What If… I’d like to give my child a car for highschool/college graduation?
However, when purchasing and financing a new or used car for your adult child, think twice:
If you co-sign on a loan for a car that your son or daughter will be driving, you may be held liable if an accident occurs – even if you weren’t driving, and even if the car was not listed on your insurance policy.
Why? Because liability follows the registered owner(s) of a car. If you are listed as a registered owner (which you are, if you co-sign), you can be held liable in case of an accident, and your assets are in jeopardy. And, since car loans often carry 5-6 year terms, this can mean that you are still responsible long after your child has established their own household or even gotten married.
So what to do if you’d like to assist your child by helping him or her buy a car?
From an insurance standpoint, rather than risk your assets by co-signing, the best solution would be to give financial support, but to register the car in the child’s name only.
Keep in mind: This advice only applies for young adults who are no longer your dependents. If your child is still a dependent and is continuing their education, families will often find the broadest coverage and best insurance rates by keeping registration and insurance in the parents’ names.