When Your Kid Wants to Buy a Car, Don’t Take a Back Seat

It’s time for your teen to buy a car. You’ll want to set some ground rules. The last thing you want is to put your child into the driver’s seat of the wrong car.

The best way to avoid disagreements is to set clear expectations and boundaries with your teen before the car browsing begins. While reining in your teen might initially dampen their enthusiasm, it could become a valuable learning experience that will guide them once they leave the nest.

4 no-gos for picking a car

In many cases, the budget will limit the options available. But once you decide roughly what your price range is, you can tactfully outline your no-go zones for selecting a car.

Here are the four biggies to avoid:

Big horsepower

Statistics about young drivers are alarming enough. “Crash risk is particularly high during the first months of licensure,” according to the Centers for Disease Control and Prevention. The younger the driver, the higher the risk. The chance of an accident is 1½ times higher for a 16-year-old driver than it is for an 18- or 19-year-old, according to Insurance Institute for Highway Safety data.

And today we put our children behind the wheel of cars with power almost unimaginable a generation ago. For example, a Toyota Rav4 Prime hybrid makes 302 horsepower, about what a Ferrari made in 1990. A Tesla Model 3 sedan makes nearly 500 horsepower and scoots to 60 mph in less than four seconds — faster than a Corvette made the year today's 16-year-olds were born.

When inexperience meets temptation, bad things happen. Mistakes are more costly at higher speeds and accidents are more severe. What's worse, street racing has surged during the pandemic, as reported by The Associated Press. Your child still may decide to race the family Honda Civic, but the call of a V8 Dodge Charger is hard to resist.

Speed is about more than horsepower, of course, but choose the slowest car you can. It will still likely be faster than whatever you drove as a teenager.

Luxury cars past their prime

It’s surprising how quickly the price of a luxury car drops, especially when there’s not a new car shortage. In a non-pandemic environment, some high-end cars lose about half their value in just three years, according to car search engine site iSeeCars. This might lead your teen to suggest an old, seemingly affordable Mercedes as a good choice.

Unfortunately, these cars have a hidden cost: repairs and maintenance.

Take a lesson from Carvana, the online powerhouse that sells hundreds of thousands of cars a year. If you bought a 2013 Honda Fit with 96,000 miles from Carvana, its two-year basic powertrain warranty would cost $1,150. Buy a 2013 Mercedes C-Class with 96,000 miles on it for only a bit more money, and the powertrain warranty goes for $4,300.

That cost would cover the unexpected big stuff. It doesn’t include maintenance — oil changes, filters, coolant flushes, wiper blades and the like, which CarEdge.com puts at about $2,000 a year for a 10-year-old C-Class, about twice its estimate for the Fit.

Moral of the story: Steer clear of used luxury cars unless you have the cash to maintain them.

Fixer-uppers

Unless your young driver is also an expert mechanic, buying a project car that doesn’t run, or has serious issues, is a bad idea. While cars that are sold “as is” have low asking prices, it’s hard to know how much it will cost to get them running. Furthermore, without the benefit of a test drive, once you begin the repair process, additional problems might be revealed.

As the old saying about used cars goes, you don’t want to buy someone else's problems. If it “just needs a battery,” it’s likely the owner would have replaced it.

Party wagons

It’s tempting to buy your youngster a big car that can fit their siblings, all of their sports gear or anything else they’ll need to tote around. While this might make your life a little easier, you’ll want to be mindful of how many friends — read “distractions” — your kid can fit in the car.

That’s because the CDC found that having teenage or young adult passengers increased the crash risk for the driver. In fact, the CDC found that “risk increases with each additional teen or young-adult passenger.”

How to buy a car with your teen

Now that you have the negatives out of the way, here are some positives to make this a collaborative project for you and your first-time buyer.

Set a budget

Decide who will pay for the car — parent, teen or both — and what your price range is. If you want to finance the car, your child will get a great introduction to learning how to choose an affordable car payment and shop for a loan.

Walk through the total cost of owning the car to make sure your teen understands this financial commitment and budgets appropriately.

Get pre-approved financing

Applying for a loan ahead of time will reveal what you, your teen over age 18, or both of you, if you cosign, will qualify for and provide a breakdown of the interest and monthly payments. Plus, a loan offer in hand will become a useful bargaining tool to get the dealership’s best interest rate.

Choose target cars

Finally, here’s the fun part. Now that you know how much you can spend, you can begin to search for specific cars. Think about how it will be used and how often. Check safety ratings and fuel economy, and estimate insurance costs.

A car-buying app is a good place to start. It’s a good idea to look for several target cars since you never know what you’ll find nearby and what shape it’s in. You have to select from what’s available.

Get an inspection

A used-car pre-purchase inspection costs between $80 and $200.

Monitor the deal

Your child may want to lead the negotiations, but you’ll want to keep an eye on all the paperwork. Review everything: the bill of sale, the title, the sales contract if you're financing. Whether you buy from a dealership or a private party, you will need to negotiate intelligently and check the numbers methodically.