How Much Should You Put Down on a Teen's Car?

How Much Should You Put Down on a Teen's Car?

When it comes to helping your teen get their first car, there are some things you should know. Spending a ton of money on a teen’s vehicle isn’t typically recommended, and we’ve got some advice on how much to spend and how much to put down.

How Much Should You Spend?

Down payments are a great idea for any auto loan – new or used. You may be aware of the common advice that says you should save around 10% to 20% of a vehicle’s selling price for a down payment. Notice how the advice isn’t “save $1,000” or any definitive number. The amount you should save depends on the price of the car.

To know how you need to save for a down payment, you need to set a price cap. It’s generally suggested that parents cap their spending limit at around $10,000 for their teen’s first vehicle, and most stick to used ones. If you stick to this guideline, then the most you need to save is around $2,000.

Keep in mind, though, that if you opt for a less expensive car for your teen driver, then you may need more cash up front to fix it up so it’s road safe. This could include checking the breaks, oil, tires, etc. The less expensive the vehicle, the more work it may need before your teen gets behind the wheel. This could mean needing extra cash to ready the car, so it’s a good idea to prepare for that.

Finding the right vehicle for a new driver can be a tricky balance. You want something that’s reliable, somewhat inexpensive, and your teen may want a nicer car (who doesn’t?). If you’re not looking to break the bank for their first vehicle, but you want them to be safe, then having your teen help you save, or having them finance the car themselves is the way to go.

But, can your teenager finance their own vehicle?

Can a Teenager Get an Auto Loan?

Teens under the age of 18 can’t sign any lending contracts, or any contracts, for that matter. They’re considered minors and legally can’t enter a loan contract or have a car registered in their name. Teens over the age of 18 can get an auto loan, but their credit score may not be the best, making it difficult for them to go it alone.

Buying a Vehicle for a Minor

How Much Should You Put Down on a Teen’s Car?Since minors can’t enter a loan contract, you need to buy your brand-new, 16-year-old driver their first vehicle. Most parents buy their teen driver’s their first car, then register it and put the auto insurance in their names. If you choose this route, then you can list the 16-year-old as a driver.

Some parents match what their teens save, like a 401k. If your kid saves $1,000, then you match it with another $1,000. That would be a large enough down payment for a $10,000 vehicle. It’s probably to put a cap on how much you’ll match, though, in case your teenager saves a lot and you can’t match it when the time comes!

Many people enter into informal family contracts with their teens until they turn 18. This can include having them save up for a down payment themselves, or having them bring all the funds to buy the car. Once they turn 18, you could “sell” them the vehicle and they can get it registered in their own name.

Cars for Teens Over 18

Since younger borrowers usually don’t have the longest credit history, their credit scores may not be the best. Borrowers with no credit tend to have less than average credit scores, which can make it hard for them to get in an auto loan alone.

For those with kids over 18, you could help them get their first car loan by being their cosigner. Cosigners “lend” their good credit score to the primary borrower, and increase their chances of getting approved for financing. You wouldn’t get any rights to the vehicle, and you wouldn’t be responsible for making the monthly payments. However, the lender can ask you to make the payments if your teen starts missing them – you act as the backup payer.

If you cosign for your teen driver, then make sure they understand that their payments influence not just their credit score, but yours as well. If they make all the payments on time, both of you can end the loan with better credit scores. If it’s handled well, they may not need a cosigner for their next loan because their credit score has improved.

No Credit Auto Loans

No credit borrowers may have trouble finding financing for their first car loan. Most traditional auto lenders like banks and credit unions tend to have higher credit score requirements that need to be met to qualify.

Whether you’re going to finance your teen’s first vehicle yourself, or you need to act as their cosigner, not everyone has the best credit. If you’re in this boat, you may need the help of a subprime lender. These lenders consider more than just your credit score when you apply for a car loan. They’re equipped to handle all sorts of unique credit situations, such as a lacking credit history, poor credit, and even bankruptcy.

Subprime lenders are signed up with special finance dealerships, but they don’t exactly stick out from the crowd. No worries, though, because we want to get you connected to a dealer that has these resources.

To get matched to a dealership in your local area, fill out our free auto loan request form. Here at The Car Connection, we’ve created a nationwide network that covers the whole country. Don’t delay, get started today!


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