Should I Buy a New or Used Car for My Teenager?

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Buying a used vehicle is a better option for most new drivers. But sometimes, a new car makes sense.

A new driver in the house is a milestone moment for parents and teens alike. After your teen obtains their driver’s license, you have some big decisions to make. Even if you know that you want your teen to have a vehicle, you’ll still need to choose between a new and old model.

The right choice is different for every family. But we’ll explore what a new or used car can offer your teen. And then, you can decide which option best suits your teen’s needs and your budget.

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New vs. Used: What to Consider When Purchasing A Vehicle for Your Teen

When purchasing a car for a teen driver, there are many factors to consider.

First, you’ll have to decide if you think your teenager driver is ready for the freedom that comes with their own set of wheels. If your teen is ready, the choice between a new or used vehicle is a big one.

Here’s a close look at what to consider when purchasing a vehicle for your new driver.

Upfront costs

No matter how you slice it, buying a vehicle is expensive. But the upfront costs of purchasing a new car are significantly higher than a used car.

According to Kelley Blue Book, the average price of a new car soared above $48,043 in June 2022. When opting for a used vehicle, the average purchase price is $28,219 as of July 2022. With that, it’s clear that a new car will cost you more upfront.

It’s possible to finance these costs with the help of an auto loan. But you’ll likely still face higher overall costs when shopping for a new vehicle.

Depreciation

Cars are depreciating assets, which means that they lose value over time. So, when you drive off the lot, the vehicle will start to lose value immediately.

According to CARFAX, a new vehicle will lose about 20% of its value within the first year. And the car will continue to lose around 15% of its value for the next four years. At the 5-year mark, a new vehicle will have lost 40% of its value.

For example, if you bought a $40,000 new car, it could be worth around $16,000 in 5 years. If you buy a vehicle that is a few model years old, the vehicle will have already lost a lot of its value, saving you money on the purchase price too.

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Maintenance

The costs of car maintenance increase over time. With that, you may face higher maintenance costs when choosing an older model.

According to a Consumer Reports study, the average maintenance cost for a 5-year-old model is $208 per month. That average cost increases to an average of $406 per month for a 10-year-old model.

When you purchase a new vehicle, it may also come with a service contract for free maintenance tasks or a warranty on critical parts. For example, you might get free oil changes and tire rotations at the dealership for a couple of years.

Vehicle service contracts for used vehicles are available to help offset some of the more expensive costs. Just read the fine print to understand what it does and doesn’t cover.

Safety

Drivers of all ages need a safe ride. But the inexperience of teen drivers means you want to make sure the car is packed with safety technology.

According to the National Highway Traffic Safety Administration, newer cars are also safer cars. Many new cars come with safety features specifically designed to help your new driver stay safe on the road. A few of the latest safety features include anti-lock brakes, forward collision warning, blind spot monitoring, backup cameras, traction control, electronic stability control, lane-departure warnings, and more.

Older cars lack the most advanced safety features. But it’s still possible to find a used model with plenty of safety features. For example, all vehicles built since May 1, 2018 have back-up cameras.

Insurance

It’s no secret that the cost of car insurance for teen drivers is sky-high. With their inexperience, insurance companies label them as high-risk drivers. And with that label comes higher insurance premiums. Although you might see lower insurance rates if your young driver stays out of accidents and avoids speeding tickets, the cost can still take a big bite out of any budget.

Generally, it’s cheaper to insure a used car than a new one. That’s because the value of a new car is usually higher than a used car. Since insurance policies can cover the cost to repair or replace a vehicle, a higher value leads to higher insurance costs.

Fuel costs

The fuel economy of a vehicle indicates how many miles it can travel per gallon of gas. Typically, newer vehicles come with better gas mileage. But a well-maintained used vehicle could still tap into a reasonably good fuel economy.

When car buying around, consider how the fuel efficiency of a vehicle could impact your teen’s budget. Although a used car with poor fuel economy could be more affordable upfront, the gas bill will add up quickly.

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Which Is Better for Teens: New or Used?

When choosing between a new or used car for your teen, it can be a challenge to nail down the best option for your family’s situation.

Let’s consider the advantages and disadvantages to drill into the details of each option.

Pros and cons of a new car

New drivers of all ages may find the following perks embedded into their new car purchase:

  • Safety features: You’ll be able to select all of the safety features that matter to you, which can help keep your kid safe on the road.
  • Lower upkeep costs: Higher fuel economy and lower maintenance costs combine for lower upkeep costs on this new ride.
  • Possible warranty: When you buy new, you might score a worthwhile warranty with your purchase.

Now for the disadvantages of giving your child a new car:

  • Higher upfront costs: A new vehicle purchase is often significantly more than a used vehicle purchase.
  • Depreciation: The new car will start to lose value as soon as it leaves the dealership.

New cars come with top-notch safety features, better gas mileage, and lower upkeep costs. But you’ll pay more upfront and face a steep depreciation curve.

Pros and cons of a used car

The other option is a used car, which comes with several advantages:

  • Lower upfront cost: Purchasing a pre-owned vehicle comes with a lower sticker price.
  • Less depreciation: If you purchase a vehicle after its 5th birthday, you’ll avoid the brunt of depreciation.
  • Lower insurance costs: Typically, used car drivers find lower insurance costs. That’s a big deal, especially for teen drivers.
  • Small mistakes are less important: Dings and dents are a regular part of most teen driving experiences, with a used car the mistake will hurt your wallet less.

But, of course, there are also some disadvantages to consider:

  • Fewer safety features: A used car might not come with all of the safety features you desire.
  • No warranty: Used cars usually won’t come with a warranty.
  • Lower fuel economy: Many used cars come with a lower fuel economy than their new counterparts.

Typically, the cost of purchasing a used vehicle is a bit easier on the pocketbook upfront. Although you could avoid the hit of major depreciation, you’ll likely pay more in maintenance costs and find limited safety features available.

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Cars and Costs: What Should You Purchase?

Ultimately, only you can decide which option is best for your teenage driver.

On one hand, a new car could provide your teen with a safer ride with more affordable fuel costs. You’ll face higher upfront costs and steep depreciation. But if you want the vehicle to carry your teenager safely for years to come, it could be the right option.

But in some cases, giving a teen a brand new ride just isn’t in the budget. And that’s okay! There are plenty of pre-owned vehicle options that come with relatively up-to-date safety features and fuel economy. Plus, you’ll know that if your teenager gets some scratches on their new-to-them ride, it’s not as big of a deal.

When selecting the right car, you want a balance between safety and price. The Insurance Institute for Highway Safety (IIHS) recommends several models for teen drivers. Here’s a look at a few of their recommendations:

  • Small cars: Honda Insight, Mazda 3 sedan or hatchback
  • Midsize cars: Subaru Legacy, Kia K5, Subaru Outback, Lexus IS
  • Small SUVs: Chevrolet Trailblazer, Mazda CX-30, Ford Bronco Sport, Honda CR-V
  • Midsize SUVs: Hyundai Santa Fe, Toyota Highlander, Nissan Murano
  • Minivans: Honda Odyssey

As you sort through your options, you should only pay what you can afford. It’s usually unwise to stretch your budget too thin when purchasing a first car for your child. And there’s nothing wrong with holding off on this major purchase until your child can kick in some funds of their own.

If you cannot afford to pay for the vehicle, there are other ways you can help your child obtain a vehicle. Start by helping them build their own budget complete with a target savings goal to get the wheels they desire.

Summary

Whether you choose a new or used ride for your new driver, it’s a big decision. Before committing to a car purchase with your teen, map out all the costs so that both you and your teen know exactly what you’ll be paying to purchase and maintain their vehicle.

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About The Author


Sarah Sharkey

Sarah Sharkey is a personal finance writer who loves diving into the details to help readers make savvy financial choices. She has written for numerous finance publications, including Business Insider, Smart Asset, and Money Under 30. She lives in Florida, with her husband and dogs, and enjoys exploring a new stretch of coastline whenever she can.


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