Quick Facts About Sharing a Car Loan
- Having a solid co-signer improves the odds of getting a loan.
- Many lenders offer loans for co-signers and joint borrowers.
- A co-signer has no ownership rights, while both joint borrowers do.
- A co-signed car loan only benefits the primary borrower.
Yes, two people can buy a car together through joint borrowing or co-signing. Joint borrowing means both applicants share responsibility and ownership, while co-signing makes one person the guarantor if the other defaults. Lenders may consider income, credit, and debt from both parties in either case.
How you come up with the down payment doesn’t change the legal loan agreement. You can use your own savings or money from someone else, but:
- With a joint loan, both people are equally responsible for payments and ownership. Both names appear on the title and loan paperwork, and both share insurance and liability.
- With a co-signed loan, the co-signer is responsible for the debt if you don’t pay, but has no ownership rights in the car.
We’ll examine these options, discuss the pros and cons of each, and share our recommendations on how we would approach either scenario.
- What Is Co-signing a Car Loan?
- When Do You Need a Co-signer?
- How Does a Co-signer Car Loan Work?
- Pros and Cons of a Co-signer Car Loan
- Should You Co-sign Car Loan?
- What Is Joint Borrowing on a Car Loan?
- Our Take
What Is Co-signing a Car Loan?
Co-signing is a strategy for borrowers with weak or no credit. In simple terms, co-signing is when someone with strong credit contractually agrees to make the payments if the borrower can’t. The borrower must still meet the income requirements for the loan. However, a strong co-signer allows the lender to take a chance on borrowers with a low credit score or dings to their credit history. Sometimes, a co-signer with an excellent credit score can even lower the loan’s interest rate.
When Do You Need a Co-signer?
A co-signer is typically needed when bad credit blocks loan approval. During a car loan application, lenders check your income, debts, housing, and credit history before making a decision. If denied, ask the lender for specific reasons—some issues may be fixable, but serious credit problems may require a co-signer. Borrowers with credit scores under 500 or major debt issues often must seek buy-here-pay-here dealers or bring a co-signer to qualify.
Follow this flowchart to determine your path:
- Start: “Is your credit score below X or under 500?”
- If No → Try applying solo with multiple lenders.
- If Yes → Have you tried more than one lender?
- If No → Apply to at least two or three lenders first.
- If Yes → Consider a co-signer or buy-here-pay-here options.
How Does a Co-signer Car Loan Work?
Working with a co-signer isn’t really any more complicated than securing a loan on your own.
Steps to a Co-Signed Loan
- Finding a co-signer: The co-signer must have strong credit, ideally a score of 650 or higher, a solid credit history, and enough income to cover payments if needed.
- Locating a lender: Many lenders accept co-signers for car financing. Start with your bank or credit union, then other mainstream institutions, and finally, consider finance companies if necessary.
- Applying for the loan: Both borrower and co-signer must apply, providing financial details to prove the co-signer can cover payments if necessary.
- Making payments: The loan works normally if payments are on time. The co-signer must pay if the borrower defaults.
- Fulfilling the loan term: Once the loan is paid off, the co-signer’s obligation ends, and the borrower fully owns the car.
Borrower vs. Co-signer: Who Really Takes the Risk?
This table compares the main benefits and risks of a co-signed car loan for each person.
| Factor | Borrower | Co-signer |
|---|---|---|
| Chance of approval | Much higher with a co-signer | No personal benefit |
| Interest rate | May qualify for a lower rate | No personal benefit |
| Ownership of the car | Full ownership | No ownership, even if they pay |
| Impact on credit report | Loan and missed payments show up | Loan and missed payments also show up |
| Responsibility for payments | Primary responsibility | Must pay if borrower doesn’t |
| Fees, collections, legal action | Can be pursued | Can also be pursued |
| Overall trade-off | Mostly benefits, some risk | Mostly risk, almost no benefit |
There is much more upside for the borrower than the co-signer in a co-signed car loan.
Should You Co-sign a Car Loan?
In most cases, no. Co-signing might make sense for an adult child or a very close family member you fully trust, but it should be a true last resort.
Why You Probably Shouldn’t Co-Sign
- The co-signer takes on the debt without owning the car, and there’s essentially no upside for you.
- The loan will appear on your credit report and may lower your credit score.
- Any late or missed payments hurt your credit, too.
- Repossession or legal action will also appear on your record.
- You may be on the hook for fees, penalties, and collection costs.
When co-signing, you’re taking most of the risk so someone else can drive the car.
Is a Co-Signed Car Loan a Good Idea?
A co-signed car loan can help the borrower get approved, but the co-signer takes on almost all of the risk with none of the ownership. Explore other options first — like improving credit, saving a larger down payment, or applying with multiple lenders — before asking someone to co-sign.
The bottom line: Only co-sign if both of you fully understand the risks and have a plan if things go wrong.
What Is Joint Borrowing on a Car Loan?
Also known as a “joint car loan,” joint borrowing on a car loan is a much different animal than co-signing. Often but not always, a joint auto loan will occur with a husband and wife or others in a cohabitation situation who will share a vehicle. Joint borrowing allows them to pool their income to qualify for the loan. Although it can be a tool to help a borrower with weak credit secure a loan, a lender often bases a joint auto loan’s interest rate on the lower credit score of the two borrowers.
Co-signer vs. Joint Borrower: Key Differences
The primary difference is that joint borrowers are 50-50 partners in the car, the loan, and all the responsibilities car ownership entails. A co-signer has no legal rights to the vehicle. This table highlights how co-signed and joint car loans differ in ownership, responsibility, and risk.
| Feature / Responsibility | Co-signer | Joint Borrower |
|---|---|---|
| Ownership of the car | ❌ No ownership | ✅ Shared ownership |
| Name on title | ❌ Not listed | ✅ Both listed |
| Name on loan | ✅ Yes | ✅ Yes (both) |
| Responsible for payments | Backup only | Both equally |
| Responsible for insurance | ❌ No | ✅ Yes (both) |
| Affects credit score | ✅ Yes | ✅ Yes (both) |
Pros and Cons of a Joint Car Loan
There isn’t much daylight between the pros and cons of co-signing and joint borrowing; however, joint borrowers share all the rights of ownership, which a co-signer doesn’t.
| Pros | Cons |
|---|---|
| Better odds of approval. | Selling or trading the car requires both borrowers’ agreement and signatures. |
| Two incomes can qualify for a more expensive car. | Late or missed payments hurt both borrowers’ credit. |
| Shared costs for insurance, maintenance, and fuel. | The loan counts as debt for both, which can limit future borrowing. |
Tip: Remember that relationships can change. In cases of a breakup, divorce, or moving out, deciding who keeps the car and who continues making payments can get messy fast.
When a Joint Car Loan Makes Sense
✅ You live together or are married.
✅ You both plan to drive and insure the car.
✅ You’re both comfortable tying your credit to this car.
✅ You agree on what happens when it’s time to sell/trade.
Our Take
Co-signing a car loan is usually a bad deal for the co-signer — lots of risk with no ownership — so it should be a true last resort for someone you deeply trust. A joint car loan can make sense for couples who share finances and the car, but both borrowers need to be comfortable tying their credit, cash flow, and future borrowing power to the same vehicle.
Editor’s Note: We have updated this article since its initial publication. Russ Heaps contributed to the report.
