University of Virginia

Cars vs. College

As teenagers get their driver’s licenses, talk often turns to what car they can drive. Driving is an expensive proposition in it’s own right but college isn’t far off, and this is a great time to start setting the stage for how your family handles major financial matters. Let’s look at just three areas:

1.  Choice: Parents often start out with the idea that they will get a nice, safe, used car. Perhaps you’ve looked at the list in Consumer Reports. Maybe you checked CarMax to see what was available. All good ideas. But then your son gets involved and, “Mom, a VW Rabbit? Are you serious?” Does your conviction start to weaken? Do you end up with a what they want to drive?

2. Cost: Not many teenagers have the resources to pay cash for a car, or the income to support a car loan. How are you going to handle that? Do you make a formal loan, or do you just buy it? Do you require your teen to make any payments to you? Whose name do you put the title in?

3.  Operating expenses: Insurance is very expensive, and at $3 a gallon, gas isn’t far behind. Who is paying for these costs, and how formal is this arrangement? What if the car needs tires or some engine work?

There are lots of points that we could cover here, but the important thing is to think about these sorts of things before you buy the car, just like you need to think about them before you “buy college.” How will you decide what colleges to consider? How much involvement should you teenager have in the cost?  And who is funding their ongoing living expenses?

If you find that a relatively simple transaction like buying a car causes you, as a parent, to compromise your values, will you be able to handle it when it comes to paying for college?