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How Teens Can Buy Their Own Cars

So you’ve got a teenager, and your teenager wants a car. What are your options?

You could do one of three things:

1. Buy a car for them.
2. Let them pay for the car on their own.
3. Do a combination of both.

Let's go through each option.

First, it may seem tempting to just go out and buy a car for your teenager, especially if you have the money. But Dave doesn’t recommend this. Buying a $30,000 car for a 16-year-old just doesn’t make sense. That $30,000 ride will be trashed in no time.

Your second option is to let them pay for the car on their own. They may scream and kick, but for parents who are struggling financially, this may be the only way their kids have a car. The last thing you want to do if you are in debt is take out a car loan for your kid. Stupid idea. They can work for a few months over the summer and save up a few thousand dollars to buy something that will get them around.

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If you are financially able, out of debt and able to afford it on your income, the other option is to help them out a little bit. When Dave’s kids were growing up, he called this plan the 401 Dave.

In other words, if your teen saves $5,000, then you match them with $5,000, and they can buy a $10,000 car. You might consider capping what you match, though, because some workaholic teens might save up $20,000, leaving you with quite a bit of money to match!

Dave’s daughter, Rachel Cruze, explains how this plan worked for her. “I worked and saved like crazy. There were lots of tears, drama, sweat, and long days babysitting and walking dogs, but I finally saved $8,000.”

In the end, Rachel said, the sacrifice was worth it. “When I sat in my car for the first time, I felt so proud of it. I mean, I ‘owned’ that car. When you save and pay for something yourself, you just treat it differently.”

Your next question is probably this—how can my teen save up that type of money on a part-time salary? It’s a great question, and one that Dave’s Generation Change and curriculum team receives often.

Play with the numbers a little, and you’ll discover that someone who works 10 hours a week for two years at $8 an hour will have $6,000 to put toward a nice, used car.

Go online and search for used cars, and you’ll find plenty of great cars available for $6,000 or less—Toyota Camrys, Honda Accords, Jeep Cherokees. Your teen doesn’t have to drive a beater. But, if they want something more than a $1,000 junker, then they need to earn that money.

Rachel says to think outside the box when it comes to finding a part-time job as a teenager. “I worked in the mall over a Christmas break during my sophomore year of high school and quickly found out that it’s not worth it. I would make more in one or two nights of babysitting than I did working a whole week after school at the mall,” she said.

“If you’re a girl, think about babysitting. If you’re a guy, think about mowing lawns or pressure washing driveways—stuff like that. Get creative,” she said. “There is so much stuff you can do to make more than $8 an hour.”

So if you’ve got a teenager who is approaching driving age within the next few years, sit down with them and explain the situation. Tell them, “You earn it; you buy it.” Of course, if you can afford to help them with the “matching plan,” then go for it.

Bottom line: Don’t lose your mind trying to pay for your kid’s car. You’re putting food in their mouth, a roof over their head, and (hopefully!) saving for their college. Let them take care of the cool ride.

Dave's programs just for teens will inspire them and give them the tools to manage their hard-earned money responsibly (with your help)! Check out Foundations in Personal Finance.

Ramsey Solutions

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Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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