Expert: Richard Hixenbaugh - 11/22/2010

Question
QUESTION: A family member has asked me to co-sign a loan of $6000 for an auto loan but I understand that besides being liable for the cost of the vehicle, I would potentially have some liability as an owner for injury caused by the vehicle.  I definitely want to help this family member and can afford to do so.  If I became the lien holder instead, would I have any risk of being sued if the vehicle was in an accident?

ANSWER: Hi Eileen,

If you are co-signing the loan there will already be a lienholder which is the finance company making the loan. They will not allow you to also be named as a lienholder. You will be listed as an owner of the vehicle, and as such may be liable.  

To protect yourself you should require relative to purchase high limits of liability insurance. It generally does not cost much more to do this. I would recommend liability limits of no less than 100/300/50.

I hope this helps
Richard Hixenbuagh

---------- FOLLOW-UP ----------

QUESTION: I am not intending to co-sign the loan because of the liability.  My question is, is that same liability there if I act as the bank (the lender) hence, the lien holder?

Answer
Hi Eileen,

Sorry for the misunderstanding.

If you loan your relative the money and have yourself listed on the title as the lienholder, then there is no liability for you. You are simply the lienholder.

I hope this helps
Richard Hixenbaugh