying to cut the $1100. BTW, that's $20k before any taxes or fees. More than likely, the car would be closer to $19k. If you do this with him, understand that he will want more of a car and for payment terms longer than 2 yrs. Your expectations as mentioned in your posts here will no way be met by cosigning.
