There are few milestones that teenagers look forward to more than getting their driver’s license. In fact, about the only thing that could top that is for a teen to get a car to go along with that driver’s license. A car can be a significant investment, though, meaning that it’s wise to help prepare both you and your teen to take on this major change.
Encourage Your Teen To Get a Job
Whether it’s car payments, insurance premiums, maintenance, or gas money, a car can be a bit of a money pit. To help your teen take ownership in their vehicle, it’s important that your teen has a job before you help them find a car. Although you can take on some of the financial responsibility, getting your teen to invest as much as possible means that they will likely take better care of their car and be a more responsible driver.
Explain the Realities of Their First Car
Buying a brand-new car for a teen is a major money-wasting decision. In addition to the initial purchase price, the insurance premiums for a teen driving a new car will be astronomical. Therefore, before you begin the vehicle search, it’s important to let your teen understand that you will only be looking at pre-owned cars. Explain to them that there’s nothing wrong with a used car and help your teen see that it will actually help save them a lot of money.
Understand the Responsibilities of Co-Signing
Unless your teen has managed to save enough money to buy a car outright, you will likely have to co-sign with them in order to obtain the necessary loan. When you co-sign, make sure that you and your teen understand the financial implications of paying back a loan. Keep your teen on a short leash to ensure that they do their part in paying for the vehicle so that you don’t take an unexpected hit to your credit due to a late payment.
Make a Car Budget
To better grasp the realities of owning a car, it’s a wise idea to make a “car budget.” Using real-world numbers, you can create a budget listing the likely costs of owning a car in your area. By seeing the numbers presented in this way, your teen will get a better understanding of whether or not car ownership is something they need to take on right now. If they aren’t quite ready, you can discuss alternative transportation options until they’re ready to take the leap into the car ownership world.
The process of preparing to buy a car provides a great opportunity to give your teen some real-world lessons on budgeting, saving, and more. Therefore, if you have any wisdom to share based on mistakes that you made at their age, now is a great time to give it to them. By helping them avoid some of these mistakes, you will help them learn in a safe environment so that they can experience financial success in the future.
