How Teens Can Buy a Car
There’s no doubt about it: Buying a first car is a big deal! Not only is it a rite of passage, but it’s also an opportunity to learn some valuable lessons on saving, setting goals, and making wise purchases.
After all, in the real world, there’s no such thing as a fairy godmother who waves a wand and turns pumpkins into brand-new cars! Here are some steps you can take to make a smart car purchase:
- Start the discussion early on. It takes a while to save up for a car, so don’t wait until the last minute. Parents, if you’ll be funding part of the car, make sure expectations are clearly communicated.
- Set some ground rules. A teen with a brand-new car is an accident waiting to happen—literally. If they want a car, it needs to be a reliable used car bought with cash. There’s plenty of time for newer cars later down the road (see what we did there). And they’re not even going to think about taking out a car loan. That’s not an option!
- Use a car savings “match” plan. Parents, one of the best ways you can help your kids buy their first car is to share the cost with them. Dave liked to call this his “401DAVE” plan, where he agreed to match whatever money his kids saved up for the car dollar for dollar. This way, teenagers have some skin in the game, but they also have some help. If you go with a matching fund arrangement, you might want to put a cap on how much you’ll match.
If you’re a teen saving for a car on your own, don’t worry. It can be done! Listen to Anthony ONeal talk about saving for a car here.
Saving Money on Teen Car Insurance
Okay, it’s no surprise that teens (because of their lack of driving experience) are more likely than any other age group to get into a car accident and file an insurance claim. So, it shouldn’t be a surprise that car insurance for teenage drivers is also more expensive.
But just how much more expensive? You might want to sit down. The average annual car insurance premium for a 16-year old driver is $6,660.1 That’s $550 per month! And while you can save money on your teen’s car insurance by adding them to your family’s insurance policy, it could jack up your family’s rate by 82% or more.2
So, it goes without saying that anything you and your teen can do to score a lower premium is huge! Here are some ways your teen can save some money and ease the sticker shock that comes with their car insurance:
- Take driver’s ed and other public safe-driving courses. Going the extra mile and learning the rules of the road can earn your teen some serious extra credit. Ask your insurance provider which driver’s education programs qualify for a discount in your area.
- Get good grades. Yup, your child’s stellar report card won’t just go a long way in helping them go to college—it can help them save money on insurance, too!
- Buy a used car. New cars are more expensive to insure because they cost more to repair or replace. Add a teenage driver to the mix and you have a recipe for sky-high insurance rates. You’ll save money on insurance just by choosing a used car, especially one that has high marks for safety!
- Track your driving habits. Want to prove to your car insurance provider that your teen is a responsible driver? Enrolling in a data-tracking program can be a good deal. Here’s how it works: You plug a device into your vehicle and drive around with it on your car for 30–90 days. Insurers look at things like daily mileage, hard brakes, rapid acceleration and the time of day (or night) you drive—all of which can affect your risk. For teens, that can be incentive to drive more safely.
How to Know You’ve Got the Best Deal for Teen Drivers
This is where an independent insurance agent comes in handy. An independent agent can help you find the best coverage for your family (including teen drivers) for a price that fits your budget.
And we can help you find an agent in your neighborhood! Dave’s insurance Endorsed Local Providers (ELPs) are experts who have a solid track record of providing excellent service.