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Ahead of the Curve

Should You Buy New or Used for Your Teenager?

By: Larry Tolbert

Date: May 30, 2016

Recently, while chatting with a friend, we drifted on to the topic of cars.  It’s an easy subject for me as I have this addiction to “Ginger” my perfect red 1967 GTO.  How she got her name is a topic for another blog.   We shared what it was like to get our first car.  Mine was a pea green 1970-something Volkswagen 412.  One of Germany’s biggest engineering mistakes.  I’ll save you the details but it was horrible. 

As a mom she gave me another way of looking at this experience.  It impressed me so much I asked her to write about it for us:

It was a very strange site a few years ago as I navigated my way through the student parking of a local public high school. There were some older Chevys, Hondas, and Fords, but there were an equal number of Mercedes, BMWs and even a Porsche or two.

Financial Education for Adults - Radian PartnersThat image has stuck with me because I wonder about the thoughts and goals of those parents. Of course, we want to provide our children the best we can afford. However, as a parent, our job is also to get our children ready for the world they will experience when they become adults. I wonder about what kind of expectations those kids have – both of the world, and their parents continual assistance.

When I was a kid of driving age, my first car was an Army Green Pinto. The air conditioner was more of a fan than anything else, but I guess that’s okay, since the windows didn’t roll up all the way. With a black vinyl interior, I was often quite sweaty when I arrived at work. The tape deck didn’t work, leaving me to a very tempermental radio.  But all was great, because it was mine. It was my first ticket to freedom – independence – and I took every opportunity I could to go anywhere!

I got my first summer job, and saved up $1,500 over the summer. My dad sold my Nova, and along with my summer savings, I was able to buy a red hot SS Monte Carlo – now THAT was fun!

Over the years, I bought and sold cars several times, and at the age of 23 I bought my first new car, a Honda CRX - a little white two-seater just perfect for me and my California lifestyle.

My dad could have started me off with a better car, but instead he made it a little tough on me. He gave me a little independence, but also the motivation to do better, to earn more, to make my way in this world. It was the source of a few great lessons - in the value of work, of staying out of debt, the art of negotiation, etc. 

Teenagers tend to be very short sighted. They don’t understand the cost of insurance, maintenance, fuel, etc. so how are they to understand something like appreciation vs. depreciation unless it’s made personal? If you tell your kid that the $30,000 car you buy for them today will only be worth $18,000 in two years, will they care? What if it were their money? What if you gave them a choice of buying that $30,000 car, or buying a $10,000 car and investing another $20,000 for them instead?  Depreciation is minimized, and the chance for gain is made real – and personal to them.

If you buy your kids a Mercedes, BMW, or Range Rover in high school, they are going to have very high expectations a few years from now when they’re involved in a wreck, graduate college, or get married. Knowing this, you should either be prepared to deliver on those expectations, or make adjustments now to control them.

Personally, I love my early car-buying experience. It brought my dad and I together in normally a very tumultuous part of adolescence. It inspired many conversations about work, negotiation, my personal life goals, and more. It’s now part of my collection of fond memories I have with my dad, and it made me a better person.