Buyer’s Market

January 27th, 2010 by Andrea Bennett

Essential things teens should know about purchasing their first car.

Brought to you by Liberty Mutual's
The Responsibility Project

Whether still studying for the exam or already licensed to drive, most teens are already focused on one of the more exciting aspects of getting a license: what to drive.

Even if mom and dad are financing a car, the process of picking out and buying a car can be a complicated process and is a good opportunity to learn the ins and outs of making a major purchase. Here are 10 essential things the experts say to consider before making a choice.

Choose a car that’s right for you.
SUV or tiny sports car? Parents and teens need to be on the same page, especially if they’re covered under the same insurance. Do some research at places like Consumer Reports and Once you’ve identified your car of choice, come up with a list of pros and cons.

New or used?
The price difference between new and used cars can be huge, even if a car is only a year old. The most important thing to consider is condition. Most dealerships will have a used car certified, meaning that it passes the automaker’s inspection. If it’s certified and breaks down while still under warranty, you won’t have to pay for repairs. You can also check past maintenance records to make sure the seller isn’t hiding any major defects — like an accident, whether it was ever reported stolen — at Carfax. Just enter the car’s VIN (vehicle identification number), located on the front dashboard. See more used-car buying tips at the Federal Trade Commission’s website.

Even if you’re buying new, you can still be strategic. Automobile manufacturers introduce new models in late summer or early fall, and this can be a good time to buy unsold inventory from previous seasons. Many dealerships also offer end-of-the-month and end-of-year rates to satisfy sales quotas.

Figure out how much you can afford.
Think you’ve found the perfect car? Remember that besides the down payment and monthly payments (or cash cost, if you’re buying it outright), you’ll have to factor in the cost of insurance, regular maintenance, gas, registration fees, and in some cases car tax.

Shop around — and negotiate.
It’s wise to try out 15 to 20 vehicles before you narrow down your choices. Test drive with someone who’s knowledgeable. Once you’ve named some finalists, understand that there’s going to be some flexibility on the price, sometimes as much as 15 percent. And as a first-time car buyer, you may also be eligible for a discount from the automaker. You can find a good list of these incentive programs at

Ask the dumb questions.
Don’t worry how your questions sound; just ask them. With used cars, find out how many previous owners the car has had, how many accidents it’s been in and how serious the damage was, whether major parts have been replaced or rebuilt, and if it has been driven in extreme climates. And listen to the experts: If an auto inspector or auto-pro family member or friends tells you it’s not a good buy, he or she is probably right.

Know the car’s fuel economy.
A car’s fuel economy can have a significant impact on what you’ll be paying over time. Keep in mind that, generally speaking, larger cars have lower gas mileage; electric and hybrid cars have the highest. You can read more about gas economy here.

Buy or lease?
Leasing is essentially like renting a car, in that you pay a specific amount for a specified period of time and then return the car. Most leases require you to be 18 years or older and have a credit history, though teens can ask a parent living in their house to lease in their own name. Some advantages to leasing include the fact that most dealers require minimal down payment; you won’t have to worry about selling the car once your lease is up; and monthly payments are generally lower than if you bought the equivalent car. But remember that in the long run, leasing is always more expensive than buying; most dealers limit the number of miles you can drive without penalty, and when you return the car, you’re back to the drawing board.

Be informed about financing.
If you’ve saved up enough to buy a car in cash, congratulations. If you need to finance the car, you’ll need a co-signor. For a teen that’s usually a parent, and it’s essential that they have a good credit and employment history. You can shop around for the best rate just like you shop for a car. Some tips on calculating the best loan: Make sure you’re ok with the monthly payments (after you factor in other car-related costs you’ll have); put as much money down as you can (you can reduce your rate that way, and you’ll have less to pay off); don’t get a loan that goes for more than 48 months; and if you get a rebate or other kind of incentive, use it as part of your down payment.