When you use a loan to purchase a car, you and the lender enter into a relationship in which both parties have property rights or obligations in the car. If you also have a co-signer on your loan, the cosigner takes on certain obligations as well. Always speak to an attorney in your area if you need legal advice about your rights as a cosigner or need help with any legal issue.
Car Loans and Cosigners
When you apply for a car loan, you ask your lender to give you money to buy a car. The lender wants to know if you'll be able to pay the loan back. In an effort to help assure the lender receives payment, some people use a cosigner who provides a guarantee to the loan. This means that the cosigner is also responsible paying for the loan if it goes unpaid. A cosigner doesn't necessarily have the right to use or possess the car, but is responsible for paying the loan.
When a lender gives you a car loan, the lender typically takes a security interest in the car. A security interest is a specific kind of property right that gives the lender security in case the borrower doesn't pay back the loan. The security in a car loan is the car, and a lender has the right to repossess that car if the lender, and any cosigner, fail to make timely loan payments.
When you buy a car and become the legal owner, you have to indicate your ownership interest by titling the car in your name. Each buyer is responsible for acquiring legal title to their automobile, and lenders are responsible for indicating their security interest on the title to perfect their property interest. If you have a cosigner, that cosigner does not have an ownership interest in the car unless her name is included in the title.
Only a secured creditor can repossess a car only after a borrower fails to meet the conditions of the loan. Because a secured creditor has a security interest in the vehicle, it does not need to sue you or get a court's permission to take possession of the car. If a cosigner wants to take possession of the car, he can only do so if he legally owns the car or has your permission.