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Difference between co-buyer and co-signer

If you’re in the market and have been turned down for an auto loan, that doesn’t mean that you’re out of options. One of the better alternatives that can give you a significantly better chance of being approved for a car loan is finding a co-buyer or a co-signer. While both of these terms sound similar, they are quite different.

What is a co-buyer?

A co-buyer is a person who is essentially a co-applicant on a car loan. A co-buyer receives all of the benefits as well as responsibilities of car ownership such as the same rights to use the vehicle. However, they’re also on the hook for payment of the loan. Co-buyers are partners in the purchase, which means that both of them must sign all the documents associated with the loan as well as the sale. These documents include the sales contract, finance agreement contract, car title, and car registration.

What is a co-signer?

A co-signer is a person who lends their good credit to the primary signer of a car loan. The co-signer guarantees the lender or creditor that they’ll pay if the borrower doesn’t. In other words, the co-signer acts as a guarantee of the debt and is legally responsible for making car payments as well as late fees or collection charges if the borrower defaults on the loan. However, a co-signer has zero ownership rights to the car. In other words, they’re taking the risk without any of the benefits.

Co-buyer vs co-signer

If you’re trying to decide whether you’re better off with a co-signer or a co-buyer, you’ll have to evaluate your plans for the car as well as the risk tolerance of the individual you ask to co-sign your application.

A co-buyer generally works better in your favour when it comes to financing because you enjoy the full benefits of the co-buyer’s income as well as good credit. The extra borrowing power you receive doesn’t come without a price which is especially relevant if the co-buyer is someone other than your spouse.

Take a look at your situation and make an informed choice as to whether a co-buyer or co-signer would be more beneficial.


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