1. Open a Savings AccountPlan on helping your child save for a down payment for at least two years. If you want your child to have a car when they are 16, start helping them save when they’re 14. If your child is already 16, plan on helping them purchase their first car when they are 18. Encourage your child to do chores or take on a part-time job and start saving at least ten percent of their income. You may want to encourage your child to save by offering to match their deposits dollar for dollar. If your child deposits $50 a month, and you match that amount, they’ll have a $2400 down payment in two short years.
2.Build Good CreditA positive credit history will ensure that your child gets a good deal on their first car. As soon as your child starts saving, help them obtain a secured credit card. Seed the card with a few hundred dollars and teach your child how to use the card responsibly. Not all secured credit cards are reported to the major credit bureaus; make sure the one you choose is reported monthly.
3.Create a BudgetOnce your child is ready to make their purchase, sit down with him or her and create a budget. Your child may be dreaming of a $20,000 car, not understanding that it comes with a $300 monthly payment. It’s not fair to your child to allow them to get their hopes up by looking at cars that they can’t afford. Once you’ve created a budget with your child, go shopping for a vehicle that your child can afford.
4.Comparison ShopOnce you’ve made a short list of the cars that both suit your child’s needs and financial status, visit several dealerships in order to get the best deal. Never let your child go shopping for a car alone! Your child is more apt to get a bad deal if the salesperson realizes that they are new to the process and have no adult back-up. If you get the feeling that the salesperson may be trying to take advantage of your child’s excitement, look elsewhere. Use the opportunity to teach your children the art of negotiation!
5.Compare LoansDon’t assume that you’ll get the best loan rates directly from the dealership. Once you’ve gotten the dealership's deal in writing, head home and contact your own financial institution. You may find a better deal for your child through your bank or credit union. A first time car buyer isn’t going to get the best interest rate, but you can often find more competitive rates through a financial institution that you have a history with.
By following these five tips, you’ll be helping your child buy their first vehicle and build a positive credit history at the same time. Help your child open a savings account, sit down and create a budget, and help them secure the best auto loan possible. The lessons that your child learns throughout the process of buying their first car will be invaluable to their future as a financially responsible adult.
Tom Yates writes for auto and auto selling blogs and web sites. For more information on prepping your car to sell, Visit this Website.