Thursday, March 8, 2012

First New /Used Car

Every parent comes to that moment when they realize that their child needs their FIRST  car. It is so bittersweet, because the child getting a car is so helpful to the parent, but the insurance and the credit , cash layout and the money needed to maintain can be overwhelming. There is also the question of how to teach the student to be a responsible driver and hold them accountable for a percentage of taking care of the car. How do parents navigate through this? The truthful answer, the best that they can.
 I will share some of what I have learned and hopefully it will be helpful.
The first topic I want to address is credit for a teenager/college student. I have found that if you come out of high school or college with no score on your credit, your will be punished. What I mean buy that is no bank will loan you money to buy a car on your own. There are some manufacturers that do have "college grad" programs which will allow you to lease or buy a car on your own as long as you have some sort of credit, no negative trade lines and a college grad working in your field . Some are Toyota, Kia, Hyundai and Nissan.

 The other option I have helped with other than paying cash for a vehicle is leasing a inexpensive car and making the payments with that cash you were going to spend on a car. This is not a bad option. But it is not for everybody. It does allow for very low maintenance costs due to the car being under new car warranty. You just need to be honest with yourself about mileage that the student will be driving. As you know with a lease there are mileage restrictions. Also there is a turn fee that could be between $300.00 and $400.00. Although sometimes those can be waived depending on the choices you make at the end of the lease.  The last thing to think about is holding the student accountable when it comes to the care, there can be charges at the end of the lease due to wear and tear. But this can make financial sense for some people.

 I know of some parents that added their children as authorized users on their credit cards at age 16. This way the student had 700 or higher credit scores when they reached graduation. This is providing that the parent maintains their own credit. This is just information shared with me and I think it is important. When it comes to financing, it is all about the FICO score.

I have mixed feelings about the co- signing thing. It so depends on the child/adult! I think if you prepare and teach your child, it will not be necessary. If they have made some mistakes on their credit, then I think they need to repair it. That can be the biggest consequence.
When it comes down to buying the first car with cash, there are some good buys. You must give your self some realistic expectations. Buying "cheap" cars are always a gamble.
It s the endless battle of trying to find the $5000.00 that has no issues. It is not an easy task. Here are somethings I tell my clients:
1) Check out Craigs List. Sometimes you will find good buys from local people. Local newspapers are also a good place to look
2) Let people in your social media network know that your looking. You can reach many people with one ask.
3) Any vehicle you find, get it inspected. It will be the best $20.00 to $60.00 you ever spend. If someone won't let you get it inspected, WALK away!Cars can look really pretty on the out side and have a ton of issues under the hood.
4) Just know that any car in this price point will need some care. So allow yourself a little buffer.
5) Let the student help and ask for them to put in some cash and agree to help do oil changes etc. Nothing unrealistic to their money saved or income.
 6) Give yourself some time to find a car. It does take time to find a good one.
 7) As long as the child is still a dependent, keep the car in the parents name. Saves money on insurance.
8) When you find a car, look online at the year make and model to see what the repair problems could be. There are certain cars that I would not put my child in if they had high mileage or older. please consult a mechanic. I cannot stress that enough when your purchasing a "cheap" car!

We all have different perceptions of what we thing is best for our finances, children, car purchases. There is a lot of information out there that can be confusing. Put it on paper. Weigh out all your options. It will save you TIME and MONEY!