How to Assist Your Teenager in Purchasing a Car
When your kid obtains their driver’s license, they may choose to purchase their own vehicle. This is an excellent chance to help kids acquire good financial habits while saving for the automobile. Teach your kid how to establish a budget, go through the pros and disadvantages of new and used automobiles, and show them several methods to pay for a vehicle.
Teach Your Teen About Budgeting
Discuss auto savings and general savings objectives with your adolescent as soon as they start high school. Saving for a bigger, more costly item, such as a vehicle, may take months or even years.
If your kid has a consistent employment, assist them in creating a budget. Assist them and ensure that they deposit their profits into a federally insured bank or credit union savings account. This account may be utilized to save towards their automobile purchase or for numerous financial objectives.
If your kid does not yet have a job, talk to them about their hobbies and what work prospects could be available. Teens of all ages might earn money by delivering meals, babysitting, mowing lawns, lifeguarding, or tutoring.
Think About Buying New or Used
Teens often drive older vehicles.
Older automobiles offer a cheaper initial cost, but your adolescent may prefer to wait a bit longer and save up for a modern car. In the long term, this might save them money on insurance and upkeep. You and your adolescents may explore the benefits and drawbacks of new and used automobiles and decide together on the best kind of vehicle.
New automobiles usually have cheaper initial maintenance expenses and more modern safety and technological features.
A new automobile will almost always come with a guarantee, which should cover the cost of any car repairs or component replacements your kid may need. New automobiles are also more customizable.
The most significant disadvantage of purchasing a new automobile is that it is more costly than a used one. A new car’s value depreciates as soon as you drive it off the lot.
Used automobiles are often less costly than new cars, and a car that is a few years old might be a terrific value since you are allowing someone else to bear the initial depreciation impact. However, if the vehicle is much older, your youngster may wind up with a less dependable vehicle that requires regular repairs. They may also have to settle with an automobile that lacks the characteristics they want.
How to Get Your Teenager to Buy a Car
You may wish to explore various payment plans and ways with your kid and collaborate to choose the best solution for them.
Using Prepaid Credit
If your child is able to save enough money, they may be able to pay for their automobile in cash rather than taking out a loan or leasing a car. Every scenario is unique, but one popular guideline is to keep your teen’s first automobile under $10,000.
Your child will most likely be earning minimum pay, so saving for a safe and practical automobile may take a long time. If you can afford it, you may want to assist your adolescent pay for the automobile by matching what they save. If they’ve saved $4,000, you may give them an extra $4,000 to go toward a new automobile. This allows them to buy a fancier automobile while still learning good financial habits.
Obtaining a Loan
Banks, credit unions, internet lenders, and vehicle financing firms all provide car loans. They are only accessible to drivers above the age of 18. 3 At this age, most teens have low credit histories, but they may still search around for lenders that may be prepared to give auto loans to people with minimal or no credit. If they can’t locate loans at all or at a fair rate, they might ask you or another family member to co-sign their loan.
If your adult adolescent leases a vehicle, they will have access to the most up-to-date features, a complete warranty, and a low monthly price. However, since most leases include mileage limitations, this choice may make the most sense if they prefer to remain close to home and don’t go far.
The disadvantage of leasing is that your adolescent may have to pay a penalty if they opt to break their contract early. They may also be penalized for normal wear and tear.
Additional Costs When Purchasing a Vehicle
According to AAA, the average cost of owning and operating a new automobile in 2021 will be $9,666.
This covers depreciation, gasoline, insurance, taxes, maintenance, and loan interest, but not the cost of the vehicle itself. You’ll want to make sure your kid is aware of all the additional expenditures associated with having a vehicle so you can assist them in budgeting for continuing expenses such as:
Vehicle upkeep and repairs
Parking for Gas