Thinking of buying your teenager a car? Assuming there is room in your household budget, there are a lot of benefits of your teen having wheels. It will relieve you or your spouse from the role of chauffeur. Your teen can drive younger siblings to and from everything from day care to dance lessons. And it could provide your teen transportation to a part-time or summer job.
Whatever your reasons, if you’re thinking of buying your teenager a car, you have plenty to think about. Here are some financial considerations to mull over.
Where to look. Check out the usual places like car dealerships, but don’t forget to go off the beaten path. For instance, Juda Engelmayer, an executive who works in New York City but lives in Bergen County, New Jersey, bought a car for his two daughters in an online auction in February 2013.
“When I was a teenager, my cars were always in the shop, breaking down on the highway,” Engelmayer says. “I wanted something better for my daughters.”
[Read: How to Brace for the Costs of a Teen Driver .]
He bought a fully loaded 2011 Buick Lacrosse, which would have been valued at $34,000 if it hadn’t had a rebuilt car title. Normally, a rebuilt car title is a sign that it’s been totaled. But that’s not always the case, and Engelmayer conducted copious research on sites like Carfax.com, learning the vehicle’s history. He felt perfectly comfortable with it and started his bid at $8,000, knowing he would go higher. He bought it for $17,000.
Work those connections. Tell your friends on Facebook that you’re in the market for a car for your teenager and explain what you’re looking for. For instance, Frank Mantero, an executive and dad in Iselin, New Jersey, says a friend who is a finance manager at a dealership alerted him to a 2003 Volvo S60 with 50,000 miles on it.
“Car was a great deal,” he says.
Be prepared for the gas and insurance. It isn’t just the monthly car payment that will affect your budget. Someone will have to pay for gas and insurance — and it may well be you. In 2011, Nationwide Insurance surveyed 1,483 American parents of 15- to 19-year-olds and found that moms and dads were paying almost two-thirds of the costs associated with teenage driving, which include car insurance, gas and, of course, maintenance like oil changes and new tires.
Because teenagers are new at driving, they may be a little rougher with the car than you’d like. In fact, 18 months later, Engelmayer says he’s already had to replace all four tires on his daughters’ car.
Nationwide’s survey also found that households with teen drivers spend an annual average of almost $3,100 more than they would if just the parents drove.
Mantero agrees that it is expensive. “What was shocking was insurance — it’s double the monthly car payment,” he says. “Almost thought twice about getting the car, but we bit the bullet.”
He adds that when his daughter turned 18 and he renewed the insurance, the premium went down about 20 percent.
[Read: Do You Have the Right Car Insurance? ]
Mara Conklin, who works in Atlanta and lives in nearby Roswell, says she and her husband, Rex, made a deal with their 19-year-old daughter, Meg, that she will pay for her gas and any parking tickets.
“If she gets in an accident, she won’t have a car anymore,” Conklin says, “so she is motivated to keep up her good driving habits. We cover insurance since she’s still on a college student budget.”
Make the car a lesson in finances. That’s the approach Conklin and her husband took when they went to CarMax. “[Meg] had her heart set on a small SUV and has always loved Jeeps. We let her drive a Jeep, along with several other cars, and then discussed the pros and cons of each,” Conklin says. Eventually, the family decided on a used 2013 Volkswagen Jetta.
“She saw that she was getting more car for the money and would pay less in gas,” Conklin says.
Something similar happened with Sue Yannello of Raleigh-Durham, North Carolina. She bought her son, Hunter-John Hurst, who turns 17 in October, a 2006 Honda Civic with 100,000 miles on Craigslist.
“We’ve had the car a year, and so far, so good,” Yannello says.
She adds that buying a car for Hunter-John has made him more financially responsible. “Our deal was that he would work for gas money, and the car has been a great impetus for him to become entrepreneurial and make money,” Yannello says. “He started a car-washing business in the neighborhood, got a part-time job at a local golf course, picks up kids to drive to school for a small stipend and does a ton of chores at home — all to earn money to fill his gas tank. So at first, while I thought I was spoiling him with a car, I now feel like it’s forced him to become more independent.”
[See: 10 Unexpected Costs of Driving .]
There have been other benefits as well. Her son visits the cheapest gas stations, and because he also pays for his own haircuts, he recently informed his mother that he’ll be looking for a less-expensive place to go.
“So he’s becoming a wiser consumer as well,” she adds.
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The Financial Considerations of Buying Your Teenager a Car originally appeared on usnews.com
