Can a car dealer ask for a co-signer after the lease contract has already been signed?

UPDATED: Jul 12, 2023Fact Checked

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Jeffrey Johnson

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 12, 2023

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UPDATED: Jul 12, 2023Fact Checked

If credit worthiness has failed, for whatever reason, then a car dealer may ask for a co-signer and renegotiate the contract. This is because if the person who leased the car failed a a credit check or didn’t pass minumum requirements on their credit report, then there is likely no consideration for the contract and the contract fails. If the dealership cannot obtain an approval from its “backer” for the loan due to your failure in credit, then the contract must be re-negotiated as far as credit is concerned and who will back you in the event of default.

Credit worthiness is a creditor’s means of measuring a person’s fitness for repaying debt obligations. Basically, it is a number, called a “credit score,” that will tell someone who is considering loaning you an asset whether or not you will be likely to pay back the debt. In the case of a car lease, the dealership is responsible for verifying your credit worthiness with its financial backer. If your credit score or credit report are too low, then the backer will not consider you credit worthy and will reject the application. Sometimes the process of verifying credit worthiness takes longer than the time you are willing to wait at the dealership.

For institutions offering to loan you something, the backer is typically a bank. For example, a car dealership takes out a loan to purchase the vehicles on their lot from the manufacturer. After a sale, the dealership repays that portion of the loan to the backing bank. Because the dealership is backed by a bank, the bank has discretion to approve any loans car leases since it is their loss if you fail to repay.

Case Studies: Co-signer Requests After Lease Contract Signing

Case Study 1: John’s Credit Failure

John recently leased a car from a dealership, signing the lease contract without a co-signer. However, when the dealership verified his creditworthiness with their financial backer, it was determined that John did not meet the minimum credit requirements.

As a result, the dealership requested John to find a co-signer to back the lease and renegotiate the contract terms.

Case Study 2: Mary’s Delayed Credit Verification

Mary visited a car dealership and decided to lease a vehicle. However, the process of verifying her creditworthiness took longer than anticipated.

While Mary waited for the dealership to complete the credit check, the dealership contacted her, explaining that they would need a co-signer if her creditworthiness didn’t meet the requirements. This prompted a renegotiation of the contract to include a co-signer.

Case Study 3: Michael’s Bank Approval

Michael leased a car from a dealership and completed the necessary paperwork. The dealership, backed by a bank, sent Michael’s application for approval.

Unfortunately, the bank determined that Michael’s credit score was insufficient, and they required a co-signer to guarantee the lease. The dealership approached Michael with the need for a co-signer, leading to a renegotiation of the contract terms.

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Jeffrey Johnson

Insurance Lawyer

Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Insurance Lawyer

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

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