OKLAHOMA CITY – When your teen starts driving, parents may be contemplating whether to buy another set of wheels.
Before you pull the trigger and buy a car, the Oklahoma Society of Certified Public Accountants has some tips on how to handle the finances and responsibilities that come with making a purchase of this size.
1. Check your budget.
Before sitting down to talk to your teen, take a look at your finances to see what fits your budget. Can you afford to add a monthly car payment? Do you have some spare money in savings to spring for an extra vehicle? What about the added expenses for insurance, gas and maintenance?
2. Know your options.
If a car payment fits in your budget, do you want to buy a gently used or new car for your teen? Will he or she be able to contribute to the monthly payment, insurance and/or gas? What if your teen saved up some money for a car and you matched it? Have you thought about buying a car for yourself and giving the older car to your teen? If you go that route, at least you would know the car’s history and your teen would already be familiar with the car. If you decide to get a car and need a car loan, talk to your bank before looking at cars. You might get a better financing rate and it could be a bargaining chip to use in order to get the best rate available at the dealership.
3. Have the talk.
If you decide to purchase a car for your teen, sit down and discuss what is financially feasible for your family’s budget. Discuss payment, maintenance, insurance and consequences for tickets and other violations. When talking with your teen, remember that what he or she has in mind may be completely out of your price range or not the most dependable car model for a young person. It’s best to get on the same page before you step foot on a car lot.
4. Know your stuff.
Before going out in search of a new or used car, get an idea of what you are looking for and make a list of what you want on a car then do some research. Thanks to the Internet, you can look at cars on manufacturers’ websites and most local dealerships. In addition, you can look up government crash test ratings online at the National Highway Traffic Safety Administration’s website at SaferCar.gov or find top safety picks at the Insurance Institute for Highway Safety’s website at iihs.org. You can also find out what a good price would be on a car given it’s age, mileage and condition at Edmunds.com, kbb.com and others.
5. Take a test drive.
After you have narrowed down your car choices, head to the car lot to take the cars for a spin. Take your teen along so everyone will get a feel for the car. Be sure to test a few cars before making a final decision.
6. It’s time for negotiations.
After you do the research, take a test drive and find the one you like, you’re better equipped to negotiate a price. Don’t be afraid to ask for a better price or to walk away if you feel a deal can’t be made. You can look at other dealerships and find a reasonable price you are comfortable paying.
7. A CPA can help.
Buying a car is a big investment. A CPA can help you analyze your current situation and determine the best course of action with regard to your personal financial plan. Turn to your local CPA (or start the conversation with one at www.FindYourCPA.com, where you’ll get a free referral and free 30-minute consultation) for advice on all of your financial questions. You can also visit www.KnowWhatCounts.org for financial tips and calculators, including the “How much car can I afford?” calculator.