Keep calm, its just a car!

We've just been through the process, of helping our 17 year old daughter buy her first car - and now the process is done, I've discovered that there were a few "I wish I had of known" moments; that are a little hard to find out, when you are going through the process the first time.

So I've put together 5 tips that "I wish I had of known" before we started the process.....

1. Have a clear agreement of who is paying for what, before you start the process:

There are so many different choices for parents to make regarding the purchase of the first car:

1. buy the car for your child and gift it

2. split the purchase between the parents and child (i.e. 50:50)

3. make your child pay for the car outright

No funding model is right or wrong, but its really important to have an 'adult' conversation with your teenager about who is paying for what (and share an understanding about why you've made that decision).

We've friends who have purchased a new car for their child and given it to them unencumbered; we've friends who've gone $ for $ with their child and we've friends who have left their kids to it.

In our case: our teenager had been working for quite some time; but we'd also decided to contribute to her savings - with regular weekly deposits being made into her savings account since she was an infant; so when she asked us if we'd contribute to the cost of the car, our response was that we'd contributed to the bank account already!

What was interesting is that our decision to make her fund the purchase from her substantial savings made her set a budget, as she didn't want her savings account to dip below $10,000. I like to think that our model has also taught her to value her money as well!

2. Teach your teenager about cost of ownership:

When you buy a car, you are also buying around $1000 a year of other things too: make sure your children understand the additional costs of owning a car - including insurance, registration, servicing and fuel. Use these expenses to help your child understand the "cost of ownership".

Cost of ownership is explained in the following way:

Price of the car: $xxxx.xx

+ Annual costs: $xxxx.xx

- Sale price of car $xxx.xx

=Cost of ownership

Annual costs include registration, insurance, servicing - these sums should be estimated for the length time that your teenager plans to own the car.

Understanding the cost of ownership will do one of two things:

1. If you are buying the car for them, it will give them an appreciation of all of the costs involved and the expense that you are incurring on their behalf

2. If they are making the purchase, it will help them make a better decision about the car that they buy: especially as often the lower the dollar value, the higher the milage, the lesser the life of the car.

3. Keep the cost of the first car down

Insurance is a killer: logically you think that the lower the value of the car, the less your insurance expense; but the reality is that when you take out insurance for a young driver the cost of insurance sky rockets.

What we discovered was that there are 3 options for insurance

1. put the insurance in the teenagers name. pay a premium, but if they maintain an accident free record, their cost of insurance will be much lower as they get older

2. put the insurance in your name and nominate them as a driver: you bring the cost of insurance down slightly; but there is still a penalty for having a young driver

3. put the insurance in your name and if they have an accident pay a BIG excess when the time comes

The fourth option is to keep the value of the first car very low (under $3000) and forgo comprehensive insurance altogether.

But anyway you look at it, the lower the value of the car; the lower the insurance cost.

4. Put the car in your name

This is definitely a piece of wisdom that I wish we had of known - as if the car is in your name, you can legitimately put the insurance in your name too..... which can save you more than $1000 in insurance.

5. Be fearless, buy local

As a resident of a smaller regional town, a major purchase of a car is a terrific time to teach your kids about building relationships, negotiating and how to support a local business.

A good car salesman will help you identify your needs and match your needs with a car.... they'll present what they have on the lot and possibly do their best to convince you to make a purchase, asap.

Purchasing a car is a perfect time to teach your kids about being brave in negotiations and asking questions like "what's your best offer"; its also a great time to teach them patience in a sales process - if its not quite right, then its right to walk away and wait for a new option to come onto the market.

What we found in our experience was that we built a relationship with our dealer - over a period of about a month, we looked at 5 cars (in one dealership), which allowed the teen to refine her "wants" and "needs" and she ended up with a great buy, because our salesman also got to know her and sourced a car that provided great value, while meeting her needs and budget.

I've added the buy local, because I also believe that the purchase of a car is a great time to teach your children about the benefit of buying off a local. Its easier to build a relationship face to face; if something goes wrong, its much easier to be dealing with a local, than be dealing with an issue with some one remote from you. You are also teaching your teen to support a local that supported them: local dealers employ local staff who are part of our community. Local dealers also put tonnes of money back into community through generous sponsorships and donations. All of that is only possible if locals continue to support them.

#firstcar #parenting #parentingteenagers #moneymanagement #teenmoneymanagement #buylocal