Nothing says freedom to the American teenager like getting a car of their own. Most parents would love to give their kids a new car when they turn sixteen, or when the graduate high school, but few can afford it.
Still, some out there hock their own financial futures to put their prince or princess in a brand new car, and pay for it long into their college years. Not only is this harmful to the parents’ financial plan, it sends a bad message to teenagers. They have nothing invested in the car, and are more likely to drive recklessly or be irresponsible with the maintenance, cleaning, etc.
Create a matching savings plan. To help Jr. raise money for a new car set up a plan to match any savings amount they contribute, dollar for dollar. If your kids are as enterprising as mine you may want to put a limit on this, else they could save $20,000 of their own money and expect a new Hummer when they turn 16! Agree to match the first $5,000 they earn and contribute to a dedicated “car fund” subaccount at ING Direct. Since they are not old enough to legally work until they reach 16, this will encourage them to get creative and find unique ways to earn money. Foster that entrepreneurial spirit by pointing out yards that need to be mowed, babies in need of sitting, and when Mom’s car needs a good washing.
Pretty soon your fifteen year-old could have one or two thousand dollars saved up towards a used car purchase.
Set spending limits. Fortunately, I’ve got a few years to plan the purchase of a good used car for teenagers. However, if I was in the market today I would probably use Edmunds.com to find a $5,000-$7,000 used Honda with a good maintenance record. I would not be overly concerned with how the exterior looked, unless there was significant body damage. I personally believe small dings and scratches give a car (and their driver) character.
Drive safely. Check Consumer Reports for safety ratings on used cars, and be sure to run a CarFax vehicle report to rule out any past accidents or significant claims related to body damage. It is also a good idea to have a mechanic look over a potential buy to advise if any repairs are needed and provide a rough estimate of the cost. This will give you some leverage in the price negotiation with the seller. Avoid small SUVs because of their propensity to rollover. Inexperienced drivers are more likely to over-correct steering and cause small, top-heavy SUVs to flip. Used, mid-size cars such as the Honda Civic and many older Saturn models make great buys for teenagers. They are generally safer, and more reliable than their sporty equivalents.
Sharing the operating expenses. Cars come with a lot of expenses. Gas, car insurance, maintenance, repairs, new tires, etc. can really add up. Come up with a realistic way for your kids to share in the expenses and encourage them to drive frugally. If parents agree to help with auto insurance costs, and any repairs, kids should pay for gasoline and oil changes. If your teenager doesn’t work, you will wind up paying for these anyway, but do so in a way that sets a budgeted amount for each category. If you give a teenager $50 a month for gas they better not “cruise” around after school burning up fuel or they will be catching the bus the last week of the month. This will subtly begin to instill in them the value of budgeting.
If you want to buy a used car for your kids then a no obligation car loan quote from one38.org could be the answer.