Is Cosigning a Car Lease a Good Idea?
Cosigning a car lease can seem like a good idea, but this guide provides you with all you need to know about how it works and how it could affect your credit.
Written by Sarah Gray
Reviewed by Jessica Barrett
Getting approved for a car lease can be difficult if you have bad credit. That’s why some lessees choose to include a cosigner on their lease to improve their odds of approval. But cosigning a car lease is a much bigger deal than many people realize.
That's why
car insurance
comparison and broker app Jerry
has put together this guide to tell you everything you need to know before you cosign a lease. In this guide, we’ll fill you in on the decision-making process, how cosigning a car lease affects your credit, and what happens if the person you signed with stops making their payments.
Find out if you can reduce your monthly car payments in minutes
* checking your rate won’t affect your credit score
Check your rate
* checking your rate won’t affect your credit score
What does it mean to cosign for a car lease?
It’s often more difficult to get approved for a lease than for financing. If someone you know or love can’t get approved for a lease on their own, they may ask you to cosign with them.
When you cosign, your name goes on the lease documents along with your friend’s or loved one’s, and that means not only that your credit is used to approve the lease but also that you will be responsible for making the lease payments if your friend or loved one defaults.
Is cosigning a lease different from cosigning a loan?
The processes of cosigning a car lease and cosigning a car loan are actually quite similar. In both cases, the payments and balance are reported on your credit, and you’re responsible for taking over the payments if the person you cosigned for defaults.
How does cosigning a car lease affect my credit?
When you cosign a lease, the lease and payments appear on your credit report. It can affect your credit score positively if your friend or loved one makes all their payments on time, but it can also affect your credit score and your potential to be approved for other loans or lines of credit negatively.
Your credit could be affected negatively simply due to the added debt associated with your history. If you apply for another loan or line of credit, this lease will affect your debt-to-income (DTI) ratio, which is a key factor in most loan and credit approval processes.
But it will also be negatively affected if the person you cosigned for stops making their payments. All those missed payments will be recorded as a part of your credit history.
What should I know before I cosign a lease?
We know it’s tempting to want to feel helpful, but the risks of cosigning a lease are numerous, so consider these things before you sign on the dotted line:
- Can you afford the payments? Sure, you’re not technically taking on any payments when you cosign a lease, but you may have to in the future. If you can’t afford the payment in the event that the person you’re cosigning for stops paying, you shouldn’t cosign the lease.
- Are you willing to check up on the lease payments? Since you’ll be on the hook if your friend or loved one stops making payments, you need to feel comfortable checking in with them from time to time to ensure that those payments are being made. A call from a collections agent and a massive ding to your credit score are not the way you want to find out they haven’t been paying.
- Can your relationship handle the stress? Finances are one of those touchy topics, so make sure they’re something you’re comfortable discussing with the person you’re cosigning with—and that’s assuming all the payments are made.
Key Takeaway Think twice about cosigning a car lease if you are tight on cash or if you aren’t particularly close with the primary applicant.
How to find affordable car insurance for your car
Being a cosigner for a car lease can turn into a big financial responsibility if the lessee stops making the payments. Give yourself some financial wiggle room by saving money on
car insurance
with the Jerry
app!Just download Jerry's
trustworthy super app
and answer a few questions. Within minutes, you’ll be presented with quotes customized just for you based on a comprehensive cross-analysis of coverage from over 50 of the nation’s top providers. Select the quote that works best for you, and Jerry will handle setting up your policy and even help you cancel your old one.
The best part? The average Jerry customer saves over $800 a year on insurance!
“I’m young and just got my first car, so choosing an insurance company for the first time was scary. My friend recommended this app to me andJerrymade everything simple! I put in my info and got something more affordable than what I expected for my age!” —Leslie T.
6 Ways to Cope with Income Loss due to Coronavirus
The Coronavirus pandemic has led to income losses for many, but there are 6 ways that help you cope
7 A.I. Companies That Can Save You $7,000 a Year for Free
Emerging A.I. technology is powering a revolution that allows people to save like never before.
Geico Policyholders Use This App to Save $853
Can a crusading app based on artificial intelligence stop insurance companies from Rickrolling? The answer: Yes.
Can cosigning a car lease affect my credit score?
Yes. The lease will show on your credit report, and any missed payments will be reflected on your report as well. That said, if the person you cosign for keeps up with payments, that good-payment history will reflect in your credit score as well.
What happens if the person I cosign a lease for stops making payments?
If the person you cosigned for stops making payments, you’ll be responsible for picking them up.
Reduce your monthly car payments in minutes?
Find out if Jerry can reduce your payments by an average of $150/month
4.7
