First Time Car Buying Tips For Teens

 

Basics

Every teen I’ve ever spoken to wants to own their set of wheels.  We will all get them eventually, but probably at different times.  If you are in a rural area, you might need a vehicle just to get food.  Those living in a city with good public transportation might not need a car immediately.  And they are really expensive! Decide what you really need.  Those extras like navigation, leather seats really add up.  Look at the basics:  You need to purchase the car, get insurance, pay for gas and then maintain it.  I’m just going to cover the basics and then refer you to the experts.  First make a budget and do your research.

You have to answer the following questions:
  • How I am going to finance it—parents, me, or both?
  • What is my projected budget—not only for the purchase but all the other...

 

 Buying A Car

As a teen it’s more difficult to buy a car, since we don’t have an established credit history and will have difficulty finding someone to lend us the money without a credit history (see Credit History & Credit Score (FICO).  If you’re paying for the car, or part of it, be realistic about where you will get the money each month and how much you really can afford.  Once you come up with a figure, save an additional 10-15% for inflation, increases in gas or car insurance and unexpected events.  Worse comes to worst, you will have extra money available to spend, or pay off the car early.

 

 

Basic Car Buying Rule

If you can’t afford to put down at least 20% on the car, you’ll probably end up owing more on it than it’s worth.  If you can’t afford to put down 20%, DON’T BUY IT!  If you can’t pay off the car in 48 months, DON’T BUY IT!  Instead, buy a less expensive vehicle that you CAN afford.  Remember—the purchase of the car is only the beginning of your expense items.

 

Car Research

No matter whether you buy a new, used or lease a car, you do not want to overpay.  You also need to check out the safety ratings
http://www.nhtsa.dot.gov , and information on gas economy  http://www.fueleconomy.gov.  Also check out the following websites: http://www.invoicedealers.com; http://www.edmunds.com; http://www.jdpower.com/autos; http://www.cars.com/go/index.jsp; http://autos.yahoo.com; http://www.myride.com; http://www.carsdirect.com/home.  These sites also have good tips on buying a car: http://www.consumerreports.org/cro/index.htm?loginMethod=auto and http://www.carbuyingtips.com.



Once you’ve completed your research and know what a "good deal" is, then you can start to shop, the fun part.  Bring along all your pricing information so you can make sure your local dealer is offering "a good deal".


 

New Cars

See above and know what a car will cost before going to a dealer.  Check the web.  You might find a better deal online or a few hundred miles away.  Use
http://newcarpricequote.com as another source of information.  Here are some particularly good times to buy a car:


  • The end of December, car companies want to finish their year strong; people are buying other things for the holidays and cars might not be on their list; and some dealers need to make their quotas.
  • The end of the summer or early fall when automobile companies introduce their new models can be a great time to buy, since dealers are clearing out their old inventories to make room for the new models.
  • Be on the lookout for factory or dealer incentives and rebates, which can happen at any time.
  • The end of the month can also be a great time to buy a car, since dealers have monthly quotas (the number of cars they need to sell each month).  If a dealer is a little short, they will give you a good deal so they can make his/her monthly quota.
It’s preferable not to have your dealer get a car from another dealer.  But if you do have to do this, make sure you see the car first.  Get the dealer to provide you with the VIN (Vehicle Identification Number) for the car at the other dealer so they don’t switch it when your car is delivered.  If you don’t see it first, make sure you can get out of the deal 100% with no penalty if when the car comes in you don’t like it or it is not what you ordered.  Better yet, buy it direct from the other dealer.  However, if your dealer needs to order the car from the manufacturer directly that is O.K.  It should not cost more than the exact same model on their lot.  Make sure you put down no more than $500, and use a credit card to secure the payment.  There should be no additional fee.

Also, you can buy a car online.  After you have decided the type of make, model and features you want, some of the sites mentioned above can be searched for your ideal car.  If you agree on a price with the online dealer, you leave a deposit on your credit card.  Once your vehicle is selected, you arrange for pickup, test drive and pay the balance.
 


 

Used Cars

Buyer Beware!  There are tons of scam artists out there.  It doesn’t matter whether you are buying from a dealer, the Internet or an individual.  Get a Carfax report
http://www.carfax.com using the vehicle’s VIN.  This will tell you the car’s history:  Whether or not it’s been in an accident, if it was ever stolen, who owns the title and a lot more.  Don’t buy a car if you don’t have this report, or if a dealer won’t give it to you.  If you are buying a car directly from an individual, purchase this report yourself if the owner doesn’t already have one.  If you’re buying a car privately make sure to take it to a trusted mechanic to thoroughly check out the vehicle before closing the deal.



If you’re buying from a car dealer, check out the dealer with the Better Business Bureau, State Attorney General, or local consumer protection agency.  A factory-certified car will be more expensive, but it comes with a warrantee.  Check out the return policy.  Dealers are not required to provide a warrantee, but reputable ones will offer you at least something, although it might be very limited.

Check out these buying tips from the Federal Trade Commission:
http://www.ftc.gov/bcp/edu/pubs/consumer/autos/aut03.shtm


 

Financing A Car

If you can buy the car with cash, great!  If, as a teen, you need to finance your car you will need a co-signor with a person who has a credit history and an employment and salary history, i.e. an adult.  Get your/co-signatory’s credit report before you shop for financing see Credit History & Credit Score (FICO).  You will need a score of above 680 for the most favorable terms.  Also get pre-approved for a car loan say from a bank or other lenders.  Do not rely solely on the auto company for financing.  Shop around to get the best rate you can.  Remember, most of the time it is the automobile manufacturer’s financing division that makes the real money.  If you do need to borrow:
  • Make sure you understand all the terms of the loan.

  • Make sure you can pay it back and are comfortable with the monthly payments.

  • Put as much money down as you can (you’ll get a lower interest rate, and have to pay off less).

  • Get the shortest time period you can manage.  Remember, no more than 48 months!

  • If you get a rebate, use it as part of your down payment.

  • If you make extra money, use it towards your loan—pay it off early if you can.


 

Leasing A Car

Leasing a car means that you pay a specific amount for a specific period of time (like renting) and then return the car after that time.  Most leases require you to be 18 or older and have a credit history see Credit History & Credit Score (FICO), which is often difficult for a teen to establish.  A responsible adult might have to take out the lease and the insurance, and list you as a regular driver.  However, you need to reside in the same house or neighborhood as that lessee. One basic guidline for leasing a car is that if you drive more than 12,000 miles per year, you should buy vs. lease a car.
  • Good Things:  Many dealers require no down payment or only a small one at best.  You don’t have to worry about selling the vehicle at the end of the lease—you just give it back.  And you can probably lease a more expensive car than you could buy in the regular way. Monthly paymnet are generally lower.
  • Bad Things:  Leasing is always more expensive than buying, especially if you’re paying cash.  Most dealers limit the number of miles you can drive and make you pay steep penalties if you go over your alloted millage.  And when you return the car, you’re back to square one. 
  • Equal:  You are responsible for insurance and repairs no matter what.


 

Expenses

  • Gas and Maintenance:  These prices will probably differ based on where you live.  Make sure you can afford all the expenses that go with owning and driving a car.  Rule of Thumb:  add at least $225 for gas and maintenance per month (Hybrids are cheaper!).  Again, if you can’t afford to properly maintain your desired vehicle, get a less expensive one!


    • Use the gas the manufacturer recommends, not a higher or lower octane.
       
    • Take good care of your car.  Follow the maintenance schedule from your car manufacturer.
       
    • Change the oil every 3,000 miles.  At the same time, have the garage check all fluids in your car.
       
    • Check your tires often to make sure they have the proper amount of air (varies based on the type of car and tire manufacturer).  This can affect your gas mileage, ride and, most important, safety.
       
    • Look for tread wear on your tires.  One quick way to check is to take a penny and insert it head first into several tread grooves.  If you see the top of Lincoln’s head, your treads are worn and your tires need to be replaced.  Check all of them.  Make sure the four tires are the same make and model.  If you want to upgrade or change the make and model, change them all.
       
    • Align and balance your tires every 12,000 miles.
       
    • Rotate your tires every 6,000 miles. 

  • Insurance:  Your parent’s insurance will likely double (if they have only one car) when you turn an age where you can drive without an adult in the vehicle.  This age varies in each state.  This is true whether or not you own your own car.  If you are the primary driver for a vehicle and whether you own it or not, your rates will go up even higher.  If you do own it, the insurance will be sky high.  You need insurance if you have a license.  Always carry car insurance even if your state does not require it—your liability if you have an accident is just too great!  Once you start driving, if you don’t have any tickets or accidents after three years, you rates should start to go down.  If you are a teen and still in high school, insurance can be particularly high.  Shop around for the best rate.  Many times you can pay a little less for insurance if you have taken a formal driving course and/or have good grades (honor roll).  The safer the car, the better the rates.  Most four-door models are less expensive than two-doors.   If a car has LoJack, a car security system, it will also reduce your rate. Insurance rates depend on where you live.  You might also get a break if your car is parked in a garage.  How much you drive and your annual mileage will also factor in on your insurance rate.  Although it is not fair, just being a teen will affect your rates the most.

Every state's insurance regulations are different, so find out what your state mandates.  Realize that what the state mandates is a minimum most experts recommend more.  There are many parts to car insurances (liability, collision coverage, comprehensive coverage, gap insurance etc.), so speak to an expert.

Quck Tips on reducing your insurance:

  • Look For A Good Student Discount
  • Keep a  Clean Driving Record
  • Raise Deductible
  • Older Cars have lower insurance rates
  • Shop around for the best policy

The biggest factor in your insurance rate is of course your safety record, and that of your vehicle.  The obvious rules help keep you out of accidents:


 

SAFTEY RULES

  • Don’t talk on a cell phone.
  • Don’t text messages while you drive.
  • Concentrate on the road, not your friends or music.
  • Let someone else change the channels or the temperature, unless you are at a stop sign or parked.
  • Wear seatbelts—make sure your passengers do too!
  • Leave plenty of room between you and another vehicle.
  • Use your signals.
  • Be especially careful in bad weather.
  • Obviously don’t drink or use drugs when driving.
  • Don’t speed.
  • Obey the rules for your age and driving license type.  Like if you are in a state like mine, only one non-relative can be in the car until you are 18.

Sorry, but I had to mention the above items in order to provide you with a complete picture.
 

  • Other Expenses:  Remember to save some money for other related vehicle expenses.  This might be for parking fees, tolls, car washes, and getting or renewing your license and registration.