Can a Minor Cosign a Car Loan? What You Need to Know

Many young people and their families wonder if a minor can cosign a car loan, especially as they seek independence and personal transportation. Acquiring a vehicle often involves significant financial commitments through loan agreements. Understanding the legal framework for minors and contracts is important.

Understanding Minor’s Legal Capacity

In the United States, contractual capacity, the legal ability to enter binding agreements, is generally tied to reaching the “age of majority.” While this age is predominantly 18 in most states, some jurisdictions set it at 19 or even 21. This standard protects individuals who may lack the maturity or experience to fully comprehend contract implications.

Contracts entered into by a minor are typically considered “voidable.” This means the minor has the option to cancel or “disaffirm” the contract, even after signing it, usually upon reaching the age of majority or within a reasonable time thereafter. This principle shields minors from potential exploitation due to presumed lack of judgment. If a minor disaffirms a contract, they must return any goods or property received.

There are exceptions to this rule, particularly for contracts involving “necessities.” These are items essential for a minor’s well-being, such as food, clothing, shelter, medical care, and education. While a car might seem necessary, courts generally do not categorize a car loan as a necessity, making it voidable. Another exception is if a minor is legally “emancipated” by a court order; an emancipated minor is granted the same contractual rights and responsibilities as an adult.

Consequences for Loan Agreements

The voidability of minor contracts significantly impacts car loan agreements. Because a minor can disaffirm a contract, most lenders are unwilling to offer car loans directly to individuals under the age of majority. The risk is that the minor could cancel the agreement, leaving the loan unenforceable.

When an adult cosigns a car loan for a minor, the adult becomes equally responsible for the entire debt. If the minor, as the primary borrower, disaffirms the loan, the adult cosigner becomes solely liable for the full outstanding balance. The adult cosigner must make all future payments, including any late fees or collection costs.

The adult cosigner’s financial standing and credit history are directly impacted by the loan. Missed or late payments by the primary borrower can negatively affect the cosigner’s credit score. Lenders often require a cosigner to have a strong credit history and verifiable income to mitigate the increased risk associated with a minor.

Alternative Solutions for Minors

Given the complexities and risks of minors cosigning car loans, several alternatives exist for a young person to acquire a vehicle. A common solution involves an adult, such as a parent or guardian, purchasing and financing the car solely in their own name. This bypasses the minor’s contractual capacity issue, as the loan agreement is strictly between the adult and the lender.

Once the car is acquired, the minor can often be added to the adult’s car insurance policy as a driver, assuming they hold a valid driver’s license. The adult retains legal ownership and responsibility for the vehicle and the loan payments. This method provides the minor with transportation access while protecting all parties from the legal pitfalls of a minor entering a loan contract.

Another option is for the minor to purchase a vehicle outright with cash, using personal savings or earnings. While this eliminates the need for a loan, minors may still face challenges with titling and registering the vehicle in their own name in some states, often requiring an adult’s assistance or cosignature. An adult might also need to be involved in securing an insurance policy, as minors typically cannot obtain one independently.