A major milestone for many households comes when their teenagers begin driving. Some families will make arrangements to purchase or finance their teens’ first cars.
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Amid the uncertainties of the current economic climate, however, families may be reconsidering whether they should take on this financial responsibility in 2023.
parents should consider when they decide to purchase cars for their teenagers.” class=”link rapid-noclick-resp”>Here’s what parents should consider when they decide to purchase cars for their teenagers.
Consider Purchasing a Used Car
Robert Tomkinson is the VP of marketing at CoPilot, a free app for car shopping that ranks every car from every dealer. Tomkinson said a teen’s first vehicle usually should be a carefully selected used car.
New cars tend to cost more in repairs and insurance for new drivers. The price of new cars also has increased over the last two years.
On the other hand, used car prices have fallen by 10% on average, Tomkinson said. An older model may be where the best bargains are, especially since tax refund season is beginning and putting more money into buyer’s pockets.
“We see a lot of people choosing compact SUV or crossover, like a used RAV4 or CR-V,” Tomkinson said. “These cars are safe, reliable and practical for high-schoolers and college kids. They also hold their value when it’s time to trade up.”
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Look at It as an Investment
Parents who feel hesitant about spending a significant amount of money on a car for their teen may be well advised to view this purchase as an investment.
“The time to buy a car is when you need a car,” said Scott Kunes, chief operating officer at Kunes Auto & RV Group.
Kunes points out that teenagers have many places they need to be. They need to go to school, attend extracurricular activities and work part-time jobs, all of which require timely attendance. Having another means of transportation takes the burden off the parents, especially for families carpooling multiple children.
“When we work with buyers, we encourage them to see a car purchase as an investment which includes not only the car itself, but also insurance and maintenance,” Kunes said. “The average cost of car insurance for a new driver is higher than the average car payment, so the impact is significant.”
What’s the Best Way To Pay?
There are a few options available to parents who need to pay for a teen’s car. Tomkinson recommends paying in cash for used cars, if possible.
“Interest rates have gone up eight times in a year, so car loans are far more expensive now than at any time in years,” Tomkinson said.
If paying with cash is not an option, parents may decide to take out a loan. Tomkinson said the best rates are usually available through local credit unions and recommends getting pre-approved before visiting a dealer.
“If they can beat this rate, great, but remember they will add on a mark-up to whatever the bank offers them,” Tomkinson said. “Negotiate hard or bring your own pre-approved financing.”
Consider Buying a New Car
In the past, Kunes said, he would advise parents not to buy a new car for a teen driver. However, in today’s market, it can be harder to come by a well-maintained, affordable used car. Kunes said this is because today’s drivers are holding on to their cars longer and demand is outweighing supply.
Another aspect to consider when purchasing a used car is spending more money on maintenance and repairs than new car buyers do. Expenses aside, Kunes said, used car owners may need to wait weeks to get service appointments or months for specific parts and ultimately be without their wheels for an extended time.
“One of the benefits of buying from a dealership is it’s a one-stop shop,” Kunes said. “Dealerships have a commitment to help you get the most out of your vehicle, and their service departments give priority to the people who buy from them.”
Assign Some Financial Responsibility to Teens
Purchasing a car for a teen, whether it’s new or used, is a massive investment. Parents who put the car in their teen’s name may make the insurance more expensive, but Tomkinson said this helps teens start establishing a driving history with the insurance company.
Families may make the overall car purchase, but this doesn’t mean the teen should be exempt from other car-related payments.
“Make them pay for the gas, oil changes or some fraction of the loan or the insurance,” Tomkinson said, “so they feel responsibility to take care of the car and drive more carefully and economically.”
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