Bring on the Budget: Buying a Car for Your Teen

As a parent, one of the challenging milestones is when your child reaches 17 years old and passes the driving test.

While they’re anxiously waiting to get their hands on their very first vehicle, you’re trying to figure out how to provide them with a car that works well, is safe, and will not break your bank in the long run.

Here are four tips to help guide you and your teen as you choose the best car, while enabling the parent and child bonding to grow in the process!

To Buy a New or Used Car?

The first question any parent might ask themselves in the quest to buy a car for their child will most likely be, “Should I buy a new or a used car?”. This guide to help you identify which option works best for you.

1. Budget

It’s important to set a budget that you’re comfortable with; this will make the car selection process smoother. With a set budget, you can easily shortlist the cars within your target spending and in line with your child’s needs or preferences.

In addition to that, a budget will help set a proper down payment for the car you’re planning on buying. It may also help you financially by providing some breathing room for future installments.

Setting up a budget is easy. Here are some guidelines that you can use to set your spending limit:

●        Increase your deposit: When buying a used car, a larger deposit equals to lower monthly payment. Putting down at least 20 percent of the total car price into your down payment will significantly lower your monthly payments in the future.

●    Limit your monthly car expenditure: You should be able to live comfortably and meet your lifestyle needs after deducting your debt which includes the monthly repayment amount for the car. The 50/30/20 budget method is a good rule to follow where your needs (which include car payments, utilities, loans) are 50 percent of your monthly income, while 30 percent should be your wants (shopping, dining) and 20 percent goes into your savings.

●     Shorten your loan term: Extending your loan term to nine years might seem like a great deal, but when you consider the cumulated interest, you end up paying more than you should. It’s best to go for a shorter loan term of five or seven years if your budget allows it

2. Financing

Once you have a budget, it is time to work out the financial aspect of owning a car. For this, it is better to have a thorough discussion with your child so that they can be prepared on what to expect as a car owner.

For comparison, we will be looking at the financing option for two similar models – the brand-new Proton Saga 1.3L Premium AT and a used 2020 Proton Saga Premium 1.3L.

Let’s say you have RM10,000 that you can fork out for the down payment and a monthly budget of RM500 for the monthly installment. The brand-new Proton Saga costs RM39,800.00. With a down payment of RM10,000 and a five-year loan with a 3.5 percent interest rate, you will end up with a monthly installment of RM583.58, as calculated here.

Meanwhile, the used 2020 Proton Saga Premium 1.3L can cost as low as RM35,200 at Carsome. with a down payment of RM9,973 plus a five-year loan, you will end up with a monthly installment of only RM494.

So, it is RM583.58 vs RM494, which means you are paying 15 percent less! Both amounts may seem affordable, but if you’re going to hand over this responsibility to your child once they become a working adult, this surely needs some consideration between the both of you.

3. Maintenance

After considering your ability to finance the car for your child, the next most important thing to look at would be the maintenance aspect.

If you are going with a new car, it is advisable to service the car only at an authorized service center with proper workmanship to keep its warranty valid.

But on the flip side, these authorized service centers limit your choices when it comes to maintaining the car. Bear in mind that maintenance at authorized service centers might be costly, especially if you continue beyond your warranty period.

Meanwhile, if you go for used cars, you are free to choose which workshop to send it for service, if the car has passed its warranty period. This works great if you already have a trusted workshop that you’ve been visiting, even more so if the workshop is close to home and it fits right in your monthly maintenance budget!

To top it off, you don’t have to worry about calling any authorized centers if the car has a sudden breakdown. You can pull up mobile applications on your smartphone and have certified professionals coming to look at the car in just a few taps, anytime you want!

4. Safety

When it comes to buying a car for your child, safety would be a major concern for parents. Needless to say, brand new cars are equipped with the latest systems and measures to ensure the well-being of its passengers, but it comes with a price.

For example, let’s look at the brand-new Proton Saga 1.3L Premium AT. At the price of RM39,800.00, it offers twin front SRS airbags, Anti-Lock Braking System (ABS) with Electronic Brake Distribution (EBD), Electronic Stability Control (ESC) with Traction Control System, Brake Assist, Hill Hold Assist, Front and Rear Parking Sensors, as well as a reverse parking camera, all covered under the Proton warranty.

And then we have the used 2020 Proton Saga Premium 1.3L, a similar car with similar safety specifications that goes for only RM35,200 at Carsome. That’s a saving of more than RM4,000.

Dealership or Online?

Now that you’ve decided on which car you’re going to buy for your child, it’s time to decide on which route to choose.

Looking for a Dealership

If you’ve chosen to buy a new car, you might prefer to go to a dealership to proceed with the purchase. It is helpful if you can find a dealership that meets all your needs.

But what happens when your needs are not met? You might end up with less than exemplary service, and if they do not have available units, you probably have to wait a few months or even a year to get the car you have planned on buying.

Also, you might have to spend a lot of effort (and petrol money) to settle the deal with a physical dealership that satisfies your requirements. 

Buying a Car Online

Alternatively, online platforms offer a convenient and trusted solution to browse for cars conveniently.

Some platforms even offer you the feature to make a booking for a home test drive. All you have to do is submit your details, and they will send the car right to your doorstep. With only a few clicks, you can find all the cars you want in the comfort of your home. Online platforms have made it easier to pay for your purchase as well, as various payment methods are now supported.

However, a major concern when it comes to buying a car online is that you might not be able to physically inspect, and interact with the car you’ve chosen. Some platforms offer you a detailed report with clear images (some even come with a 360-degree view) of the car you have selected, to offer you that peace of mind.

If you’re still unsure and would like to research further, check out Carsome. With a huge inventory of quality used cars, it won’t be difficult to find one that suits your teenager.

Decisions, Decisions…

Owning a car is a major step forward in the life of a young adult. As a parent, you need to talk to your child first before gracing them with a car to ensure they are ready to accept such a responsibility.

Once they understand the reality of owning a car, they could prepare themselves mentally and physically to become a proper car owner, and you would have one less thing to worry about in the future.

==This article was inspired by “Bring on the Budget: Buying a Car for Your Teen” on Carsome.my.==