December 1, 2011

Your First Ride


For many teens, getting a driver’s license means one thing — freedom. The open road all to yourself. No longer having to beg for rides to school, sports or other activities. Weekend evenings spent wherever you’d like, instead of trapped at home with mom and dad.

But let’s face it, the reality of a first car is a lot less like those holiday car ads that start airing every year around this time (where do they find those giant bows, anyway?) and more like the ones for an oil-change place. It’s practical. And though it does give you a certain amount of freedom that you didn’t have before, it also comes with a lot of responsibility. But that’s O.K. — taking on more responsibility is good practice for being an adult. A first car is a great place to start learning about finances too. You’ll want to consider the price of the car, gas money, insurance, taxes and other fees, plus any maintenance your car will need and create a budget from there.

To get you started, we’re going to break down each expense so you have a realistic idea of what your car will cost. Once you’ve got your budget together, you can start picking out colors.

The Cost of a Car


Finding the sweet spot for the price of your car is a big first question to answer. Are you paying for the car yourself? Do you have money saved up or are you going to try to get a loan? If you’re paying for the car yourself, congratulations! Saving up enough cash to buy a car is a big accomplishment.

Of course, you still have to decide how much of your savings you can put towards the car and how much will have to go for the other stuff (insurance, taxes, etc.). Plus, you might decide that you want to spend a little more at first to spend less later – newer cars often need fewer repairs and get better gas mileage.

On the other hand, you’ll pay more for insurance and taxes on a new car. Do the math carefully before you make your final decision.

If you’re planning on getting a loan for your car, you have a few options, but keep in mind that as a young person, those options are limited. You’ll definitely need a down payment — usually 20% of the entire loan — to get started.

You’ll also probably have to be at least 18 to take out a loan, though some lenders will allow an adult to cosign for financing with you. You should also expect to pay between at least 4 and as much as 16 percent in interest on your loan. Rates on loans from a car dealer are typically the highest, but you can also borrow money from a bank or a credit union, which offer lower rates on loans, as do insurances companies, which can also land you a discount on the cost of insurance.

Obviously, you should search for a loan that requires you to pay the lowest interest rate.

Tag, Title and Tax


If your first thought when reading the above is what?, that’s O.K. The good news is that two out of three of those are one-time fees, and the third you’ll only have to cover once a year. Tag refers to the cost of getting a license plate for your car and how much you pay depends on the car you buy and the state you live in. It typically runs around $300.

You’ll also have to pay a few to have the car’s title transferred to you. Again, this varies by state but will typically cost around $100.

Finally, taxes. This one is just like the sales tax you pay on the regular stuff you buy. Most states charge you a percentage of the cost of an item when you buy it. How much it is depends on where you live and the price of your car, but keep in mind you’ll have to pay a tax on the value of your car each year, just like in Monopoly.



This one might sound simple. You find an insurance policy and pay your premium and if you have an accident, the insurance company pays to have your car repaired, right? Alas, it’s a little more complicated than that.

There are three basic types of car insurance coverage: Liability, Collision and Comprehensive. Liability covers the cost of damage to someone else’s car or medical bills if there is an accident that is YOUR fault and that you’re liable, or responsible, for. That’s it. Your medical bills, damage to your car or anything else isn’t covered under liability insurance.

Collision insurance covers the cost of repairing your car if you’re in an accident, no matter whose fault it was.

Finally, comprehensive insurance is just what it sounds like. It covers the cost of anything that happens to your car outside of an accident, like flooding, theft or vandalism.

You also have option to purchase insurance for other stuff that can happen to a car, including small things like broken glass in a window or personal injury for your passengers. So, what’s the price of all this insurance?

Not to sound like a broken record but it all depends on where you live, how safe of a driver you prove to be, how old you are, what kind of car you have and, yes, if you’re a boy or a girl.

We’re almost there. Last thing to think about is regular repairs.



Have you checked the prices at your local gas station lately? Have you multiplied the price of a gallon of gas by how many gallons your car can hold? Yowza! That number alone might make you want to invest in a nice bicycle.

However, if you’re prepared, it is possible to keep your car on gas and food on the cafeteria table.

To set a budget for gas money, take into account how often you’ll be driving and things like how long it takes you to get to school. This is one place where driving restrictions for teens can actually work if your favor. After all, if you’re too young to drive at night, that’s a third of the day you won’t be spending money on gas. Also, keep in mind that if you carpool with a neighbor somewhere or drive a younger sibling to school, in most cases it’s probably alright to ask for a little gas money from your passenger, or parent.

One of the best things you can do to keep your car running well is getting an oil change when you’re supposed to — about every 3,000 miles you drive. You should also have your tires rotated and your brakes checked and, if necessary, replaced. You should budget between $125 and $400 per year for oil changes and tire rotation (depending on where you go to have the oil changed and the kind of oil you use) and around $400 every 30,000 miles for brakes.

You’ll also want to get your car tuned up from time to time — something that you’ll want to do when your car seems a little off, which will cost you on average between $100 and $300.

Taking all of this into account, you’re now ready to ask the big question: Can I afford to buy and keep a car?

If the answer is yes, congratulations! Remember to turn off your phone before you get behind the wheel and keep your seat belt buckled.

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