Ready For Your Child's First Car?

Your Child's First Car

Today's parents are far more likely to buy cars outright for their children than their parents were. According to a recent Autotrader.com survey of parents of recently licensed teenage drivers, 14 percent reported that their parents had purchased their first car, while 41 percent of this same group reported having bought their teenagers' first car for them.

Things have changed a lot in the last generation. Access to credit is generally easier - the mortgage crisis notwithstanding. And low interest rates tend to make car payments and other debts more affordable for those over age 18 - but not for teenagers who cannot unilaterally enter into a car loan agreement.

There are also far fewer stay-at-home mothers than there has been in the past. Families with the means to purchase a child's first car for them are frequently more affluent because both parents work. In addition, because of the dual working parents, there is often nobody to chauffeur teenagers to their many extra-curricular events.  Uber may be an option, but I don't find many parents who are comfortable with that yet.

In other scenarios, parents may buy cars for their children - or provide a lot of help - for safety reasons. No one wants his daughter to be stranded on the roadside because of an overheated clunker. And cars aren't nearly as easy for kids to repair themselves as they once were.

The decision to purchase a car for a teenager is one that every couple that is raising kids will one day have to consider. There is no one solution that is best for every family.

Regardless of the path your family chooses, children should have a financial goal. Saving for something as substantial as their first car helps children learn the value of deferring consumption and planning ahead. If you do decide to purchase a car for your teenager, try not to short-circuit that important life lesson.

One idea: Offer to match your child's saving - 401(k) style - towards a worthwhile goal, based on your family's budget. If you can't match dollar-for-dollar, try to match something, to give your child an incentive to save.

My wife and I are preparing for this now.  We're currently shopping for a practical and dependable vehicle for our daughter who will be driving soon.  I tend to like the smaller SUV's while my wife insists on something more safe - anyone have an M1 tank for sale?

Written by

Andy Anderson