If you have a teenage driver in your home, you might be facing a time when they want to buy their own car. This major life stage can give teens a sense of freedom and independence, but it also brings important lessons of responsibility.
You can play a key role in helping your teen buy their first car by guiding them through the process of creating a budget, comparing prices, prioritizing safety, and more. Below, we’ll discuss the key details on how you can help your teen through this complicated process, the factors you need to consider, and the options you and your teen have when it comes to paying for the car.
Key points to remember
Creating a budget is one of the first lessons a teenager should learn before buying their first car.
Help your teen understand the costs of owning a car beyond the sale price, such as insurance, gas, maintenance and repairs.
Teach teens to research financing options before making a purchase.
Encourage your teen to compare the pros and cons of buying a used car versus a new car.
Teach your teen to budget
Buying a car is a major purchase that can involve making decisions through emotions and reasoning. Your teen might be excited about getting their own car, but they still need to think carefully about several financial aspects of the purchase.
How do you start the conversation? Start by sharing key planning and budgeting lessons , discussing the difference between buying and renting, and offering them price comparison strategies.
Planning
You can help a teenager cultivate values, habits, and principles that support their future financial well-being when you talk to them about buying their first car.
First, have conversations when you’re comfortable and feel like you could be productive. Discuss the importance of saving regularly , and how to budget their expected income with their expenses. Teach them the difference between saving for long-term goals, like retirement, and shorter-term goals, like buying a car.
Show them that by having a target savings goal and a target savings date, they can calculate how much to regularly contribute to a savings account.
Let your teen know that there are more costs associated with owning a car than the purchase price. These ongoing costs can include buying car insurance, paying for gas, repairs, maintenance, parking and car washes.
You can work with your teen to develop the skills they need to reach specific financial milestones. Explore money concepts such as how being thrifty can pay off, how they can maintain the right attitude, and how they can practice self-control while spending.Buying a car is the perfect time to illustrate how credit and leasing work.
Borrow vs. Lease
If you are considering renting or taking out a loan to purchase, teach your teen how to factor these costs into the budget. Help them understand that interest on a loan is part of the total cost of buying a car.
If your teen car will be leased , explore the overall cost of the lease and what to do when the lease expires. Factoring in these costs will bring more clarity to the approach you take when developing a budget.
Shopping Comparison
To prepare an accurate budget, teens need to understand car prices. They can start by getting quotes from several sources to help them compare the types and models of cars they are interested in. You can also use hypothetical prices, interest rates, and features to illustrate these lessons when shopping for comparison.
Buy new or used? What to consider
A car is a major purchase for everyone. Whether your teen is buying new or used , more research will help them get more value. With the right information beforehand, they will be less likely to feel pressured into making the wrong decision.
Buying a car and driving on their own is a big milestone for a teenager. Please see the tips below to help buy your teen their first car and get them driving on the road safely.
Infographic provided by Capital Auto Auction
