Buying a car: What teens need to know


As newly licensed drivers, many teens are interested in buying their own car. But owning a car comes with many costs and responsibilities to keep in mind before you buy. 

“I got my first car around four years ago,” said Tom Kreitzer, 20, a junior at the University of St. Thomas. “I paid for my car myself, along with the gas and maintenance costs. My parents paid for the insurance, thankfully.”

There are several financial options to consider when buying a car. One option is for the teen to build up his or her credit score to get a loan.

“You need to have some kind of documented basis of being able to pay your bills on time,” said John Severy-Hoven of Oracle Financial Planners LLC in St. Paul. “Start by having something you can pay for on credit, such as ordering a newspaper and having them bill you every three months, and pay your bill on time. Find other things you can have in your name that you can pay your invoice on and apply for a credit card.”

James Maldonado, a financial service representative from SPIRE Federal Credit Union in St. Paul, also stressed the importance of building a credit history.

“To establish credit, we recommend starting off with a small Visa (credit card) and then gradually over a few months make sure you make the payments and establish credit that way,” Maldonado said. “The longer you have it and the more payments you make, the better.”


A teen’s first car shopping experience
Lisa Fan writes about how intimidating going to buy a car can be.

My MoneyTalk teammates, Mary and Ariel, and I, are not exactly experts on cars. None of us has owned a car so we wanted to get a first-hand experience with car buying. To be honest, I was pretty clueless about cars, and Ariel and Mary weren’t car-smart either. I was nervous about how we would be treated. I had also read several articles online about how car dealerships are out to deceive buyers. Read her full essay!

If a teen does not have any credit history, another option is to co-sign with his or her parent for a loan. This means that if the teen doesn’t pay on time, the parent is liable for the charges.

One of the hardest parts about getting a car is choosing a reliable vehicle that fits in a teen’s budget.

“Most used vehicles these days are typically $5,000 or higher,” Maldonado said. “That is a large amount for a teen to take on. It can be stretched over sixteen months, but still the payments are pretty high.”

CarHop, a used car dealership that helps people with bad or no credit obtain a car, may be a good place for teens to start. Another option is, a website that provides car listings from local dealerships and private sellers.

When looking for a car, consider gas mileage, warranty, and safety features and ratings. According to Consumer Reports, used Hondas seem to maintain their value, but that makes them more expensive to buy.

A car salesman at the Chevy dealership in White Bear Lake recommended several good deals for teens. The ’03 Chevy Cavalier at $5,400 and the ’01 Buick Regal at $4,900 were a couple of the cheapest, yet well-maintained cars there, he said. Prices at both of these dealerships, CarHop and Chevy, typically range from $5,000 and up.

Some teens are lucky enough to inherit an old car from their parents, relative, or friend. Hannah Love, 17, from Oak River High School, got her car this way. “I have a ’93 Buick for free because it was my aunt’s old car,” Love said.

Kreitzer also got his car at a reduced price because he bought it from someone he knew rather than from a dealership.

“I was able to buy a car from a neighbor with cash that I saved up, as well as by mowing her lawn, at a reduced price,” Kreitzer said. “I bought a 1995 Mazda Protégé 4-door sedan from her at only $2,000 while I would have paid $2,700 otherwise.”

Insurance costs are also a big part of owning a car. According to insurance agent Christopher Okeleye from Allstate Insurance Company in St. Paul, insurance costs about $100 per month for a 16-year-old male added on to his parents’ insurance policy, and $70 per month for a 16-year-old female. But for teenagers getting insurance on their own cars, the costs would increase dramatically. For the same 16-year-old male, it would cost approximately $200 a month, and $185 a month for the 16-year- old female.

There are many insurance discounts available for teenagers though. “Teens can get good student discounts when they have a B-average or higher,” Okeleye said. “There are also discounts for safety features in your car like airbags and anti-lock brake systems, as well as automatic withdrawal discounts and discounts for having taken driver’s education courses.”

Along with insurance, there are gas and maintenance costs to worry about. “I probably spend around $4,000 a year for gas, maybe a little more,” Kreitzer said. “On average, it takes $45 to fill my tank of 15 gallons. Plus, I spend about $800 yearly on maintenance.”

Chris Baillargon, 18, of Maple Grove, pays for nearly all of his car expenses by working at Fleet Farm.

“I do a fair amount of driving and spend $20 on gas every few weeks,” Baillargon said. “I drive to work, and [outings with] friends. I also spend about $30-$40 every six months on maintenance.”

Love said she has learned a lot from owning her own car. “I have learned that I need to be responsible for the other people that I am driving around. The hardest part about owning a car is paying for it, but I like having the freedom to go places.”