PenPenWrites

When Bud's stepson wanted to buy a car, Bud thought back to his own youth–a time when he was irresponsible and somewhat reckless. The son, in his 20s, needed a car to commute to a job. But he had no credit rating and couldn't get a car loan on his own.

Bud was willing to help–even though he saw a few signs of the irresponsible and reckless in the young man. So here's the deal he and the young man's mom came up with: They would help him–but not by co-signing a loan. They feared that if the son missed a payment it would reflect poorly on their credit record. Instead, they would take out a loan for the car in their own name and the son would make monthly payments directly to them–but with this string attached: If a payment was missed, the parents [owners of the car] would put it up for sale. "I wanted to make sure he shapes up," says Bud. "I don't want him squandering his money on beer and other things. I want to make sure he takes responsibility for the car."

How did it work out? Stay tuned. They just bought the car.

For more information on the perils and pitfalls of co-signing for a a car loan, here's an article on teaching adult children financial responsibilities that deals with the co-signing issue. Bottom line: If you co-signed
on the loan, you must make the payments if your child doesn't or suffer
the consequences.  The bank lent the money on the strength of your
signature and ability to pay.

The article offers some tips on other ways to deal with the car issue:

• Lend him a second family car.
• Buy him a clunker. It can be a gift or he can pay you back.
• If you feel
  you must buy him a new car, keep it in your name.
  At least that way, if your kid quits making payments, you have the vehicle. By
  co-signing, you get all the responsibilities and none of the benefits.

Sounds like Bud is on the right track.