Used Car Buying Guide for Teenagers

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.

Comments

  1. In our family, the kids got the old car when my parents got a new one. Everything just got passed down the line, which at one point resulted in us driving in a ’76 Volvo in the late ’90′s, but it worked.

    The deal was also that you didn’t get a car unless you needed one for work (in NY, the junior license, at 17, only allows for driving to work and back.) And since we were working, my parents let us pay for all car related expenses except insurance. On the other hand, they matched any money we put away for college from our jobs, so all our money wasn’t being sucked into the car.

    I suggest reminding kids that having a car does not mean they are their friends’ chauffeur. Not only are other teens in the car a distraction, but it gets expensive driving everyone around. At the very least, they should ask anyone who’s a regular passenger for gas money. (We had a empty tissue box in the center of the car. If you wanted a ride, you threw some change in the box.)

  2. Very practical advice not only on buying used cars but also on parenting too.

    With the sky high gas prices now, a car is the last thing on our mind, some people just chug it in the garage and take public transport.

    I discourage my kids to buy a car, if they want to do so, they pay for the necessary evil themselves.

    Jeff
    http://jeflin.net

  3. I’m going to go way against the grain on this one and say that when my kids are old enough to drive I am not going to even think about buying them a car until they ask. When they ask I think I’ll go through some hemming and hawing for effect (ha!) and maybe (if they have a job) I’ll pledge around 5 grand to the cause. Only if they have good reason to need a car though! After pledging the money they are on their own in terms of finding the car and haggling for it.

    My big brother helped me buy my first car. It was $2,300 and I still don’t know how my mom came up with the money as we were quite poor. My big bro also helped me go register it and get the plates. You learn a lot about taking your own initiative and feel a good sense of accomplishment when you don’t have a parent breathing down your neck. I paid for all my own gas and certainly didn’t ask friends to pay up. After all, they had all given me rides on many an occasion in the past.

  4. Along the lines of money for maintenance and repairs…this would be an excellent teaching opportunity for reasons to institute an emergency fund. We are far from getting a vehicle for our child, but I think it would be wise for parents to require the child to keep a chunk of their saved money for these purposes rather than spend every dollar on the car purchase.

  5. Actually, children CAN work at any age. In fact, this fact is an AWESOME tax benefit for those who claim their children as employees for their small business. Since their income up to a certain dollar amount is not taxable, and since you don’t have to pay FICA, Medicare, FUTA and SUTA taxes, it is very advantageous since it removes that tax burden from you as a parent.
    The employment needs to be “reasonable” wage (you can’t pay them $200/hr for mopping), and of course will be questionable if the child is very young – unless you run a modeling company or something like that.
    However, employing a child is a wonderful way to save money in addition to giving them the opportunity to earn that money. Employing your spouse isn’t advantageous, since you have to withhold FICA and Medicare.

  6. Great advice! I think it is vitally important that we teach our children early the principals of sound financial management. It’s crazy how so many teenagers are driving cars better than I ever owned and it seems that most of them aren’t even working to help pay for it!

    Thanks for the great article and for linking to me!

  7. I would love to give my future kids a new car. You are right though, they need some sort of financial bond with the car that way they care more. If you have the money its tough to know if you should spoil them or make them work for it.

  8. I’ve long said to my kids that I will match whatever they have, but THEY pay all expenses thereafter. There’s where my wife and I disagree. She thinks we should pay for the insurance, maintenance, and repairs, to which I reply, “I paid my own way from the time I was 16!”

    We have 17 months to get this glitch worked out!

  9. This was a great article. Our oldest son is sixteen now, driving on temps until we see straight C’s on a report card, though we’ll take higher, if forced too. (As a side note, there’s nothing like operating large machines to motivate homework completion in boys. The temps and instruction were our way of pointing out we’re doing our part on this driving thing.)

    I did investigate insurance costs, and since our premiums will go up by 50 a month, I said that’s what you’ll be paying. What? I’m paying that?
    Um, was I supposed to work more to pay it for you?

    Well that really didn’t seem fair to him either. He did comment about how this growing up thing was getting kind of expensive. So now he does have to get out and get a job–which I don’t think he’d do if it weren’t for that insurance bill. And now he’ll need to budget that money, and realizing that life as he knows it is soon over. All part of the plan to get him out of the house in two years–and not falling on his face six months after.

    We do have a car for him, only because my husband has always operated on a policy of one extra vehicle in the driveway. He works a lot of hours and the cars are at least 12 years old; if one breaks down he wants the freedom to repair it himself at his leisure. I don’t know if this is cost effective or not, and for our marriage it’s better not to know. It does mean we have a car available to lend to people in need, and we will have three cars with three drivers soon. And when oldest moves out, he’ll need to leave with his own vehicle, not one of ours. (We’ll have another kid driving by then.)

    I do think providing too much too early is more detrimental to any kid’s character than providing too little. Love and affirmation is free flowing around here; money is not. He’ll have to work twice the hours I would to pay his expenses, but this is parenting, teaching life as it is, not as we wish it were.

  10. When i turned 16, my grandfather, an auto mechanic, told me to save up as much $ as i could and then he would find me a good, reliable car. That first car was a Ford maverick. I forget how much it cost, but i suspect my grandparents pitched in a few extra bucks.

    I want to emphasize to parents that their kids get a USED car, as you said, not new, or anything near new.For years i read in the police blotter of my weekly hometown newspaper of all the accidents and fender benders, a disproportionate number of which involved drivers under the age of 21.

  11. Starting your kid out in a car – new or not – is an excellent opportunity to equip them to avoid some notions that will be pitfalls for years to come if they get caught up in them:

    First, there’s the insane notion that bigger & faster is better. For more than 50 years, American car buyers have been suckered & steered into a fascination with useless & inapplicable performance – most often, horsepower – and it’s time for the deception to end. A car’s “0 to 60″ time is not only meaningless, but can encourage reckelessness.

    Then there’s the silly perception that a smaller car can’t be roomy enough. That’s simply not true. Small cars can be – and often are – deceptively spacious & comfortable even for larger-sized folks.

    And too, many people still buy into the elitist notion that a small car is a cheap car for people who can’t afford something big & luxurious. Let’s see if you can still muster a disparaging glance at me when you’re spending $75-90 to fill up the gas tank on your luxury SUV.

    Finally, there’s a nasty misperception that bigger vehicles (like SUVs) offer increased safety, but that’s also just not true. In fact, the engineering that goes into keeping a small car safe is far more impressive than the sloppy “we’ve got plenty of sheet metal to protect us” design that pervades most SUVs & trucks.

    Even if they were anywhere near as safe as people seem to think (bigger = safer, right?) the “I can plow over anything in this tank” attitudes & driving habits of SUV-owners even further dimish their overall roadway safety.

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