|Saturday, April 19, 2014|
Help Your Teen Find the Right Car
It's essential to consider safety, affordability, and reliability when purchasing a teen's first car, according to William Van Tassel, Ph.D., manager of driver training programs for the American Automobile Association (AAA), Heathrow, Fla.
Van Tassel says parents should ask teens to prove they are ready for a driver's license through requirements such as maintaining good grades or completing household chores.
Teens also need to learn what it costs to drive. Parents can start the process by telling teens the cost of gasoline, insurance, and repairs as they pay the bills. Ask the teen to help care for the vehicle they eventually will drive by washing it, checking fluid levels, and keeping the maintenance log.
Aim for a series of short discussions to minimize resistance and allow teens to absorb each lesson.
"Start these talks half a year, at least, before a teen is actually eligible for a learner's permit," Van Tassel says.
Even after teens get a license, Van Tassel suggests waiting to buy a vehicle until it's truly needed.
Instead, set rules for the teen's use of the family vehicle, including when the teen can drive and who can ride along. This reinforces many state driver's license policies that limit teens' driving hours and the number of passengers in the vehicle.
Your credit union is a smart first stop for teens looking for car financing.
Look for safety
Van Tassel says parents should insist that teens choose a safe vehicle, using information offered by Web sites such as AAA, the National Highway Traffic Safety Administration, and the Insurance Institute for Highway Safety.
Van Tassel urges parents to look for vehicles with at least three safety features:
Understand the cost
The combined cost of owning and operating a car is another lesson to share with teens. The 2009 edition of AAA's Your Driving Costs survey puts the average annual cost of driving a sedan 15,000 miles a year at 54 cents a mile—$8,095 a year, including purchase price and operating costs.
Even after teens get a license, it may be a good idea to wait to buy a vehicle until it's truly needed.
Put that figure into perspective for teens by converting the vehicle's cost into hours worked. To get an approximate figure, take the number of miles the teen will drive each year, multiply it by 54 cents a mile , and divide the result by the teen's hourly wage.
Get a loan
Your credit union is a smart first stop for teens looking for car financing. For example, teens who seek their first vehicle loan from one New Mexico credit union must meet with a financial consultant, according to the associate vice president, membership development.
A financial consultant checks the teens' credit scores and talks with them about what they can afford to borrow. The adviser emphasizes the importance of building a good credit score by paying on time.
A used sedan with a four-cylinder engine often is a good option for young adults.
The adviser urges teens to create a financial plan to cover operating costs, plus a savings fund containing three to six months of payments and expenses.
Make an agreement
If parents have a financial stake in the teen's car—a down payment, loan payments, insurance, or other costs—then one credit union lender advises parents and teens to create a written agreement.
The agreement should cover:
Teens also need to learn about dealer practices and negotiating the best price. Parents can help by sharing their experiences and going with teens as they shop.
Urge your teen to ask these questions:
Avoid the rush
Many credit union lenders have seen teens rush into "deals" only to find they paid too much, agreed to a loan at exorbitant interest rates, lacked a clear title, or bought a car with serious defects.
Parents and teens alike can benefit from taking time to share stories, do their research, and consider what owning a car will cost over time.
Home & Family Finance® Resource Center