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So your child is ready for their first car and you’ve decided to help them on their journey. We take a look at how to consider your finance options and some tactful ways to steer them away from a sports car and towards a smart purchase.
However you choose to manage the car purchase, a great starting point is to sit down and talk. You’re dealing with a teenager/twenty-something, so it’s important to begin the process by understanding exactly what they want to get out of it. There’s no point expressing an opinion until they’ve fully expressed theirs.
Try to get a clear outline of what they would want to use a car for. This will give you important information regarding how far they want to travel over the course of a month and what specific needs they will require from the model that is purchased. For example, if they’re planning on taking it to the beach to surf, they’re going to have to consider space for the surfboard. Similarly, if they’re planning on driving it to university every day they’ll have to pay close attention to petrol costs.
Let’s talk money
You’re going to need to make a decision about whether you are willing or able to pay for the car or whether you want your child to manage the cost themselves. Your participation will not only have a huge impact on what they can afford, it will also give you more ability to determine what they buy with the money.
The decision is yours, but there are pros and cons for each of the different finance options:
1. You purchase the vehicle
This gives you all of the cost and all of the control over what is bought. You can choose either to pay for the car upfront or organise a car loan that will require regular repayment. Depending on the level of financial involvement you want your child to have, you could then reasonably expect them to contribute to the repayment cost.
2. Your child purchases the vehicle
If your child purchases the vehicle they take control of the decision making process and any potential debt. As a parent, you will know best if this is advisable. If your child does not have the money to make an upfront purchase, you will need to help them to organise a loan. Setting up a loan without a credit record may be challenging as it is unlikely your child has any previous borrowing history - this could lead to higher interest rates and a higher cost of borrowing.
3. You purchase the car in partnership with your child
This could be the happy balance you are looking for. You may be able to partly finance the car purchase and help a finance company with the challenge of lending to a customer with no history of borrowing. Your involvement will also allow you to maintain an input into the car type, and keep a close eye on repayment of any debt.
Remember when you’re reviewing the financial cost of buying a car to take into consideration both set up and running costs. These include the cost of insurance, registration, petrol and maintenance.
Let’s focus on safety
It may be unlikely that you’re going to be able to afford to buy a brand new car for your child but that doesn’t mean you need to compromise on safety. Because your child is new to driving it’s important that they are as protected as possible when they are on the road. There are a variety of safety reports available that will allow you to choose a model of car that will offer optimum protection for your child and their passengers should anything go wrong.
Try looking on the Rightcar website for details of key safety features to look out for. You can also access lists of the safest new and second hand cars on the market.
As well as focusing on making the model of the car as safe as possible, it’s worth setting some ground rules around safety for once your child hits the road. Make them clear and simple, and easy to remember. Some clear consequences for failing to be safe - such as restricting car usage - can provide a further incentive.
Make some choices, find a car
Having had a good chat with your child about what exactly they’re looking for, you should be able to work with them to choose a make and model of car that fits your budget, their needs, and your safety requirements. There will no doubt be some compromise required on both sides, but if you’ve got a teenager then you’re probably already good at negotiating.
It’s a good idea to put your child in charge of finding the cars that fit your criteria and are available to sell. Once you’ve created a shortlist you can take time to visit the cars together and test drive them so that you can both be satisfied with their handling and quality.
Before making a purchase
Remember that if you are buying a car second hand it’s important to get a thorough vehicle inspection before you hand over any money. This will allow you to check that there are no hidden problems with the car and be sure that it hasn’t been involved in any major accidents that have required large scale mechanical repair.
Prepare your finance before you enter into negotiations. If you are organising a car loan make sure you contact the team at Enterprise Cars so that we can work out the best solution for you. Even if you decide your child doesn’t need to be involved in the finance upfront, it’s a good idea for them to understand the process and the financial commitment involved. If nothing else it will help them appreciate the value of your investment in their freedom.
A first car is an important step in the process of growing up and finding independence. Whether you invest in it yourself or you support your child on the journey; it’s worth being actively involved to ensure that you keep a focus on safety. Being part of the process will also allow you to support your child through what can be a big financial commitment, which could set them up nicely for managing their own finances in the future.
If you’re thinking of buying a new car or you already have a car and you’re taking a closer look at your car loan, give Enterprise Cars a call. Our team can help you to work out the best loan for your situation. We also offer support with working out your car loan budget when you need it. Contact us today to find out more.