It seems like only yesterday that your son or daughter was taking his or her first steps and now is ready to drive. A certain trepidation is likely to be mixed in with your pride in your child’s increasing independence.
Image: Lars Plougman
While your teenager is eagerly anticipating getting her first car, you have totted up the costs involved and realized that this could add thousands of dollars a year to family expenses. A big chunk of those extra costs come from the fact that teen drivers tend to have more accidents, and are so more expensive to insure; another worrying factor.
Most teenagers aren’t going to be able to cover costs by themselves, so how should you handle getting your teenager’s first car, and how much should you contribute?
Do they need a car?
Just because your child has passed driver’s ed and got his license, or even if all his friends have a car, that doesn’t automatically mean he needs a car at 16.
Look at your family’s circumstances before you commit to adding another car to the household. If you live in an urban area it might be cheaper for your child to continue using public transport, or if your children need a car only occasionally, insuring them to drive a family car might be a better option.
Ask teens to contribute a certain amount to the ongoing costs of maintaining a car, as this will make them appreciate the financial trade offs, since they may have to sacrifice other spending. This in itself can be a useful lesson in managing money.
Choosing a car
This is where contributing a chunk of the down payment comes in useful, as it gives you considerable clout when it comes to making sure that your child has a car that’s safe and appropriate.
It might be tempting to surprise teens with a car and see the delighted reaction, but getting them involved in the process gives them a chance to learn how to buy a car and what scams to look out for, setting good car shopping habits early on.
Plan in advance and ask your child to save money from summer jobs and gift money towards the cost of the car, perhaps offering to match them dollar for dollar. If they’ve saved their own hard-earned cash and decided they want a car more than the latest pair of sneakers, they’re likely to take good care of that car.
For teenage drivers insurance is easily the highest expense behind running a car. If your teen is still at high school, he or she is probably not going to be able to cover the premiums themselves.
Get your child to contribute to a portion of your increased insurance premium, even if it’s as little as 10 or 20%. Contributing helps teens understand the responsibilities that come with owning a vehicle and gets them used to the real cost of running a car.
As they’ll end up paying more if they are involved in an accident, this rewards responsible driving too.
On the plus side, getting car insurance might encourage your teen to keep her grades up. Many insurance companies offer discounts to students with a B grade average or higher, presumably on the basis that these students are likely to be as responsible on the road as they are at school.
If insurance is prohibitive, consider delaying purchasing a car as rates decline rapidly for drivers between 17 and 19. That extra year or two could give your child the chance to save more money towards their car too.
Skimping on maintenance is a false economy, so you want to ensure that you agree on who is covering this. Teaching teenagers how to do the basics themselves saves money while giving them useful life skills.
Before your child hits the road in their car, decide on who pays for repairs. Say that you’ll cover a percentage of standard repairs but that your child will have to foot the whole bill if he or she is at fault to create a strong incentive for responsible driving.
If your teen’s income is sufficient, ask your teen to set aside a certain amount of money for automotive ‘rainy days,’ to enable dipping into this fund when necessary. It might seem tough, but it’s better to learn to plan for these expenses at age 16 than in your twenties.
It’s a no-brainer that if your teen gets a ticket, he or she should cover it themselves. As with at-fault accidents, even if you have to meet the initial expense and get them to pay you back, it’s vital that they learn that dangerous or irresponsible driving has consequences.
You might also decide to reward positive driving behavior, for example, allowing them more freedom after a year without tickets or accidents.
Our final thoughts? While you don’t want your child working so many hours to afford their car costs that they compromise school work and extra-curricular activities, having a bit of skin in the game creates a valuable stepping stone to adulthood and encourages responsibility.
What have your own experiences been like? We welcome your comments!