Your teenager is about to get their license, and you’ve been thinking about whether or not to get them a car or have them pay for one themselves. Before you make the decision, there are a few things that you and your new driver should know about the cost of owning a car. Owning and maintaining a car can be quite expensive, and your new driver should clearly understand all of the expenses that are involved. Many teenagers know how much it costs to get a car, but they may not be aware of how much it takes to maintain it. Here are the top car related expenses your new driver needs to be aware of.
Vehicle Insurance Costs
One of the first car related expenses your new driver needs to be aware of is the cost of vehicle insurance. Car insurance is required as soon as your teenager gets their learner’s permit. Your teenager can either be added to your policy or get their own policy from a car insurance company. Insurance rates are typically lower when your new driver only has their learner’s permit, but may significantly rise when they get their license. The reason rates are lower at first is because a licensed driver is required to be in the car with the new driver, which lessens the risk involved.
Adding a teenager to your policy can be more expensive than if they got their own insurance. However, if you have discounts and perks with your car insurance company, it may be cheaper. Many insurance companies offer discounts to new drivers if they meet certain requirements. The cost of insurance will vary widely, depending on the choice of car and where you live. When considering car insurance, it’s important to explore all available options with your insurance agent.
Deciding Between a New or Used Vehicle
Your new driver will need to decide whether they want to purchase a new car or a used one. Can your teenager afford a monthly car payment with insurance? Have they saved up enough money to make a down payment? If your teenager can’t afford a monthly car payment and insurance, it may make more sense to look for a used car. Buying a used car runs the risk of unexpected car related expenses with maintenance and repair.
Your new driver will need to be aware of this risk and understand the need to budget for these costs. There are a few tips to consider when looking to buy a car that can help save them money. Your teenager may be able to inherit some of the warranty protection when they buy a nearly new used car. Some car companies have certified pre-owned cars that offer a factory-backed warranty. Look for a vehicle that you can use all year long, instead of having to store it at home or through a storage company in the winter.
Take age and mileage into account when looking for a car. An older used car that has been well maintained with lower mileage may be a better deal than one slightly newer with higher mileage. Research cars on consumer websites to check their overall reliability and any potential issues the vehicle may be known to commonly have. You may also want to help your teenager understand that taking a car to a mechanic to have it fully inspected before they buy it is a wise idea. It may be able to help them save hundreds of dollars in repair and maintenance costs from buying a faulty vehicle.
Your teenager may be able to get a car loan to purchase a new vehicle if they are over 18 years old and have a good credit history. They must also be able to show proof of steady income. Getting a car loan can be difficult, but there are lenders who will work with people who have little to no credit. Car loans can be acquired to purchase a new or used vehicle or pay for car related expenses related to repair and maintenance. Special financing programs are available for teenagers based on their GPA, income, and amount of down payment.
A teenager may need to have a parent co-sign in order to get the loan. If your new driver fails to make payments on time, it can significantly impact your credit score as well as theirs. Car loans requiring little to no credit can be quite expensive to pay each month. You teenager should compare quotes from multiple lenders before making a decision. It may be wiser to save up money over time than risking their credit reputation with a car loan they are unable to pay.
One of the car related expenses that new drivers often overlook is depreciation. Your teenager may want to buy a new car, but may not understand it’s worth less as soon as they drive it off the lot. A vehicle can depreciate up to $3,000 every year, which equals 40% of the entire cost of owning a car. Depreciation is an important factor to consider when choosing between buying a new or used vehicle or getting a car loan. Your new driver may end up paying more than the car is worth.
Be wary of incentives and deep discounts offered by auto dealers that can directly influence depreciation. These incentives can include items such as extended finance terms and low down payments. A car loan that is extended for several years will have your teenager paying more than the purchase price. If your teenager wants to lease a vehicle, look for a less popular vehicle model and a short leasing contract. Your new driver can control depreciation on their car by keeping the car in good condition and keeping the mileage down.
What to Buy for the Vehicle
When your new driver finds the car they want, they may want to fix it up with some new car or truck accessories. There are a few must-have items your teenager will need to budget for. Some practical car related expenses your teenager should get for their car is new tires, a portable jump starter, and an emergency road assistance kit. A car toolset and a hydraulic jack are highly beneficial for making minor emergency repairs while on the road. Blindspot mirrors with an acoustic signal can help your driver avoid an accident.
Another accessory your new driver may want to get is a stinger. This device can smash open windows and cut seat belts if your teenager becomes stuck in their car after an accident. A phone mount and USB charger will allow your teen to use their phone for directions while keeping both hands on the wheel. A Bluetooth transmitter will give them the ability to enjoy their favorite music playlist with their phone so they don’t get distracted trying to change radio stations. A dashboard camera can record evidence that can be beneficial for your new driver if they get in an accident.
Repairs to Be Aware of
No matter how well a car is maintained, there will always be car related expenses to repair items that break down. If your teenager fails to perform the proper engine cleaning maintenance, the engine could overheat and become permanently damaged. The car battery can die if your teenager leaves their light on too long. A dead battery can lead to issues with the car’s alternator, which can cause expensive computer system malfunctions. If certain sensors burn out in the car, it could cause the car to burn up more gas than it should.
During the summer, your teenager may have to pay for air conditioning repair from extensive use. One complex issue with car related expenses with repairs is warning lights on the dashboard. The warning lights can be a simple glitch with a sensor or an indicator of a serious issue. Having a professional taking a look at it may be the only way to tell for sure which problem it is. If the car refuses to start, your new driver may have to replace a dead starter.
Ongoing Operating and Maintenance Costs
Your new driver may not be aware of all the ongoing care-related expenses for operating and maintaining their vehicle. The car will require an oil change every few months, which can cost anywhere from $25 to $50 on average. Tires should be rotated every time there is an oil change and wiper blades need to be changed once a year. The air filter and brakes will need replacement when they get worn. There are fees for getting the title, driver’s license renewal every few years, and vehicle registration and taxes annually.
Depending on where you live, your teenager may have to pay for parking fees, tolls on certain roadways, and emissions tests. There is the cost of gas to put in the car each week. Financing fees may apply if your teenager is making monthly payments on the car. Your teenager may have to pay for car washes and maintaining fluids in the vehicle. If your new driver violates traffic laws, they will have to pay fines.
In the Case of an Accident
Teenagers as new drivers are at the highest risk of getting into an auto accident. According to statistics, teenagers are responsible for 14% of all car accident deaths even though they only make up 10% of the general population. The cost of car accidents in the U.S. is about $230.6 billion each year. There are numerous costs involved in a car accident. These can include vehicle damage, medical expenses, legal fees, and insurance deductibles. Many of these costs can be covered by insurance, depending on what policy you have.
If your teenager gets into an accident, they will need to file a claim regardless if they were at fault. The insurance company may require the new driver to pay an insurance deductible before they will pay for any repairs. Depending on your coverage, the insurance company will pay an auto shop directly for window replacement, vehicle body damage, and other similar car related expenses. If the teenager has minimal insurance, they may be required to pay for damages out-of-pocket themselves. The average cost for a simple car accident is around $10,000 and can be significantly more depending on the damage.
Potential Legal Expenses
If your new driver gets into a car accident, there may be potential legal car related expenses. If the other driver causes the accident and your teenager gets hurt, your family may need to hire a personal injury lawyer to represent them in court. These types of lawyers take a certain percent of the settlement when they win the case. An insurance company may pay for these legal fees if your teen or your family has the right coverage. However, the insurance company will only cover the number of total expenses included in your coverage.
Your teenager may need to look for criminal defense attorneys if they cause serious injury while driving recklessly or under the influence. The insurance company may not be willing to pay for these legal expenses because the teenager was deemed at fault for the accident. If your teenager is convicted of criminal charges, they may have to pay a bondsman and can lose their driver’s license. They may have to pay traffic violation fees and a fine to get their license back. The new driver will also be impacted by higher insurance rates due to their increased risk.
Owning a car is a huge responsibility for your new driver. Car related expenses can add up quickly and catch your teenager off guard if they aren’t aware of them. Before your teenager gets their new car, have a conversation about their new financial responsibilities. Use this guide to show them everything that’s involved in being a car owner. By helping them understand all of the expenses involved in owning and maintaining their car, your new driver can be fully prepared for whatever may come their way.