If you have children in their teens, you understand how exhilarating and nerve-wracking it can be to purchase a first car!
While they certainly want cool wheels, it's also important to teach them about the "boring stuff" - cost, auto financing, service records, and safety ratings. Not only are you investing in quality time together, you’re allowing your teen to learn the ins-and-outs of auto financing in a risk-free environment, helping your teen understand how to avoid common car-buying pitfalls and setting up good shopping habits for the future.
Make sure you lead the car buying discussion with a few clear-cut rules. It’s important that new drivers understand early on that the rush of freedom they feel behind the wheel also comes with a lot of responsibility.
Safety is the number one concern for most parents looking to buy a car for their teenager, followed closely by cost. Fortunately, you don’t have to break the bank to find a high-quality used car that is safe and reliable. Look at the age of the car first. Typically newer model cars are more likely to include important safety features like side airbags, anti-lock brakes, and electronic stability control.
Teenagers don’t usually have the resources to afford an auto loan, let alone to carry the entire cost of car ownership. You probably don’t want your teen neglecting schoolwork or skipping out on extra-curricular activities just to make car loan payments, but that doesn’t mean that teens shouldn’t contribute at all. In fact, studies show that teenagers who are involved in the car buying process and who contribute to car costs take better care of their cars and drive more cautiously. Expecting some contribution will keep your teen safe in addition to teaching responsibility and financial management.
First, discuss the full cost of car ownership with your teen. Most young people don’t consider the added costs of insurance, taxes, maintenance, and repairs. After you lay out all the costs, decide if, when, and how your teen will be expected to pitch in. Perhaps you should have your teen set aside a certain percentage of each paycheck to save up for routine maintenance and repairs or ask your teen to cover your insurance increase. Whatever you decide, this is an excellent chance to discuss money management, engage with your teen, and work toward a mutual goal.
Co-Sign on Loan
Every money expert under the sun will tell you that you should never co-sign a loan for anyone. And that’s true in many cases. But letting your teen co-sign your car loan may be a brilliant financial move. Let’s say that you’re asking your teen to pay $100 every month toward a $350 a month auto loan payment. You’re planning to pay the majority of the car loan anyway and you can comfortably afford the car without contributions from your teen. Adding a second name to the auto loan documents helps your teenager establish credit without costing you anything.
One of the best time to learn about money management and about the benefits and responsibilities of car ownership is when you’re young and have your parents to help guide you. We love watching families grow and prosper together, and we’re pleased when we get to serve our members through multiple generations. If you’re ready to purchase a car to mark this major milestone in your teen’s life, bring your teen to your local branch, or apply today.
This material is for educational purposes only and is not intended to provide specific advice or recommendations for any individual.
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