As a parent, watching your first child receive their driver’s license may feel equally nerve-wracking and exciting. With this new skill, your child has taken a significant step toward adulthood and the independence that comes with it. At the same time, a new driver means a new set of safety concerns and, of course, new expenses. The process could feel overwhelming, especially if you’ve never purchased a car for one of your children before.

Whether you plan on purchasing a vehicle outright or taking out a personal loan to buy a car, the right price for your kid’s first car depends on your family’s unique circumstances. Consider the following factors to help you make the right choice.

Your Kid’s Driving Needs

Asking how your child plans to use their car could help you find the right price point. Will they primarily drive around town or travel longer distances? If they plan on spending a lot of time on the highway, you may want to consider paying extra for specific safety features like adaptive cruise control. Likewise, if you live somewhere that experiences a lot of winter weather, you might prioritize cars with excellent traction, heated seats, or all-wheel drive. Make sure your teenager is involved in the decision-making process so you can invest in features they’ll use.

Your Family’s Budget

Of course, the cost of your child’s new car shouldn’t break your family’s budget. While it’s tempting to splurge on a new car with all the latest safety features and most recent technologies, that may not be the best option for most families. You may be able to find a used car that meets your needs and your budget. Whether you’re paying for the car on your own or with help from your child, make sure the costs won’t cut into your necessary expenses.

All Related Costs

When it comes to buying your kid’s first car, you have more expenses to consider beyond the car’s price tag. You’ll need to budget for monthly expenses like insurance premiums, gas, and maintenance. Some cars could also cost more in unexpected repairs later down the line. While buying an older used car with many miles on it could save you money initially, mechanic bills may add up over time and make it less worthwhile.

The type of car your child drives usually impacts their insurance premiums, as well. Generally, sports cars, luxury vehicles, or brand-new models mean higher insurance costs, especially for a teenage driver. As you decide how much to pay for your kid’s car, make sure you keep these extra expenses in mind.

Your Loan Terms

While buying a car in cash may simplify the purchasing process, it’s not always feasible. You may have to take out a personal or auto loan. This approach has some advantages—if your child is old enough, you may be able to cosign a loan in their name and help them build their credit score.

It’s also critical to read a loan’s terms and conditions thoroughly before applying. Even a relatively affordable car could require expensive monthly payments if the loan has high interest rates. Remember, a higher down payment could help secure a loan with lower monthly payments. Before finalizing the loan, determine whether your kid will be responsible for a portion of the payments.

The Bottom Line

Your kid’s first car offers them a taste of freedom and responsibility, but it could leave a dent in your family’s savings. There’s no set rule for the right amount to spend on a teenager’s first car. But with factors in mind like your child’s needs and financing options, you could keep your new driver safe and content on the road without breaking your budget.

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