The Cost of Keeping a Car for Your Teen
Insurance companies figure that drivers between 16 and 24 are most at risk for accidents. Insurance rates for that age group reflect the industry's feelings.
Those of us who own cars understand that buying one is just the beginning of the strain that a vehicle can place on your pocketbook. Most teenagers understand that it takes significant money to buy a car, but are uninformed about the continuing costs.
Keeping a car is expensive business. You've got to buy gas and pay to have the car maintained. Gas prices are already astronomical. Our shaky world political situation at the moment, however, makes it impossible to predict what gas prices will be like in the future.
An oil change, depending on where you live, can cost anywhere between $25 and $50, and then there are all the little costs such as washing the car, inspection fees, parking fees, tolls, and so forth. And then there are registration fees, costs to have your driver's license renewed, and the big one—auto insurance.
When your teenager starts driving, he'll either have to buy his own auto insurance or you'll have to add him to your policy. Most insurers will require your teen to be added to your policy or to have his own policy as soon as he gets his learner's permit. However, because a licensed driver is required to be in the car with a learner, some insurers don't consider a learner to be a significant risk, and will charge only a minimal amount to add him to your policy. Other insurers, however, will up your rates significantly as soon as your teen gets the permit. Insurance companies consider teens to be high-risk customers, because they're inexperienced and make more frequent mistakes than those who have been driving for longer. Unfortunately, statistics show that while teens make up 10 percent of the general population, they're responsible for 14 percent of all motor vehicle deaths.
Remember that many insurance companies offer lower rates to teens who have completed a high school driver's education course, who earn good grades in school, or who meet other requirements. You may save up to 10 percent of the additional premium for a new driver, so be sure to ask your agent what's available.
While it's common practice for parents to add their kids onto their policies, it isn't always the least expensive way to insure your child. If you've got two or three expensive cars in the garage and your kid is going to drive one of them, it's going to cost a hefty sum to add him onto your policy because expensive cars cost a lot of money to fix. If your kid is driving a used car that didn't cost an arm and a leg, however, and you buy him only basic insurance coverage, it may be less expensive to get him his own policy than to add him onto yours. On the other hand, if you have discounts on your policy, such as safe driver or multi-vehicle, adding your teen to your policy might be the way to go. You'll need to sit down with your agent to determine the best plan for you and your teen.
Ask your agent to run the policy costs of adding your child to your current policy and the cost of having him insured under his own policy. Many insurers will require your child to be included on your policy for a certain amount of time after he's started driving. That can be fine, but if your teen has an accident or commits a traffic violation, your policy will reflect that. And an accident or violation may prevent your teen from being able to get his own policy.
When considering what to do about your teen's car insurance, consider all the options and ask a lot of questions.
An important consideration to keep in mind if your teen is included on your policy, is the designation of the car he'll be driving. You sure don't want to designate your brand-new Volvo as the car he'll be driving when you can just as easily designate the eight-year-old Honda Civic. The rates will be increased on the car your teen will be driving, and you don't want to have to pay even more to insure a new car than you'll already be charged. Also keep in mind that, just as with your own auto insurance, insurance rates for teens vary depending on where you live. Insuring a teen driver in Los Angeles, for instance, can cost many times more than insuring a teen with the same vehicle in a rural area of Kansas.
Explain to your child that owning a car is expensive business, and that the costs do not end the day the car is purchased. Teach her the value of taking care of her car, and make sure she understands what needs to be done in the way of maintenance and daily care. And, be sure that he or she knows exactly what to do in the event of an emergency. Come up with a plan in case of trouble like a flat tire or engine trouble.
Teens and cars can be a worrisome mix, and paying for the vehicle is just one of those worries. If your kid has a car, do what you can to educate him in every applicable area—from finances to safety. Then sit back and try not to worry too much. Remember that most teens make it through to adulthood relatively unscathed, and your teen most likely will, too.
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Excerpted from The Complete Idiot's Guide to Personal Finance in Your 40s and 50s © 2002 by Sarah Young Fisher and Susan Shelly. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.
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