Does It Make A Difference If I Buy My Teen Driver A New Car Or Used?

Dec 21, 2020 | Personal Insurance

Transitioning to adulthood is one of the most exciting events in your teenager’s life. Since most of them are looking forward to being independent, getting their car could mean absolute freedom. It is one of the gifts that they dream of receiving from their parents as they turn 16. Determining what vehicle to get a teenage child is one of the most dreaded yet crucial decisions that parents make. For most, the cost of the vehicle is vital when deciding whether to buy it or not. That being said, does it make a difference when you buy your teen driver a new car vs a used one? Let us unwrap these options together! 

Should I Get My Teen a New Car or a Used One? 

Buying a vehicle can mean a fresh start! It is important to know though that not all the time, buying a new car is the best option. A lot of things have to be considered such as the budget, the purpose, and the person who will use it. In general, either a used car or a new one is better than the other. Albeit, there is a certain level of excitement when buying a new vehicle. Seeing it polished to a tee with no dents and musty mildew smell can be intoxicating. Then again, as long as you scour the right places, you will also see a used car of equal condition. Here are some advantages and disadvantages of buying a new or used car for your teen. 

Advantages of Buying a New Car 

You get the latest model thus, newer technology 

When buying a new vehicle, most of them have the latest technology. Aside from its cosmetic benefits, you get better features such as improved gas mileage and lower emissions. It also has automated safety features such as automatic high beams, emergency brakes, and airbags. These features will help keep you at ease while your teenager takes his car on the road. Assistive features such as blind-spot detection and assisted parking have been augmented on newer models to better guide new drivers. It is recommended for a teenager’s car to have functional safety features as they are more prone to accidents given that they are new to driving. According to the CDC, Motor Vehicle Accident is the leading cause of fatality among teens in the US. Having advanced safety features and functional accessories can leave your teens unscathed during these instances. 

It is brand new! 

No pungent smell, interior stains, or obvious signs of wear and tear. Getting a new vehicle means fewer worries in terms of repairs and cosmetic car care. Due to most parts being pristine, your teen can solely focus on the basic maintenance of his vehicle especially on his first few years of owning it. 

Unused Warranty 

We all know that the cost of repairing damaged cars could punch a hole in your pockets. A new car comes with a warranty service provided by its manufacturer. This is, by far, the most economical and comprehensive warranty that your vehicle will have. The duration of the coverage will most often be based on the car’s mileage, you can purchase extended service plans to lengthen the duration. 

Customizable 

Owning a new vehicle gives you the right to customize it. Your teenage child may want to add a few accessories or features to pimp their ride. If they want a moon roof or a rear spoiler added, you can easily request this from the manufacturer. Most brand-new cars are customizable depending on the owner’s preferences. Expect additional costs as these features are considered add-ons. 

Hassle-free buying experience 

New cars are released fresh from the manufacturer’s site. Therefore, there is no need for pre-purchase inspections when buying one. This could help save time and money. Compared to a used one, there may be less wiggle room to haggle on a new vehicle’s cost. Although, if you research further, you may find promotions and discounted deals that will suit your budget. 

Disadvantages of Buying a New Car 

Higher Price Tag 

Buying a new vehicle can leave a dent on your bank accounts as it costs up to 50% more than a used one. To add, there may be extra charges such as dealership fees, destination fees, sales tax, and conveyance charges. Most of these fees are unknown to the owners until they have decided to check out. A new car may not maintain its crisp for a long time but your payments will linger for years. 

Immediate Depreciation 

It is good to note that a car’s value depreciates the moment you drive it off. Hence, getting a used one will save you from the depreciation hit. What others do not know is, the value of a brand-new vehicle can shred up to 15% to 20% the moment you bring it home. When you decide to sell your car back to the dealer, they will only pay you the depreciated value. 

Undetermined Reliability 

Because the model of the car is new, no history could vouch on its reliability. No matter how expensive your brand-new vehicle is or how long in the business the manufacture has been, car recalls can still happen. One of the primary reasons for a vehicle to get recalled is it not meeting safety standards. It will be a hassle for the owner to go back and forth the site just to get a replacement. Also, getting a car with undetermined reliability can put your teenager’s life at risk. 

Advantages of Buying a Used Car 

Cost Savings 

The primary advantage of buying a used vehicle is its cost. On average, a preowned car costs 50% less than a fresh one. Sure, it is not sparkling new but if you choose the right make and model, maintaining it will be as easy as a new car. 

Fewer Service Fees 

A used car can save you from crazy surcharges especially if it is from a private sale. Imagine not having to pay for dealer charges, service maintenance contracts, and acquisition fees. You will be able to cut off a significant amount from the final price thus, will help you save more! More better-engineered vehicles now require less maintenance so it is unnecessary to pay extra for these service fees. 

Tested Safety and Durability 

Since most used cars need pre-sale inspections from certified mechanics, you can be certain that it is of quality. The car’s durability has also been tested given that it has already been driven and loved by its previous owner. As long as you choose a vehicle that has been properly taken care of, safety and durability would be at the least of your concerns. 

Lower Sales Tax 

It is mandatory in some states to pay Sales Taxes when buying a car. Due to its lower value, buying a used vehicle means lower sales tax. In general, taxes are computed based on the Final Purchase Price (after trade-in allowance) multiplied by the Sales Tax percentage. For example, in Denver, Colorado, they charge Colorado State Tax (2.90%), RTD Tax (1.10%), and Denver City Tax (4.31%) amounting to 8.31% in total. If the net purchase price of the used 2015 Honda Civic you are eyeing is $12, 200 multiply that by 8.31% and your sales tax will be $1013.82. Buying a brand new Honda Civic in 2020 costs $20, 650 gross. Following the computation, imagine how much your sales tax will be. 

Disadvantages of Buying a Used Car 

Used or No Warranty 

Since you are not purchasing the car directly from the manufacturer, factory warranties may no longer be included. Although some used auto dealers offer a warranty, it is usually good for a couple of months only. If you buy the car off a private sale, chances are the warranty is excluded from the package. This can post a major financial risk to teen car owners and their parents. Since teens are more susceptible to accidents or damages, you may need to cough up more money for their car’s maintenance fees or repair costs. 

Limited Customization Options 

One disadvantage of buying a used automobile is its limited customization options. On a new car, you can request for the color, style, and accessories that you want to be included. However, you and your teen will have to do a major overhaul if you want to customize a used car. This will be at your own expense. This would also mean higher costs as the accessories and features may have to be custom-built depending on the make and model of the car. 

Higher financing rates 

Lenders charge a higher interest rate for used cars because they are usually harder to value. A lot of things would need to be considered and researched on like history of accidents, mechanical issues, or undisclosed problems. Lenders would like to mitigate the risks in financing a used vehicle, so they choose to reserve the best-value deals for new automobiles. This usually persuades the client to purchase a new car instead. Also, banks and credit unions charge more when the vehicle is pre-owned. 

The Difference in Insurance Coverage of a New Car vs a Used Car 

When shopping for cars, remember to look past the gross sale price and also consider your monthly insurance rate. It is essential to ensure your teen’s vehicle as this prevents unplanned costs to drive a hole in your pocket. Car insurance coverage can range from damages caused by Acts of God to personal liability. The three types of car insurance are Comprehensive, Collision, and Liability. 

● Comprehensive

a type of car insurance that covers the repair or replacement cost of your vehicle when it has been stolen or damaged in an accident. Examples are fire, vandalism, or falling objects. 

Collision

covers costs of repair or replacement when your car gets involved in a crash either with another vehicle or an object. 

Liability

covers costs brought by injuries to people or damages to another property. A new car can cost as much damage as a used one hence, it is imperative to get liability insurance. Most states require a minimum level of liability coverage regardless of the driver’s tenure in driving. 

Typically, a used car is much cheaper to insure than a new one. Among the things your insurer considers are the year of manufacture, make and model, condition of the car, and needed insurance coverage. For example, insuring a 2020 Honda Odyssey would cost you $132 per month. However, getting insurance for a mint 2016 unit with the same make and model would cost you only $92. Knowing the Vehicle Identification Number (VIN) of the car you are interested in would help you get personalized insurance quotes faster. This will also give you visibility to different insurer rates. You can use the quoted rates to decide which car insurance would fit your budget. Claim Histories can also play a big role in determining how much your teen’s auto

insurance premium will be. If the used car often got stolen, damaged or the previous driver has received many tickets, the insurance cost may be higher. 

What Cars to Get a Teenager? 

Aside from worrying about the cost, one important thing to consider when buying a car for your teen is the reliability of its safety features. I have rounded-up a list of recommended cars for teens from Carbuzz. Remember that this list is not comprehensive. The majority of the available cars in the market now have functional safety features. Some are just better and cost-efficient than the rest.

  • Honda Civic

The Honda Civic has a long history of safety and reliability. It has been consistently rated as the safest vehicle to drive making it a top choice for new drivers. Its 2020 model has a driving-assist technology which enhances road safety. It includes a Collision Mitigation Braking System which scans the road ahead for potential dangers. The 2020 model retails for $20,650. 

  • Nissan Kicks

For a small vehicle, the Nissan Kicks sure comes with excellent standard safety features. It is a great utility vehicle especially for new drivers like your teen. Its safety features include high beam headlights, blind-spot monitors, and rear cross-traffic alerts. The 2019 SV trim retails for $20,350.

  • Kia Optima

Known for getting a Top Safety Pick+ rating from IIHS, this car is indeed getting a lot of attention from new drivers. It comes with a standard Kia 5-year warranty and safety features such as blind-spot detection, rear cross-traffic alerts, back-up camera, and rear parking assist. This car retails for $23,390. 

  • Ford Fusion

Aside from the blind-spot monitoring, this specific model also has driver-assist features under Ford’s Co-Pilot360 mechanism. It includes auto high-beam headlamps, lane-keeping system, and pre-collision assist with automatic engine braking. The 2020 model retails for $23,170. 

  • Mazda CX-30

This model received remarkable ratings during safety tests. Among the safety features are forward-collision warning with automatic emergency brakes, full-speed adaptive cruise control, and driver drowsiness monitor. This car retails for $21,900. 

Tips When Deciding the Best Car for Your Teenager 

Earlier we weighed the pros and cons of buying a new car versus a used one. Here are more tips that can help make your car shopping experience seamless. 

  • If your purchased vehicle does not have one yet, invest in car safety accessories such as blind spot mirrors, airbags, rear and dashboard cameras, and anti-lock brakes. 
  • Regardless if it is new or used, always go for a test drive! Doing this can help you gauge the condition of the car. 
  • For used cars, consider looking for model years 2012 onwards. This was when electronic stability control was made mandatory in cars. It helps drivers not to skid or lose control which may result in accidents or collisions. 
  • Purchase 3 to 4-year-old cars as some of it is still under a manufacturer warranty. You may choose to extend the duration for a lower price rather than worrying about the repair or replacement costs in the future. 
  • Before purchasing a used car, have it inspected thoroughly by a certified mechanic. This will help you avoid getting a “lemon” and ensure that the vehicle is safe to use by your teen. 
  • Verify the Vehicle Identification Number before buying the car to ensure that it was not reported stolen. 
  • Before entering a sale, know the market value of the vehicle you are getting so you can negotiate the price. 
  • Choose an easy to drive a car for your teen. It is not recommended to get your novice driver a muscle car or a sports car as they may be tempted to participate in unsafe driving practices. 

Getting your teen their car is indeed an exciting experience! Though the thought of them driving alone may be exhilarating for us parents, they will surely remember it for the rest of their lives. Make the best memories together by gifting them the right car. If you need further help with deciding on what car insurance to get, call us today! We can help you find policies that work best for your family.