If you’re a teen, it’s possible that getting your driver’s license was or will be one of the most important milestones in your life so far.
Getting your driver’s license as a teenager gives you more freedom, but with that also comes responsibility.
If you’re ready to be a safe, focused driver and following the guidelines for teen drivers, you might also be ready to buy your own car.
So how do you do that?
The following are some tips for teens who would like to buy their own first car.
Set a Goal
First, before you can start working toward saving up for a car, you’ll need to set a budget or an amount you’d ideally like to spend.
Don’t blindly guess—take a look at the used car offerings in your area and see what they typically go for.
You’ll more than likely have to buy a used car on a teen budget.
This will give you some starting point to map out how you’ll save that much money.
Calculate a Down Payment
The down payment is something you don’t have to pay on a new car in every case, but if you’re a young buyer or you want to lower your monthly payments, you’ll likely need to.
Once you decide on an overall budget for a car, you should aim to have around 10% down on a used vehicle.
The more money you can save toward the down payment, the better off you’re going to be when it’s time to buy.
Can You Get a Car Loan If You’re a Teen?
If you’re saving up just for a down payment on a car, then you’re going to have to get a loan to pay for the rest. You can get a car loan as a teen, but it’s tough to qualify, so that’s something to be aware of.
As a teen, you don’t have an established credit history.
You’ll may need to find a lender that specifically focuses on people with little or no credit history.
You will also need to show if you’re going to apply for a loan that you have a reliable income to make your payments.
Some lenders have programs not only for teens with no credit history but also specifically for students and first-time car buyers. They may look at factors outside of your credit history when deciding whether or not to give you a loan, such as your GPA.
If you have a family member who will co-sign for you, that’s the best way to get a car loan as a teen.
Make Sure You Can Cover the Other Costs of Owning a Car
If you save your money and buy a used car outright or maybe you make a down payment, and you’re able to get a loan, unless your family is going to help you, you’re also going to be paying other expenses.
You have to work these into your budget.
One thing you’ll need to pay for is car insurance, although if you can manage it, it’s better to add to your parents’ policy instead of getting a separate one, which would be much more expensive.
You’ll also need to plan to pay for the costs of gas and parking, maintenance, and sometimes major repairs as well.
Alternatives to Getting a Loan
It can be challenging to get a loan as a teen, so you’re better off exploring your alternatives.
As has been touched on, saving up for your car outright is a good financial choice. You can avoid the loan, and you don’t have to worry about how you’ll make payments.
You could also talk to your parents or another family member about whether they would be willing to provide you with a loan, where they initially pay for your car, and then you make payments to them instead of a bank.
Earn Money On Your Savings
Finally, as you’re working toward saving for a car, you should be smart with how you put your savings aside. There are savings accounts that will pay interest, or you might even talk with someone who knows about finances to figure out if you could invest in something relatively low-risk. This way, each time you’re setting money aside you’re potentially earning more passively, which can help you reach your car goals faster.
Along with working at a regular job, you might want to find ways to pick up extra income on the side whenever possible. For example, you could work and also babysit, tutor, or do odd jobs for family members or neighbors while you save for a car.