@billlori wrote:
My daughter-in-law cosigned for a auto loan before she was married. The girl she signed for has not been making payments and is real behind. She did give up the car to my daughter-in-law. The outstanding loan is around $10,000. The cars value is $5,000 at most.
How much will it effect my daughter-in-law and son's credit if they give the car back to the bank? I'm sure all the late/missed payments have already hurt, but to what degree I don't know.
It's a good lesson for her. If someone asks you to co-sign a loan. Ask why they can't get one themselves.
If your daughter asked her friend to pull up her credit report and show her, her friend would have dropped it, I'm sure.
Voluntary Repossession is little more than a footnote on a repossessed car. It doesn't change anything except that when they sue you over the car, you might not have to pay as much in fees that they'll deduct from the value of the car. They will also get a very low price for this car at auto auction which means that your daughter would be doing good to just sell the car for $5,000 herself and cough up $5,000 to pay the note off, because if you "give the car back to the bank" expect all but $800-1000 of the car's value to disappear and then a lawsuit for $9,000 plus court costs and their attorney.
If the car runs and gets around okay and it's just not worth much, your daughter could keep it and make the payments and realize that she's lost a lot of money on a car that isn't worth half that.
Or you could make them come get it and add all those fees for sending the repo men. Then you'll owe them $10,000 plus their lawyer and court costs.
There's usually no good way out of it when you loan a friend money who can't get a loan. The banks looked and said no because they knew this would happen.
Most people don't understand what they're signing when they get a car loan. My mother didn't. The law requires them to quickly minimize their loss, which is the auction they won't get a good price at. They won't get a good price because they had repo fees to deduct from the value, and they're selling a repossessed car to a dealer through an auction company that wants money, which will be deducted.
My mom told me "and then they sent me a letter saying they sold my 2011 Impala for a very small amount of money just to insult me". They are legally required to tell you what they sold the car for, and any fees they're deducting. If you want to feel something, feel stupid for paying $17,000 for a car loan on something that was only worth about $9,000 private party, and then getting a loan to finance the car, the dealership nonsense, and an extended warranty that denies all your repair claims and added $3,500 and interest all by itself. She roasted her credit so bad that the only place she can buy a car from are bad credit car lots that see how much they can pack into a loan at high double digit interest rates.
Once you realize what you've done, do better next time.
The really nutty part of the story is she had a 2003 Impala that was paid off and ran, and it still runs 7 years after she filed for bankruptcy.
She had no reason to ever go to her credit union and that car lot to get the 2011.
Then after her bankruptcy, she quickly signed on another bad car loan with a bankruptcy car loan outfit and she's having more trouble out of the newer car than the 2003.
She apparently just likes donating her money to these places.
She never learns anything from her mistakes, the only explanation is some sort of mental problems going on that leave her functionally unable to manage her finances and make positive life choices.
Anyway, I said all of that because what your daughter did when she signed a loan for an acquantance makes even less sense than what my mom has been up to all these years. Your daughter didn't even get the car, she just got the shaft when her "friend" didn't do what she said she would.
Asking for a co-sign from a spouse isn't automatically alarm-bells going off, if the marriage is solid, but that's pretty much it.
Tell your daughter this. The world is an engine of loss. It takes and it takes from us. Other people are selfish and worried about their own problems and always looking to get more, and if that means cheating other people, that's what they'll do. No matter what they have they want more. If they're broke they want you to co-sign an auto loan so they can feed you to the bank when they stop paying. If they're rich, it means they'll sit back and watch the world rot while they accumulate several billion more dollars. It's never enough.
It's hard enough to get by for most people with the problems they have already. It certainly doesn't sound like your daughter has $10,000 to just go pay the bank and then try not to think about it again, so why would she sign someone else's car loan?
Why did the bank allow the loan? Same reason they allow co-signing a student loan. It's easier to sue TWO people and get something than it is to only sue one person who is too broke to get the thing they want.
Think of the lenders like The Wishmaster, the evil genie in all those movies, running around making people's wishes turn into a disaster.
You want a new car? They can make that happen. They can give you a $50,000 car right now, if they think they'll get another $25,000 in interest from you.
How many dollars per hour do you make again? (Rhetorical question....ask YOURSELF this whenever you want something.)
Pouring your future earnings potential into the coffers of some bank instead of getting something for it isn't a very wise proposition, it's an even worse one when you pledge your future earnings for a car for someone who stiffs you.
I loved how Dave Ramsey put it. A guy called in over a car loan he shouldn't have signed that was costing him over $700 a month at the time. He owed $40,000, it was worth $25,000, because the finance room people got him and the car depreciated faster than he could make payments over the first few years, and Ramsey says "If you saved $700 a month and didn't have this car, you could drive a $7,000 car in ten months. How many months is that loan?" and the guy says "84".
Car loans are for the birds man. Especially this sign and drive garbage. They're laughing at sign and drive people because you leave the dealership, have no equity, and then if you hit something in the next 2 years you'll owe the bank more than the car is worth because you didn't put any skin in the game. (Down Payment) So the finance room people try to roll in overpriced GAP insurance (much cheaper through car insurance, but nobody who finances a new vehicle seems to be the sharpest tool), into the loan so that can gather interest for the bank too.
Then the bank turns around and pays the dealer a percentage for steering your loan to them.
And they laugh again. Everyone laughs at your car loan, but you.
I literally had a Ford car salesman tell me GAP insurance was $995. Then when I flipped my phone open and said I'll just buy it from my car insurance company, he said "How about the same policy for $495?".
In other words, they'll change gears. They test you to see if you're dumb enough to pay the first thing they tell you, but it turns out they're making money even if you buy it for half that.
