Deciding whether or not to purchase a car for your teenager can be daunting; there’s a lot to consider. On the one hand, giving your child the gift of their first car is an opportunity to provide a newfound sense of independence while instilling responsibility and creating more freedom and flexibility for your family. However, safety is always a concern, and the financial implications can be reasons for pause.
Before committing, it is important to weigh all the factors involved. By weighing the pros and cons and carefully evaluating your financial situation, you can make an informed decision that's best for your family.
Should You Buy Your Teen a Car?
Whether you had a car as a teenager or wished for one, you can probably relate to your teenager’s enthusiasm for having their own transportation. And as most high schoolers are happy to remind you, buying teens a car comes with many benefits.
For parents, it frees up the time you normally spend chauffeuring them to and from school, work, practice, and social engagements. For teens, it can give them a sense of independence and responsibility. Owning a car means maintaining it, filling it with gas, keeping it clean, and practicing essential life skills like learning to manage their time and finances.
Of course, there are also some drawbacks to buying your teen a car. One of the biggest is the financial burden it can place on you as a parent. Cars are expensive to buy and maintain, and you'll need to factor in the cost of insurance, gas, and repairs. More driving means exposing your teen to a greater risk of having an accident or getting tickets, which can cause anxiety, drive up insurance rates, and strain your finances.
Other factors to question include societal and peer pressure. Many teenagers feel that owning a car is a rite of passage, and not having one can make them feel left out. You’ll need to question whether you're buying the car to appease societal pressure or because it's truly the best decision for your teen.
Setting a Budget
Setting a budget can be challenging, especially in an uncertain economy, as the cost of cars and maintenance has increased exponentially. Gone are the days when a few thousand dollars would suffice. The key is to strike a balance between affordability and reliability to ensure your teen has a safe and dependable vehicle without breaking the bank.
Remember that a car is not an investment, and it will depreciate significantly in value over time. You’ll need to think carefully about the cost of the car, fuel, maintenance, and repairs, and set a realistic budget that accounts for all the associated expenses. Beyond the sticker price, leave room for insurance premiums, taxes, dealer and registration fees, maintenance costs, highway tolls, and parking expenses — to name a few. Insurance costs can vary for different types of cars, especially for younger drivers, so be sure to shop around for quotes and add your teen to your family policy to save money.
Can you afford to buy a car outright, or will you need to finance it? Remember that financing a car comes with added interest and fees, so don’t forget to include that in your budget. It's important to consider your financial situation and avoid splurging to keep up with the Joneses or give them what you couldn’t have at their age.
The Responsibilities of Car Ownership
Before purchasing a vehicle, don’t skip the conversations about the responsibilities associated with car ownership. Who will pay for gas, insurance, and maintenance? What happens if your teen gets a ticket or has an accident? What will be the curfew when driving? These are all crucial questions to cover with your teen.
Remember, you know a car isn’t a toy or a free ride, but even the most responsible teens haven’t fully matured yet. Ensure they understand that safe driving means operating free from distractions and that small mistakes can lead to big consequences. Let them know that breaking the rules means handing over their keys. It’s not just a disciplinary issue; too much leniency can lead to fatal mistakes.
You should also discuss what will happen to the car once your teen is out of the house and no longer dependent. Will they get to keep the car, take over the remaining payments, or get their own insurance policy? Many parents assume the teen will be able to take over when they get their first job, but the cost of living is on the rise for young people. Setting clear expectations in advance will avoid confusion down the road.
Buying the Best Car for Your Teenager
When researching the best cars for teenagers, there are many factors to keep in mind. Reading reviews from reputable sources such as Consumer Reports and Car and Driver can help determine the best cars for teenagers. Involve your teen in the decision-making process and think through their needs and preferences.
Safety should be the top priority, as new drivers are more likely to be involved in accidents. Look for vehicles with high safety ratings and features such as airbags, anti-lock brakes, electronic stability control, adaptive headlights, and traction control. But overall affordability can’t be ignored, so look carefully at things such as fuel efficiency and maintenance costs.
Ultimately, buying a car for your teenager can be a win-win, but it is a big decision. You need to consider the financial implications and make a responsible choice for everyone involved. By doing your research and making an informed decision, you can give your teen the independence they want while helping them learn life skills, and the whole family can enjoy the benefits of having another car owner in the household.
Russell D. Rivera, CFA, CFP® is the Founder and President of Voice Wealth Management (Voice) in New York, NY. He also likes to think of himself as a Personal CFO and Financial “Therapist” for entrepreneurs, young professionals, and their families. He helps clients make prudent financial decisions regarding spending, saving, investing, and planning while giving a voice to the individual client's financial priorities and experiences.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.