One of the things on my mind lately? Buying a car for Eva. Or Eva buying a car for Eva. Or not buying a car for Eva. There are so many things to consider and the more I think about it the more I feel like taking a nap and drinking a margarita. But not in that order…
This the car that Eva wants…ahem.
There are several options for the teenage driver when it comes to buying a car:
Financing
This option is probably not going to work for the average teen. Most companies are not going to extend credit to a teenager. Period. Unless the parent co-signs the loan. If you sign on the loan with your child you must understand that you are legally responsible to pay the payments if they do not. A general guideline is for the teen to be able to put down at least 20% and finance for only 36 months. My personal guideline? No financing. I cannot afford a car payment and I don’t want Eva locked into working 30 hours a week in order to make a payment on a car she can’t really afford.
Beware the used car salesman – and his financing ‘deals’…
Teen Savings
The teenager is responsible for purchasing their own car. This means that they need to start saving their money now. Right now. They will probably have to buy a used car and it might not be the sportiest car on the block. So be it.
Buy the Car For Them
As a parent you may choose to purchase the car for your teenager. Many of us are not in the position financially to be able to do this. My parents bought a car for me when I was a teen and paid for the insurance as well. I think that they even gave me money every week for gas. It was a ’65 Mustang. V8. Cherry Red. Original everything. Ahhhh. Those were the days. I won’t be able to do this for Eva, but I would definitely consider it if it were within my means.
Combine Forces
This is a great opportunity for teens and parents to work together to get a car. The teen saves their money and the parent supplements or matches what their child has saved. I love this plan. It allows the teen the satisfaction of having worked for the car themselves and encourages them to save as much as possible because they know that their parent is going to help them. This is also a great way to make sure that they have a safe and reliable vehicle because their budget is a little bit larger.
Just Say No
Many families choose not to purchase a car for a teen at all and/or delay the process of getting their drivers license. They simply ‘make do’ with the family car. With the rising costs of college this is understandable and a wise decision for many teens. They can share the family car, use public transit, or pay a friend for needed rides. It may not be easy but it is possible.
Dave Ramsey outlines how he handled this issue with his teens in an article HERE. I found it very helpful.
Other considerations:
How will you educate yourself and your teen on how to shop smart when looking for a car?
How much will insurance be each month?
What are the average maintenance costs? Oil changes? Tires?
Are they prepared with an emergency fund is something big goes wrong?
What type of work schedule will be required of your teen in order for them to cover these costs? How will it affect your financial picture if you try to cover everything?
These are issues that we will take a closer look at in the coming weeks!
Europe is so different in that matter, I didn’t have a car until I was 28! And I then bought it cash with my own money, we rarely do credit except for a mortgage. I know the US are different because public transportation is lacking, but I don’t think I would buy my kid a car. Let them borrow mine and be responsible for gas money and repairs until they can afford theirs, maybe. My few friends who did have car (and generally a loan) when we were 18 are much behind in term of growing wealth, the car payments set them back quite a lot.
Wow Pauline, most American teenagers would have a stroke if they didn’t get a car until 28. However, you have made a great point about the cost of a car greatly affecting your ability to save and build wealth. Something that we should consider much more, particularly as so many are going into great debt before they ever graduate from college. Thanks for the comment!
I like the combine forces option if the teen cannot pay for the car on their own. I think it gives more of a sense of appreciation. It also seems to me that this logic could apply to college as well!
I agree Greg. Working together is my favorite option and that is our plan. Thanks for commenting!
My father wouldn’t have dreamed of buying me a car! Though we did inherit his ‘run to the station’ mum-mobile which turned into the granny-mobile (the car granny could no longer use). Though neither we purchased (the three children) but we pay all the expenses. At 28, I’ve not yet bought a car. My 26 yo bro did a year or two ago, and I’m not sure he’s thinks it’s been the best $$ but he couldn’t get to his work without it (he could get to work without a car, he chooses work without consideration of the transport as he HAS a car).
If I were a parent, my child could save for a car, borrow mine, and I’d like to live somewhere where pub transport is a good option for my teen.
I don’t think that my mom would let me use the bus because it isn’t safe where we live. However, we may end up sharing a car until I absolutely have to have my own.