Buying your teenager’s first car? We’ve obtained advice from budgeting to financing.
So, the time has come in your teen to get their first automobile. It’s a big milestone in any family.
Driving introduces a new degree of freedom — and accountability. While your baby is probably going excited (and perhaps somewhat nervous) to get their first set of wheels out on the road, they probably want some assist with the car buying process. On top of that, you in all probability have your own issues about what mannequin they want to drive and how much it should price.
Don’t fear, we’ve outlined a five-step course of for how to purchase your teenager’s first car and every thing to contemplate along the method in which.
📌Takeaways: * The car-buying process begins with monetary planning. Create a budget together with your teen and ensure they stick with it.
* Not all automobiles maintain their worth. Don’t forget about depreciation charges whenever you evaluate new autos.
* Just as you’d store around for potential vehicles, compare lenders to make certain you get one of the best charges.
* That sticker value has wiggle room. Buying a car is a superb time to show your child tips on how to haggle.
Step 1: Budgeting for Your Teen’s First Car
Buying your teen’s first automotive is a prime opportunity to show them in regards to the significance of non-public finance, particularly budgeting. It’s a vital life duty that often will get missed during our younger years.
Your teen’s automotive price range depends on several factors. For starters, who’s paying for the automobile — and how?
Chances are your teenager’s schedule is tied up with high school and extracurriculars, however they could have a part-time job. If so, you could assist them define a plan to save cash for a car by setting apart some or all of their paychecks.
Depending on the timeline and your desire to help with financing, this could either be the total amount or a downpayment. It’s also not uncommon for fogeys to match no matter their child saves.
If you don’t anticipate your teen to contribute, then you’ll should decide how much you’re prepared to spend. You may even resolve to offer them your personal car and buy a model new one for yourself.
There’s no hard-set rule for the way much you and your teen should spend on their first automobile. Still, you don’t want to go overboard on worth, however you also don’t want to sacrifice safety in the name of a “good deal.” It’s a delicate stability.
The biggest issue is whether you purchase new or used. To offer you an concept of pricing, the common new automotive bought for nearly $45,000 in May 2022.
Just as a end result of it’s their first automotive doesn’t imply it needs to be their most costly one, which is why many mother and father opt for used automobiles. Based on that approach, anywhere from $5,000 to $20,000 is usually recommended. For instance, Kelley Blue Book compiled a list of best vehicles for teens beneath $20,000.
However, if you and your teen are set on buying brand new, Consumer Reports’ listing of Best New Cars For Teens ranges between $20,000 and $40,000.
If you and your teen have already saved for this financial milestone, you might have enough money put aside for an all-cash purchase. This lets you sidestep a automobile mortgage and the added cost of interest.
Of course, everyone’s monetary state of affairs is completely different. It’s okay when you and your teen need to use for a loan. This method has its perks too. Most teens don’t have a credit score historical past. You may want to help them construct their credit score rating (and take advantage of low interest rates) by taking the normal auto loan route.
That mentioned, until your child is 18, they can’t take out a mortgage by themself. Even if they are of age, they may not have a adequate credit score but (if they’ve one at all). In either case, you might have to cosign your child’s auto loan.
Lastly, consider getting preapproved for a loan primarily based on your finances. Banks and credit score unions usually offer more competitive charges than dealership financing applications.
Other prices to consider
Cars are big purchases, however the financial hit doesn’t stop whenever you drive off the lot. So, it’s essential to teach your youngster about the ongoing costs of auto ownership — corresponding to automobile insurance coverage, taxes (can’t neglect about Uncle Sam), upkeep costs, and potential repairs within the event of an accident or mishap. That doesn’t even include variable prices like gas (or electricity) and parking.
Keep in thoughts that teens are already susceptible to larger insurance coverage premiums. When they’re behind the wheel of a sporty model with high horsepower, insurance coverage rates have a tendency to increase.
Step 2: Listing Your Needs and Preferences
Not all makes and models can be perfect for a teen’s first automotive. That doesn’t imply they can’t have any say within the selection, but sure features ought to take precedence.
So, together with your price range in place, you and your teen can create a listing of wants and preferences, which is able to help guide you through the car selection process. Here are a number of things to suppose about for your teen’s first automobile.
Safety is paramount in phrases of buying a automotive, especially for brand spanking new drivers. As you’d anticipate, year-old drivers have the very best accident rates of any age demographic, based on the Insurance Institute for Highway Safety (IIHS).
We don’t imply to scare you, but that’s why it’s important to find a vehicle with excessive safety ratings and loads of safety options, such as anti-lock brakes and backup cameras.
Consider how your teen will use their new car. Do they have a job that would require extra storage space? Will they assist transport youthful siblings to and from school?
Although fun to drive, two-door mustangs aren’t precisely accommodating for multi-person travel. (Speaking from experience.)
And don’t neglect about fuel financial system — or battery range if you’re thinking of an electric vehicle.
While your teen’s first experience will always hold sentimental worth, that doesn’t mean it’ll hold its dollar value. There’s a reason older cars are usually worth much less — most automobiles depreciate. The uncommon exceptions are classic automobiles and low-supply sports automobiles. But sure makes and fashions depreciate quicker than others.
For instance, Jeeps tend to carry their value properly. According to an iSeeCars research, the Jeep Wrangler (9.2%) and Jeep Wrangler Unlimited (10.5%) had the bottom average five-year depreciation rate of all small and midsize SUVs, respectively.
Luxury and electrical cars, however, don’t hold their worth almost as nicely. For instance, BMW accounted for 4 of the 10 highest-depreciating cars.
If you and your teen want to maximize resale value, contemplate car makes and models that are likely to depreciate slowly.
Step 3: Shop Around for the Right Car
We’ve lastly made it to the fun part. You’ve created a priority record of features and, hopefully, decided the kind of automotive you need to pursue inside your finances (e.g., a used four-door sedan under $15,000). Now, it’s time to buy round for the best automotive.
Best automobiles for teen drivers
There are plenty of applicable autos for you and your teen to browse. To guide you in the best course, you probably can lean on curated lists of low-cost, high-quality automobiles that emphasize safety and practicality. In addition to the ones we’ve already talked about, the IIHS and Consumer Reports also compiled a listing of safe and inexpensive vehicles for first-time drivers.
Play the field
Depending on the place you live, you might only have so many automobile dealerships in your space (and, subsequently, options). That could be a limiting issue, however, you can even discover online platforms like Carvana and CarMax, in addition to private sellers.
You can use sites like Kelley Blue Book and Edmunds to gauge market values too. While you aren’t guaranteed to search out a precise match at the listed price, it provides you an excellent reference point. Plus, it’ll come in useful throughout negotiations.
Step four: Don’t Forget To Inspect and Test Drive
You don’t need to make the error of driving off the lot in a lemon. Make certain you completely examine any automotive you’re contemplating. Look out for scratches and dents as nicely as practical issues (e.g., a damaged AC). Any defects you discover could presumably be leveraged through the negotiation stage.
Drive before you buy
A car may appear to be it’s in pristine situation, but that doesn’t mean it runs like it’s. If you’re severe a few specific vehicle — particularly used fashions — take it for a spin. Try to check it on the freeway too. Listen for any suspicious sounds or vibrations.
Use an unbiased mechanic
While it might seem like an extra hoop to leap by way of, enlist an impartial mechanic to examine any used vehicle before making a purchase. They could uncover points and save you from overpaying. If the seller is hesitant to let a mechanic take a look — or refers you to “their guy,” that’s a pink flag.
Step 5: Negotiate Like a Pro
You’ve narrowed your sights on a car. It meets your wants, and it’s inside your price range. It’s time to get right down to brass tacks and negotiate.
Buying a brand new car might be your teen’s first foray into haggling. So, it’s a great time to teach them about salesmanship.
That purchase price has room to spare
You can start by explaining the distinction between an auto producer and a dealership. Why does this matter? Because it’s the explanation why automotive costs are negotiable within the first place.
There’s a common misconception that car dealerships are merely extensions of the auto brands they sell. That’s not true. Most dealerships are franchised, which means an individual or consortium of investors constructed or purchased the lot and partnered with one or more automakers.
The relationship is pretty simple — the vendor buys its inventory from their affiliated automakers and then they slap a higher sticker price on the window and profit on the sale.
How much profit? Anywhere from $2,000 to $5,000 relying on the car. For instance, AutoNation, a dealership conglomerate, averaged $2,044 and $4,579 of gross revenue from used automobile and new automotive sales, respectively, in 2021.
So, long story short, you presumably can negotiate the purchase worth down, and the vendor will still make a revenue on the automobile.
Be mindful of persuasion methods
Not all automotive salespeople are sleazy con artists with their eyes on your pockets. Even so, be cautious of widespread persuasion techniques to make certain you aren’t exploited. That might embrace time-sensitive deals or urges to buy as a outcome of different prospective buyers have had their eyes in your automotive.
Similarly, hold a watch out for unwanted extras. Salespeople are incentivized to sell add-ons to juicen their fee, such as a GAP waiver or automobile service contract. You may resolve that you want these added protections, but make sure it’s your choice — not something a salesperson slips in unnoticed.
One Last Tip: Read the Entire Contract
You and your teen are nearing the end line. All that’s left is to signal on the dotted line. Now is an efficient time to reinforce the thought of reading something you sign.
You and your teen ought to thoroughly learn all paperwork. If you bought via a supplier or private seller, make sure every thing aligns with what you’ve agreed to. If you’re buying on-line, there could not have been any negotiating, but it’s still necessary to watch out for hidden charges and clauses.