Why Buying a Brand New Car for a Teenager is a Form of Insanity

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car accident, teen driver
No small number of parents buy a brand-new car for their teenager. It may be done as a first car, or even as a graduation present. But while it can seem like a benevolent act, it could also be a form of insanity. Consider some of the following – you may even come up with…

No small number of parents buy a brand-new car for their teenager. It may be done as a first car, or even as a graduation present. But while it can seem like a benevolent act, it could also be a form of insanity.

Consider some of the following – you may even come up with a few more!

An accident waiting to happen?

car accident, teen driver

We all want to believe that our teenagers are “responsible.” That may be true – but only in a relative sense. They may be responsible compared to other teenagers, but they’re still teenagers. That means that they probably are not responsible in an adult sense of the term.

I’m not saying this as a criticism either – a teenager simply hasn’t had the life experience that an adult has. Where cars are concerned, that means accidents are bound to happen. We certainly don’t wish them on anyone, but the ability to avoid them – to the degree that’s even possible – usually comes with several years of driving experience.

As a new driver, a teenager will get into their share of “fender benders.” They don’t intend to do it, they just misjudge spacing and inertia. They assume they can park a car in a tight spot, and lo and behold – they can’t. Whoops – side swipe; didn’t see that coming. They hit the brakes a little too slowly at a traffic light, assuming they have more time to stop than they do. Oh-oh – rear-end collision.

They’re all accidents, but accidents that might have been avoided with a little more driving experience.

This isn’t to say that a teenager won’t get into an accident with an older car. But it will be a lot less expensive if they do. Replacing car parts and making major repairs is a lot more expensive in a brand-new car. With a used car – particularly one that’s over 10 years old – you can always use secondhand parts to replace the ones lost at a fraction of the cost. Also, since they’re more valuable, an accident with a new car will lower it’s resale value more substantially than it will with a used car.

When it comes to teenagers, accidents should be assumed as a given. You have to hope and pray that they won’t be anything serious. But teenagers getting into fender bender’s is about as predictable as the sunrise. Are you willing to bet a new car against that?

They probably won’t take care of it

If you had an older car when you were teenager – even a “beater” – you may not have liked the car, but you learned a lot about cars and car maintenance as a result of having it. That experience trained you about how to take care of a new car later in life. You learned what worked and what didn’t, and by the time you upgraded to a new car you knew exactly what you needed to do to take care of it.

A brand-new car is not a training vehicle – it’s the final product. The stakes are higher because the vehicle is more expensive, but the learning curve has effectively been removed. The teenager may not have the slightest idea as to what is involved in maintaining a brand-new car. That neglect could result in more repair costs than would be necessary.

Lack of financial contribution

Perhaps the most under-estimated problem with buying a brand-new car for a teenager is the fact that he or she will have “no skin in the game.” If they had to buy a car all by themselves, or at least have to make a substantial contribution, they will have a very different view of the vehicle then they will if they don’t even put up a dollar.

Now maybe your teen is making a contribution to the purchase of a brand-new car, but that’s often not the case. A teenager typically does not have the financial resources to make a significant contribution to something as expensive as a brand-new car. They might be able to pay the entire cost of a $2,500 used car, but it’s doubtful that they will be able to make much of a dent in a $25,000 brand-new car.

Which brings us into the last and most obvious issue…

High cost

I saved this point until last, because it is the most obvious reason for not buying a brand-new car for a teenager.

No matter how you add it up, a brand-new car just costs more than a used car and can really put a tight grip on your budget. It’s not just the purchase price either. It’s also higher insurance, more expensive repairs (you can’t put use parts into a brand-new car), and the fact that your teenagers brand-new car will probably be the preferred mode of transportation in his or her social network. Translation: a brand-new car is likely to be used a lot more than a used car will. That will mean more gas and wear-and-tear.

All of those costs will be magnified if the new car is purchased with a loan. Even with a fairly low loan balance – say, $15,000 – you could be looking at a monthly payment of $300-$400. Will you have to pay that each month while your teenager is in school? And if your teenager will make the payment, does he or she have the means to do so? And even if they do, what percentage of their income will be eaten up by the car payment? And even if you or your teen can easily afford it, is it the best use of financial resources? Cars after all, are a depreciating asset – especially new ones.

Is buying a brand-new car for teenager a form of insanity? Based on all the points above, I think it’s inescapable. But what do you think?

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About Kevin Mercadante

Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry. He lives in Atlanta with his wife and two teenage kids and can be followed on Twitter at @OutOfYourRut.

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