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…
There are several options for the teenage driver when it comes to buying a car:
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.
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.
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.
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!