Almost all teens look forward to that magical day when they can finally get in a car and drive themselves away -- anywhere but home is usually good! But before a teen can get behind the wheel and drive off into the sunset, there are some small details that need to be figured out, mainly who is going to cover the costs of the car. There’s more to driving than the purchase price of the vehicle. Send your teen off to get their license with a budget for his or her driving and a good idea of how he or she will cover the costs.
Adding a new, young driver to your family’s insurance plan will bring your rates up. Have a discussion with your teenager before he or she starts driving about who will pay the increase. If your teen doesn’t want to assume responsibility for the insurance premium, it’s likely that he or she isn’t quite ready to drive yet.
If your teen agrees to pay for some or all of his or her car insurance, it can help to see what discounts your insurance provider offers. It might make more sense to add your teen to your own policy, rather than have him or her get a policy on his or her own. Keep in mind that insurance providers often offer discounts to teens who earn good grades or who have completed a driver’s education program. The type of car your teen drives matters, so choosing a car with lots of safety features and a limited “cool” factor is usually a good option.
Gasoline and Maintenance
Before you hand over the keys to a car, sit down with your teen and make sure he or she understands what it will cost to actually run the car. If you’re giving your teen an older family vehicle, give him or her an idea of how much it costs to fuel the car on a monthly basis and what you paid annually for inspections, tires and other maintenance issues. You can work with your teen to develop a budget to help him or her see if driving is something he or she can afford.
Buying a Car
Perhaps your teen wants to show up for the first day of class with a new set of wheels. Going through the process of buying a car, whether paying for it in cash or getting a loan, will help your teen understand financial responsibility. Before he or she starts looking at cars, sit down together and make a budget to determine how much “car” they can afford and if buying it get in the way of other financial goals, such as saving for college. Since your teen will most likely need a cosigner on a car loan, figure out if you’d be willing to cosign or if you’d rather he or she pay cash to avoid getting into debt.
Learning to drive doesn’t only mean learning the basics of road safety and car maintenance. It also means learning to take financial responsibility for getting behind the wheel. Handing a set of keys to a teen driver not only means you trust him or her behind the wheel. It also means you trust that he or she is ready to handle the financial responsibility of driving.
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Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
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