After practicing behind the wheel of your family’s station wagon for months, your teenager is finally ready for their very own car. While the idea of your child behind the wheel of their first vehicle might seem a little scary, you would prefer to be involved in their car purchase decision-making process. And you’ve got the experience and tools to make sure their vehicle is safe and affordable! Questions like “How much should I spend on a car for my teenager?” or “What’s a good first car for my high school child?” may be floating around in your head. But before you start browsing specific makes and models, there are a few points to consider in terms of financing. Check out these tips on how to lock in an affordable and safe ride for your teenager.
First Things First: Establish the Legal Owner of the Car
While the rules and regulations on the legal age to own or insure a car vary by state, it’s likely that you will be the owner of your child’s vehicle until he or she turns eighteen. It’s entirely possible to transfer the vehicle’s title once your teenager is old enough to own a car, but if you’re a parent of a high school driver, initial purchases and loan agreements could be your responsibility.
Even if your teen isn’t a minor, it’s doubtful that they will have access to the same competitive loan rates as you would due to the fact that he or she probably doesn’t have a lengthy credit history. However, for an eighteen-year-old who would like to finance their own vehicle, you could also co-sign the loan agreement. Once you’ve established how the car will be paid for and who will be responsible for the title and or loan, it’s time to break down the nitty and gritty finance details.
Discuss Financing with Your Teen
While the aforementioned paragraph highlights the likelihood that you will be the sole title holder and loan contract signer, that doesn’t mean you can’t set some payment rules with your teen. Between monthly loan payments and insurance costs, the price of your child’s dream car can certainly add up. Consider utilizing this opportunity as a way to gift your teenager with a new set of wheels and a sliver of financial responsibility by working out a mutual payment plan so he or she can contribute.
It’s no secret that car insurance can be pretty pricey — especially if you add a teenager to your plan. However, there are additional coverage options that may not be required but are just as preventative, such as Guaranteed Asset Protection (GAP Plus), which costs around $500 to $700 when purchased from a dealership. Explain the importance of “covering the gap” between a car’s original price and what is owed on an auto loan if the car is compromised or stolen. If your teen has a part-time job or some cash saved, he or she could handle the fees, and could even score a $100 cash reward on the purchase of GAP Plus from Police FCU (a limited time offer).
Narrow down Safe and Affordable Vehicles
When finally getting to what will probably be the most exciting part of the car buying experience for your teen — shopping for a make and model, there’s no shame in entering protective parent mode. While a brand new shiny set of wheels may be the only thing on your teen’s mind, take the lead in emphasizing safety and cost-effectiveness while browsing.
If you plan on buying a new vehicle, look for the added safety features that will ensure reliability and even save you a penny on maintenance costs down the road. An obviously more affordable option, a used car, will require some additional research on your end. If the upfront cost of a used car doesn’t seem legit — trust your gut. What looks like a bargain could cost you and your teenager down the line in terms of added maintenance fees if the car encounters problems frequently.
No matter the make, model, or upfront price of your teenager’s dream car, a responsible purchase involves some serious planning. Thankfully, Police FCU is here to help you map out a payment plan that meets your budget and terms. Learn more about our auto loans and apply today.