How to Help Your Child Purchase That First Car

Requiring your teen to work and save for her first car is a great life lesson. We have done a few things right and several things wrong in helping our four children get that first car. Hopefully, you can repeat our “rights” and avoid our “wrongs” as we explore the issue of helping your teen with his/her first car purchase.  These tips should help:

Note: For this post, we will refer to your child as “Sam”… a name which works for young men and women alike.

1. Start early.

Discuss the car purchase early and often. Two of our children had no interest in owning their own car; they were content to drive Mom and Dad’s car.  The other two were fixated on having their own vehicle.  But, because all four knew well before their 16th birthday that mom and dad were not going to buy them a car, they also knew not to ask. If you are going to offer a match (see point 3), let Sam know early on.  Hopefully, he will start squirreling away his “car” money several years before he is ready to buy that car.

2.  Think “teachable moment”

Did we always think “teachable moment”? Not really. My wife and I did what we thought of at the time, but, looking back, we wish we would have.   Why?  Because that first car purchase could set a life long precedent for Sam. Consider:

• If you agree with him that he has to have his own car just because he has a driver’s license, you are teaching him that there is no difference between “wants” and “needs”.

• If you buy Sam a new car on her 16th birthday, you are teaching her that she should always have a new car, and that someone else should pay for it.

• If you buy him a used car, you are still teaching him that someone else should pay for his car.

• If you loan her the money, you are teaching her that the way to get what she wants is to borrow money for it. By participating in the loan, you are further cementing this lesson into Sam’s psyche…and probably pointing her toward more auto financing in the future.

• If you make him work and save for a car, you might be considered an ogre, but you will teach him the value of hard work, patience and saving money. I like this lesson best, don’t you? Did we require our kids to pay cash? I wish we had but we didn’t. Still, we didn’t do too badly; three of our four drive paid for cars today.

But…but…isn’t that asking a lot of a high school student?
Yes. So let’s move on with more tips:

3. Offer a match.

This isn’t for every parent, but matching whatever funds Sam saves for her first car will not only encourage her to work and save, but will also allow her to buy a nicer car…without debt of course. A word of caution: you may want to set a limit because some children will hear “free money” and work double hard to squeeze more from you than you can afford. If you can’t do a 50% match, consider 25% or even less. You will still be encouraging Sam to save…a great lesson.

We had never heard of this concept when our teens became drivers, but we probably wouldn’t have offered it anyway. Why? We simply didn’t have the money. I might add that we were very accommodating about allowing them to use our cars. Even in college, as long as they agreed to live at home and commute, we always supplied a car for them to drive.

4. Discuss repairs, insurance and maintenance.

Although we didn’t encourage it, two of our four purchased their own cars while still in high school. In order to teach them the cost of owning a car, we made them pay for their own repairs and maintenance. We agreed to pick up the insurance, partly because it was unreasonably expensive and partly because we were paying insurance for them to drive our cars anyway. This being said, in an effort for us to save on car insurance, we required them to pay their own traffic tickets and any increases in insurance the ticket may have caused. At times, a car needed to be parked for a while.

5. Don’t back down.

You will hear it. “Dad”, that is crazy! Do you honestly expect me to save up enough money to buy a car?” Your answer is “Yes.” Hint: it helps to know someone their age who has actually done what you expect them to do. For example, I know a 16 year old who recently purchased his first car — a 1989 Impala — for $400. It CAN be done.

6. Practice what you preach.

Sam will spot your hypocrisy if you require her to pay cash while you are deeply in car debt. So what are you to do? How about selling that car and buying one you can pay cash for? Yes, that seems a bit radical, but what better way to teach your teen that you are serious. My guess is that she will someday be proudly telling her own children of the time dad sold his high dollar car to buy a clunker. We are talking teachable moments here: this is your chance.

I hope this process will be a positive one for both you and Sam. Starting early, keeping expectations clear and holding your ground will all help. Hopefully, he will someday look back at this time in his life and thank you for teaching him how to avoid car debt.

That moment, a dividend of those teachable moments, is one that all parents dream of.

Have you helped a child with their first car purchase?  What additional tips would you recommend?