How did you help your children get their first car?

[bjl584]

I don't have kids, but I remember my first car.
It was a 1987 Pontiac Sunbird, complete with all the problems that Detroit cars had to offer in the 80's.
My Dad paid for it.
I think it was around $2000.
This was in 1995.

I drove it for about 4 years before it died.

I was responsible for gas, insurance, repairs, and maintenance.

[GoodSteward]

Are they contributing to a Roth IRA?

I can see the whole working and saving thing but owning a car at that age seems like a bit much and a lot of money that could be saved for later.

my parents added a third car for the kids.

I worked summers only from junior year high school through college. That money went towards books and live like a college kid with no money.

when I graduated college and bought my first car, they gave me $500 towards it.

With the prices of cars today (I'm seeing used cars that people posted for 6,500 two years ago going for 12,000 today) I was thinking the first safeguard was to get a payment out of the way. I'm concerned if we keep waiting it'll just get worse instead of better. Toyota and others are shutting down plants again due ro covid, so used cars are going to keep going up. Saving for an IRA is a good idea, but telling my kids they need to save money they don't touch for another 40 years isn't going to make them very excited. I doubt they'd even do it. I want them to do something productive with it. I felt like a car would be the easiest to get them to do. I guess we'll see.

When the cost of goods increases this fast, buying sooner can be a better investment than saving for later.

[Fishindude77]

We bought their first cars (beaters) shortly after they got their drivers licenses as it eliminated a lot of our taxi service time.
When they got ready to move out we upgraded those to pretty decent used cars, paid for them in full, titled them in their names, pre-paid a year of insurance and told them from here on out vehicles were their responsibility.

[disneysteve]

Saving for an IRA is a good idea, but telling my kids they need to save money they don't touch for another 40 years isn't going to make them very excited. I doubt they'd even do it.

That's where good financial education comes in. I taught my daughter early on about saving and investing and compound interest. When she started babysitting, I had her open a Roth. I sat down with her at the computer and used a savings calculator to show her how that money could grow from age 16 to age 60. Those numbers are pretty impressive when you get such an early start. She funded it for a couple of years, paused during college when she had no income, and then resumed once she started working, even maxing it out the last couple of years. Suddenly, she finds herself with 20-30K already at age 26.

None of this has anything to do with the car question, but I'm a huge proponent of getting kids to start their retirement savings the moment they have earned income.

[myrdale]

In the meantime, My son decided to ask some of his online friends what he should look for, and his closest friend that lives out of state went nuts. Jealousy I guess? Told him it was terrible we were letting him get into debt (lol I'm the one in debt technically if we finance), but then this kid's mother texted my wife telling us we were horrible for considering this. Just floored at how some people feel they have a right to run into someone's business and start causing drama.

The friend isn't completely off base. The situation you originally described was you putting $5k towards a $15k car, and leaving the other $10k for them to cover. Being 16 years old, and $10k in debt (even if it is to your father) over a used car is not a good idea.

Teaching someone about the burden of debt and how they need to be free of debt as soon as possible, by putting them into debt makes no sense to me.

Your son asked his friend for advice. The friend telling him not to go into debt is the exact opposite of jealousy.

The friend's mother may have overstepped her bounds by giving her advice unsolicited, but then again she has your wife's phone number. If you want to make this mistake, then simply respond "Thank you for your input / concern" and leave it at that. Or text her back "Its none of your business and keep your nose out of our affairs" and block the number.

[kork13]

With the prices of cars today (I'm seeing used cars that people posted for 6,500 two years ago going for 12,000 today) I was thinking the first safeguard was to get a payment out of the way. I'm concerned if we keep waiting it'll just get worse instead of better.

Minor piece of advice, both for you and your kids -- in nearly all circumstances, one should aggressively avoid making long-term decisions (or those with long-term impacts) out of fear. The result is rarely to your benefit. It's really no different than the panic-selling of investments during a market correction.

Better to make cold, calculated decisions with an eye focused on the rational.

[LivingAlmostLarge]

DH bought his first car in 2000 with $10k from working a sabbatical year (he seems to be into this whole sabbatical thing) and $5k loan on a ford focus hatchback manual. He was 23 and starting grad school in the states. It was good for his credit. I got a car from my parents in summer 99 right before senior year of college and it was a Toyota Corolla automatic with manual handles, door locks and without a car clock. There was a space for it and my DH to this day always jokes about my car being so basic it lacked passenger airbag (i think it had it) and a clock. We kept those two cars until 2010 and 2012. Thankfully it helped us keep financial stable when we were in grad school making no money in HCOLA.

I wanted to keep my corolla past 2012 but my DH made me give it up when we had our 2nd child. I thought it was fine. He thought it was ridiculous to be driving without airbags, latch, etc. So I gave in and we bought a used hyundai. I'm now all about used cars, love the value. But I will say we probably overpay on used cars because we get them from dealers. But they still are pretty good deals.

I have a 12 year old so I'm getting there. I'm unsure what to do either.

[GoodSteward]

The friend isn't completely off base. The situation you originally described was you putting $5k towards a $15k car, and leaving the other $10k for them to cover. Being 16 years old, and $10k in debt (even if it is to your father) over a used car is not a good idea.

Teaching someone about the burden of debt and how they need to be free of debt as soon as possible, by putting them into debt makes no sense to me.

Your son asked his friend for advice. The friend telling him not to go into debt is the exact opposite of jealousy.

The friend's mother may have overstepped her bounds by giving her advice unsolicited, but then again she has your wife's phone number. If you want to make this mistake, then simply respond "Thank you for your input / concern" and leave it at that. Or text her back "Its none of your business and keep your nose out of our affairs" and block the number.

What is your opinion based on? Do you have any experience or findings, or is it just not normal so it's not good? I think buying a child a $5-10k car and handing it to them to cover everything else doesn't make sense to me. I don't want my kids feeling entitled to anything. My dad did to me what I am planning to do with them, I'm just a couple of years early on it right now. Adjusting for inflation, the price is around the same too but my dad didn't give me any cash. Just used his credit.

Teaching someone about the burden of debt by making them fear it is also unwise. That's the Dave Ramsey mindset and doesn't translate into the best advice long term. They will struggle to ever have a decent credit score, which will translate into paying more when you do need to borrow. Based on what I've seen and experienced, everybody is going to get into debt at some point. I'd rather establish the understanding on how to handle it upfront by letting them deal with some while I'm in charge of it all. That way I direct it.

I am one of the few "successful" individuals in my family, so I am accustomed to jealousy being touted as "concern." By successful, I mean I am not loaded in debt and I have retirement. The Bar is not real high here lol. My family thinks I "have money" because I don't carry credit card debt.

To each their own, I guess. Thank you for the imput!

[GoodSteward]

Minor piece of advice, both for you and your kids -- in nearly all circumstances, one should aggressively avoid making long-term decisions (or those with long-term impacts) out of fear. The result is rarely to your benefit. It's really no different than the panic-selling of investments during a market correction.

Better to make cold, calculated decisions with an eye focused on the rational.

I appreciate that, but this is a little different. The decision was already on the table for just a year out. Right now, production of cars will not return to normal for another two years they are predicting. Toyota shut down again and Manufacturers are enjoying higher profits than ever with less cars, they have no reason to increase production. This is leading to a hike in the used car market. The difference between older used cars and newer used cars is shrinking quickly.

This all came from the thought that IF I was going to do this next year anyway and IF the used market was going up, would it make sense to wait until next year to just see all your money wash away in inflation.

For a 10-11 year old Cmary with around 100-120k miles I'm seeing 11-12k on the low end within 200 miles of me. It apparently is only getting worse for the next two years unless we hit a recession.

Truth be told I don't want to be dealing with two cars at once. I just wanted to push and get one done (or close to it) around the time I need to do the other.

[Like2Plan]

First car for our son was one of the older family cars. He used one of ours through college. He got his DL when he was a senior in HS (he was 17 when he graduated HS) and he wasn't allowed to have a car at college until senior year--rules set by the college. When he graduated college we bought him a new car (a promise we made as he was growing up). We let him pick it out (X dollars toward the purchase and if he picked out something that exceeded the amount we put up--he would have to make up the difference). He kept that car for almost 10 years and IIRC he put about 285K miles on it.

[Joan.of.the.Arch]

It's been so long that the question stirs nostalgia. We bought our son a secondhand Canyon pickup in the summer he finished high school, 2006. Don't remember how much we paid. He got a bonus from his summer job and gave us that to help pay, a couple thousand, I think. The bonus (in addition to the overtime) was from staying at the job 24 hours a day to keep generators running to power a high rise senior citizen building when a couple of huge storms knocked out area power for days.

We wanted him to have transportation to and from his university that was four hours away. He still keeps that truck running, today! I don't know how he learned, but he has never had it in a shop, just does all the work himself. He is always telling us we should do our own maintenance and repairs, but we don't. We don't even do oil changes ourselves anymore.

[srblanco7]

Purchased DW a "new to us" car about 2.5 years ago and kept her old car for use by the kids (Mazda CX9). Agreement with both kids is we'll go 50/50 on a car with them, but they pay for gas, maintenance, insurance etc. and, of course, it has to be a cash purchase. DD decided to purchase a "new to her" Nissan Rogue for $21k about a year ago. Despite us coaching her to wait, she elected to proceed, and we followed thru, allowing her to make the decision. Part of her growing up.

We did allow her to finance some of her portion - $7500, because the dealer knocked $750 off the price for financing. DD made payments for 6 months (minimum term) which cost about $60 in interest, to save the $750. Helped her to build some credit (also had her take out a secured credit card to help with this). Not every kid is the same, but she's got a good head on her shoulders, is working while in college, contributing to a Roth, getting good grades, and overall is on her game.

DS is finishing his junior year in HS and now has the Mazda for his use - drives to school, practices, and the girlfriend's house. He's also working and we'll open a Roth for him shortly.

[myrdale]

What is your opinion based on?

My opinion is based on my judgement of the facts you presented.

Do you have any experience or findings, or is it just not normal so it's not good?

Just because something is "Normal" doesn't mean it is good. "Normal" in American finance is pretty bad. The suggestion you've made, in my opinion is even worse.

I think buying a child a $5-10k car and handing it to them to cover everything else doesn't make sense to me. I don't want my kids feeling entitled to anything. My dad did to me what I am planning to do with them, I'm just a couple of years early on it right now. Adjusting for inflation, the price is around the same too but my dad didn't give me any cash. Just used his credit.

If your father put you $10k in debt at 16 then he screwed up too.

Teaching someone about the burden of debt by making them fear it is also unwise. That's the Dave Ramsey mindset and doesn't translate into the best advice long term

I don't fear debt, holding snakes, smoking meth, or driving 40 miles over the speed limit. I don't do them because I understand they are stupid ideas, not because I am afraid of them.

They will struggle to ever have a decent credit score, which will translate into paying more when you do need to borrow.

False. I had no credit score when I applied for the mortgage for my house, and obtained a reasonable interest rate at the time.

Based on what I've seen and experienced, everybody is going to get into debt at some point.

Almost certainly for a house. Vehicles are an absolute choice. You choose to go into debt. You can save a car payment every month for two or three years and buy a car out right.

I'd rather establish the understanding on how to handle it upfront by letting them deal with some while I'm in charge of it all. That way I direct it.

You may not have meant it, but this statement comes across as pretty narcissistic.

I am one of the few "successful" individuals in my family, so I am accustomed to jealousy being touted as "concern." By successful, I mean I am not loaded in debt and I have retirement. The Bar is not real high here lol. My family thinks I "have money" because I don't carry credit card debt.

Everything is relative.

If you live in the United States, on welfare your better off than half of the people on this planet.