Chapter 7
Trading In the Bikes for Cars

In This Chapter
  • Teens get cars and parents get anxious
  • Judging if your teen is ready to own a car
  • Deciding who will buy the vehicle
  • How to pay for a car
  • Determining what kind of car to buy
  • Dealing with ongoing costs of owning a car

Although you’d swear it was just yesterday that your Becky was 10 and still wearing braces on her teeth and her hair in pigtails, today she’s 16 and talking nonstop about learning to drive a car.

For years Becky and her friends rode their bikes through the neighborhood, venturing out further and further as they got older and braver. Eventually, they could ride those bikes across town to get to the video store with the best selection of movies or the ice-cream shop with the most flavors.

While you encouraged Becky’s independence on her bike, thinking about her operating a car probably seems a bit frightening. Driving a car, after all, is a lot different from riding a bicycle on the sidewalk with a couple of friends. Where will she and her friends venture out to in a car? Across town? To the other side of the county? The country? Will she remember to wear her seatbelt every time she drives, and remind her friends to buckle up, too? Will she drive responsibly? What if she’s in an accident? What if she’s hurt, or even killed?

Most parents experience a significant level of anxiety as their children trade in their bikes for automobiles. And with good reason. About 7,000 teens are killed each year in car accidents. What parents don’t have qualms as they watch their child climb in behind the wheel and drive off alone for the first time?

The anxiety level also may cross over to your pocketbook. If you agree that Becky may have a car, should you buy it for her? Maybe you’ll loan her money, or give her a certain amount to use toward a vehicle. Who will pay for the car insurance?

Once you’ve decided if you’ll open your wallet to fund the car thing, you’ll face another set of issues. Should Becky get a brand-new car with the latest safety features and a warranty, or will a little used car be suitable for the driving she’ll do? And you should take some time to think about rules you’ll apply to the car and Becky’s driving.

Those are some of the topics we’ll hash out in this chapter, which is intended to take a bit of that anxiety out of the car issue.

When Your Kid Wants a Car

There’s a great probability that, sooner or later, your teenager is going to want to have his own car. The question is, will you agree to let him have one?

Let’s dispel the notion right up front that every teenager needs to have his or her own car. Plenty of kids do just fine without a Jetta of their own. They walk. They keep riding their trusty bikes. They skateboard. They take a bus. They bum rides from their friends (and that’s another issue), or from you.

Tom and Ray Magliozzi, the brothers who host National Public Radio’s Car Talk, polled 5,000 listeners a couple of years ago on whether or not a 16-year-old should have his own car. Sixty-seven percent of those listeners answered with a resounding “no.”

We all know, however, that plenty of kids do own cars. Check out any suburban or rural high school parking lot. Chances are that it’s filled with students’ cars. When contemplating whether or not your child should have one, consider these points:

  • Does your teen need a car, or just want one because all her friends are getting them? If she goes straight from school to her job at the assisted living center every day, and right on to her dance lesson after work, then it may make good sense for her to have a car. If her primary motivation to getting one is to load up her friends and cruise around on Saturday nights, however, she doesn’t need a car.
  • Is your teenager responsible enough to have his own car? We’ll discuss this at length in the next section.
  • Will letting your son or daughter get a car make your life significantly easier? If your child’s school is 20 minutes from your house and you’re making two round trips a day, you’re spending a lot of time as a kid chauffeur. Letting her drive herself to school could take a lot of pressure off your schedule.
  • Is there money available to buy a car? Even used cars can be expensive. If buying a vehicle is a strain on your finances and your teen doesn’t have money to pay for a car, postpone the purchase until she can buy it herself, or your financial position improves.

[image] Money Morsel
Remember that buying the car is only the first expense. Fueling, maintaining, and insuring a car is expensive business, too.


Carefully considering these questions, and discussing them with your teenager will get you started in deciding whether or not he should have his own car. Be sure to read the next section carefully before deciding whether he’s responsible enough to own a vehicle.

Knowing If He or She Is Ready

We all know that kids mature at different rates. For that reason, deciding whether or not your child can handle the responsibility of having his own car is a judgment call.

Some kids make it easy to decide. They’re either obviously mature and responsible or obviously immature and irresponsible. If your kid is typical, though, he’s probably basically trustworthy and sensible, but subject to frightening lapses in judgment.

Car accidents are the leading cause of death among teenagers in the United States, accounting for 36 percent of all deaths of persons aged 15 to 19 years. Obviously, you don’t want your child to become a statistic.


[image] Don’t Go There
Parents should be aware of car surfing, an incredibly dangerous game that resulted in about 500 deaths between 1995 and 2000. Car surfers stand on the hood of a moving car. The person driving the car slams on the brakes, causing the surfer to fly off the hood. Most of those killed car surfing are between 16 and 24 years old.


Remember that teenagers often change quickly. If you have doubts over whether your son or daughter is responsible enough to own a car at age 16, wait for a year. Tell her that if she continues to mature and exhibit responsible behavior during the next year, you’ll re-address the car thing when she’s 17. Meanwhile, you can make sure she gets plenty of driver training, and you can let her use your car and observe her level of responsibility.

You also should observe her friends’ behavior concerning autos and driving. If you ever observe, or hear about any of them driving irresponsibly, address the issue immediately. Think about limiting the number of people she can ride with in one car. It’s a known fact that accidents happen more frequently when a lot of kids are in the vehicle. Some states have passed laws limiting the number of teenagers in one car without an adult present.

While we’re on the subject of safety, consider these safety tips from the Insurance Institute for Highway Safety:

  • Give beginning drivers as much supervised driving time as possible.
  • Teens should wait six months before driving with other teenage passengers.
  • Don’t assume your teen drives the same way when you’re not around as she does under your supervision.
  • Restrict unsupervised nighttime driving.
  • Select safe cars. Large cars with safety bags are extra safety features to consider when purchasing a car your teen will drive.

You know your child better than anyone, and you’ll have to decide whether or not he’s mature and responsible enough to have a car. If you decide that he’s not, don’t feel bad about denying him. Explain your reasoning and tell him you’ll reconsider the matter in six months. Keeping your teenager safe is more important than keeping him completely satisfied.

Ann Landers, the syndicated answers lady, recently included in one of her columns a suggested driving contract between you and your child. The reason for the contract is twofold. It serves as a reminder that driving a car is a serious responsibility, and it addresses potential driving situations before they occur. The contract, Landers says, should include the following stipulations.

  • If your child gets a traffic ticket, she’s responsible for paying the cost of the ticket, as well as the difference in the insurance premium for as long as the premium increase is in effect.
  • At no time will your child ever drink and drive, or carry any alcohol in the car.
  • Your child must agree to pay for any damage he causes to the car that is not covered by insurance.
  • He will never have more people in the car than there are seat belts, and he will not begin driving until all passengers have buckled up.
  • She will keep the car clean, refill the gas tank, check the oil, and so forth.

We think that this, or a contract between you and your child that you come up with on your own, is a great idea. Be sure that your child understands the consequences of not living up to the agreement, and be sure that the consequences are serious enough to get his attention.

Who Should Buy the Car?

Once you’ve cast a nay or yea on whether or not your teen gets a car, you’re faced with the question of who buys the vehicle.

Should you buy it? Should your child buy it? Or should you share the cost? If you buy the car, should it be an outright gift, or do you expect your teen to make payments to you? Will the car be in your name or his? What costs relating to the vehicle will he be responsible for?

We feel strongly that it’s not a good idea to buy your child a car with no financial strings attached. Bearing or sharing the cost of the vehicle will give your teen more ownership and (theoretically, at least) make him more responsible for taking care of the car.

If you’re going to help your teen buy a car, be very clear about the arrangement. Tell him exactly how much you’ll contribute, and make it clear that he’s responsible for the remaining costs. If you’re loaning him money for a car, work out a schedule for him to repay you and make sure he sticks to it, just as he would have to do if he had a car loan.


[image] Money Morsel
If you and your teenager are in the market for a vehicle, have her check out “Car Buying Information for Teenagers,” an online excerpt from The Teenagers Guide to the Real World, by Marshall Brain. Located at www.bygpub.com/books/tg2rw/cars.htm, the article contains links to all sorts of useful car sites.


If he’s buying the car himself and will need to finance it, it’s a good idea to help him with that process so you make sure he doesn’t get into a bad loan situation. You’re likely to have to sign or co-sign for the loan if your child is under 18, so you’ll want to get the best deal possible.

If you’re helping your teen to get a loan or you decide to buy the vehicle for him and are going to finance it, keep the following tips in mind. Remember, though, that you’re likely to negotiate a better deal if you’re able to pay for the car up front.

  • Use a loan from a bank or credit union instead of the car dealership. Dealer financing usually costs at least a percentage point or two more than a bank.
  • Make the biggest down payment you can comfortably afford. This lowers your interest rate and cuts the amount you’re financing, saving money in the long run.
  • If the car you’re buying comes with a rebate offer, use the rebate money as part of the down payment.
  • Get the shortest-term loan you can afford. Explain to your teen how a car loan works, and consider having her contribute some of her Burger King salary to help out with the monthly payments.
  • Think about getting a home equity loan instead of a car loan if you’re going to finance a car for your teen. Interest on a car loan is not tax-deductible, but interest on a home equity loan is.
  • If your child comes into extra money at a birthday, high school graduation, or other occasion, encourage him to apply the money to the car loan and get it paid off early, if possible.
  • Look for a simple interest loan instead of an installment loan. A simple interest loan lets you pay interest only on the money you still owe. A front-end installment loan, on the other hand, requires that you pay interest on the entire loan, even after you’ve repaid a portion of it. If you borrow $5,000 and pay back $2,500, you’d still be paying interest on the full amount, even though you only owe half.

[image] Money Morsel
If you decide to buy or lease a car for your teenager, be sure to include him in the process.

This will help to prepare him for the time when he’ll be buying a car on his own.


What About a Lease?

If you lease your own car and are happy with the arrangement, you might consider leasing a vehicle for your teen. As you probably know, there are two schools of thought on leasing versus buying. Some people swear that leasing is the only way to go, while others would rather take a bus than lease a car.

Basically, when you lease a vehicle, you’re paying for the estimated depreciation that occurs to the car while you’re driving it. You pay only for the part of the car’s value that you use—plus interest.

There are pros and cons to leasing a car, and some special considerations to keep in mind if you’re thinking of leasing a car for your teenager.

Advantages to leasing a car include:

  • You probably can lease a more expensive car than you can buy. Since you’re getting this car for your teenager, however, that shouldn’t be an issue. Your kid doesn’t need to drive a Lexus.
  • Many leases don’t require a down payment, or require only a minimal down payment. This makes leasing very appealing to many people.
  • You don’t have to worry about selling or trading in the car when the lease ends.
  • You can lease a small new car for almost the same price you would be paying for a used car, and you’ll need only a small down payment. You won’t own the car at the end of the lease, but this may enable you to get your teenager a more reliable car for the money.

Disadvantages to leasing a car include:

  • It’s almost always more expensive in the long run to lease a car than it is to buy one. Leasing is usually more expensive than financing, too.
  • When the lease ends, your kid will no longer have a car. Actually, you can consider this either an advantage or a disadvantage. If you lease a car for your teen with the understanding that when the lease ends and the car is returned, she’s responsible for getting her next car, that’s pretty good incentive for her to start saving her money. If you’ll just end up buying her another car when the lease ends, however, you’re back to square one.
  • Most lease agreements impose mileage restrictions, and charge a penalty if you exceed the limit. If your kid is driving six hours each way to visit his girlfriend every weekend and every chance in between, chances are he’ll exceed the limit and end up costing even more money than you’re already paying out.
  • You might end up paying disposition charges when the lease ends. These charges cover the dealer’s cost of auctioning the car.

[image] Don’t Go There
If you suspect your teen isn’t going to take good care of a vehicle, don’t lease one for her. Your dealer will be very unhappy if you try to turn in a leased car that’s been trashed. And you will pay dearly for it.


Once you’ve decided whether your child should have a car and who’s going to pay for the vehicle, you’ll need to think about what kind to buy.

New Jetta or a Junker?

Ask your 17-year-old what kind of car she wants, and chances are that she’ll have some pretty strong opinions on the topic. Even many 10- and 11-year-olds know what kind of car they hope to have when they’re old enough to drive.

Back in the early 1970s, when we were beginning drivers, kids didn’t drive brand-new cars. In fact, most kids didn’t have their own cars. We borrowed Mom’s or Dad’s car, or Dad would buy one little car that you got to share with your brothers and sisters. Nobody expected to get a new car as soon as they were able to pass their driver’s test.


[image] Don’t Go There
Don’t buy a teenager a car that’s made for speed. Handing him the keys to a car that has a V8 engine or is turbo-charged is just not a good idea. Remember that kids consider themselves to be both invincible and immortal.


Drive by your local high school some day and take a look at what’s sitting in the parking lot. Sport utility vehicles, flashy pickups, BMWs, spanking-new Volkswagon Bugs. Gone are the days when kids were grateful for any old junker that appeared in their driveway. Many teenagers are very status-conscious, and they are painfully aware of what their affluent peers have.

Your job is to convince your teenager that there’s nothing wrong with driving a good, dependable, used car, even if it’s not the prettiest vehicle in the high school parking lot. There’s no need, in our opinion, to dash out and buy a beginning driver a brand-new car.

Regardless of what type of car you’re considering, its safety factors should be your primary concern.

  • Air bags. Remember that cars manufactured before 1992 were not required to have air bags on the driver’s side. Some do, others don’t. If you’re thinking about an older car, make sure it’s air bag equipped, preferably on the driver’s and passenger’s sides.
  • Watch out for SUVs. Sport utility vehicles give the illusion of safety because they’re so big, but remember that they’re way more likely to roll over than cars. For a report on the likelihood of rollovers for various types of cars, SUVs, and light trucks, go on the Internet to the National Highway Traffic Safety Administration’s site at www.nhtsa.dot.gov. SUVs also can be unwieldy to drive and difficult to maneuver in a situation such as if you’re trying to avoid an accident.
  • Don’t go too small. A tiny car won’t offer the protection of a larger one in the event of a crash. Don’t be tempted to trade in safety for better gas mileage. Crash test scores also can be found on the National Highway Traffic Safety Administration’s Web site.
  • Make sure your teen has adequate training and experience before you allow her to begin driving on her own. Most highway safety experts feel that it’s too easy to get a driver’s license in the United States and that the requirements should be stricter.

Once you’ve considered safety issues concerning your child’s vehicle, look to reliability. The last thing you want to happen is to have your 16-year-old stranded on a dark road some night because her car has broken down. If you’re going with a used car, try to be sure that it’s certified, which means it’s been inspected and tested to make sure everything is in working order. It’s a good idea to have a private mechanic check out a car before you buy it, especially if you’re buying from an individual. Dealers who sell used cars are subject to the Federal Trade Commission’s Used Car Rule, but individuals are not.

A used-car dealer should be willing to let you test drive the car, and under the Used Car Rule must provide information about the major mechanical and electrical systems, including what problems you should be on the lookout for. Be sure to ask for the car’s maintenance and repair records, and get any promises the dealer makes in writing.

For many people, the cost of a car is one of their key considerations. The trick is to get the best car you can for the money you have, or the money that your teenager has. If your friends or acquaintances have purchased used cars for teens, find out where they got them and whether or not they’re satisfied with their purchase.

Also, check out Edmunds.com for used new and used car prices and information. You’ll find it on the Internet at www.edmunds.com. The site also includes an affordability calculator to help you or your teenager figure out exactly what kind of vehicle you can afford.

Safety, reliability, and expense are the three main factors you’ll consider when buying a used car. Of course, your teenager will no doubt consider some factors of her own, such as the make of the car the color, and its peer acceptability.


[image] Adding It Up
The Federal Trade Commission’s Used Car Rule requires dealers to provide certain types of information about a car to potential buyers. Information that must be revealed includes whether the car comes with a warranty, what percentage of repair costs the dealer will pay, and so forth.


The Cost of Keeping a Car

Those of us who own cars understand that buying one is just the beginning of the strain that a vehicle can place on your pocketbook. Most teenagers understand that it takes significant money to buy a car, but are uninformed about the continuing costs.

Keeping a car is expensive business. You’ve got to buy gas and pay to have the car maintained. Gas prices on the East Coast currently are hovering somewhere around between $1.30 and $1.60 a gallon, depending on the grade. Our shaky world political situation at the moment; however, makes it impossible to predict what gas prices will be like in the future.

An oil change, depending on where you live, can cost anywhere between $25 and $50, and then there are all the little costs such as washing the car, inspection fees, parking fees, tolls, and so forth. And then there are registration fees, costs to have your driver’s license renewed, and the big one—auto insurance.


Go Figure
Insurance companies figure that drivers between 16 and 24 are most at risk for accidents. Insurance rates for that age group reflect the industry’s feelings.


When your teenager starts driving, he’ll either have to buy his own auto insurance or you’ll have to add him to your policy. Most insurers will require your teen to be added to your policy or to have his own policy as soon as he gets his learner’s permit. However, because a licensed driver is required to be in the car with a learner, some insurers don’t consider a learner to be a significant risk, and will charge only a minimal amount to add him to your policy. Other insurers, however, will up your rates significantly as soon as your teen gets the permit. Insurance companies consider teens to be highrisk customers, because they’re inexperienced and make more frequent mistakes than those who have been driving for longer. Unfortunately, statistics show that while teens make up 10 percent of the general population, they’re responsible for 14 percent of all motor vehicle deaths.

While it’s common practice for parents to add their kids onto their policies, it isn’t always the least expensive way to insure your child. If you’ve got two or three expensive cars in the garage and your kid is going to drive one of them, it’s going to cost a hefty sum to add him onto your policy because expensive cars cost a lot of money to fix. If your kid is driving a used car that didn’t cost an arm and a leg, however, and you buy him only basic insurance coverage, it may be less expensive to get him his own policy than to add him onto yours. On the other hand, if you have discounts on your policy, such as safe driver or multi-vehicle, adding your teen to your policy might be the way to go. You’ll need to sit down with your agent to determine the best plan for you and your teen.

Ask your agent to run the policy costs of adding your child to your current policy and the cost of having him insured under his own policy. Many insurers will require your child to be included on your policy for a certain amount of time after he’s started driving. That can be fine, but if your teen has an accident or commits a traffic violation, your policy will reflect that. And an accident or violation may prevent your teen from being able to get his own policy.

When considering what to do about your teen’s car insurance, consider all the options and ask a lot of questions.

An important consideration to keep in mind if your teen is included on your policy, is the designation of the car he’ll be driving. You sure don’t want to designate your brand-new Volvo as the car he’ll be driving when you can just as easily designate the eight-year-old Honda Civic. The rates will be increased on the car your teen will be driving, and you don’t want to have to pay even more to insure a new car than you’ll already be charged.

Also keep in mind that, just as with your own auto insurance, insurance rates for teens vary depending on where you live. Insuring a teen driver in Los Angeles, for instance, can cost many times more than insuring a teen with the same vehicle in a rural area of Kansas.

Explain to your child that owning a car is expensive business, and that the costs do not end the day the car is purchased. Teach her the value of taking care of her car, and make sure she understands what needs to be done in the way of maintenance and daily care. And, be sure that he or she knows exactly what to do in the event of an emergency. Come up with a plan in case of trouble like a flat tire or engine trouble.


[image] Money Morsel
Remember that many insurance companies offer lower rates to teens who have completed a high school driver’s education course, who earn good grades in school, or who meet other requirements. You may save up to 10 percent of the additional premium for a new driver, so be sure to ask your agent what’s available.


Teens and cars can be a worrisome mix, and paying for the vehicle is just one of those worries. If your kid has a car, do what you can to educate him in every applicable area—from finances to safety. Then sit back and try not to worry too much. Remember that most teens make it through to adulthood relatively unscathed, and your teen most likely will, too.

The Least You Need to Know
  • Seeing your teenager get in a car and drive off can be a great source of anxiety but is something most of us will go through.
  • Only you can judge whether or not your child is responsible and mature enough to own a car.
  • Making your teen at least partially responsible for paying for a car gives him a good sense of ownership and appreciation.
  • When deciding what kind of car to buy, you’ll need to consider safety, dependability, and expense.
  • Make sure your teen understands the cost of owning a car doesn’t stop once the actual purchase is completed.
  • Teach your child well, and then trust that she’ll use good judgement.
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