March 30, 2021

The Plan For Our Kid’s 1st Car

Time Keeps On Ticking

I can not believe that I am writing a post about my 15-year-old son’s first car. Time has flown by, but here we are. My wife and I could not be more proud of the young man he has become. He has overcome a few obstacles in his life that no kid should have to deal with and has done so with maturity and grit. Like all teens, he has his moments. He is fiercely independent and stubborn, which can drive us nuts. But he is also a great student, athlete, teammate, friend, and son.

As we approach his 16th birthday, we have been putting more thought into how we will approach having another driver in the house. Because he is a student, athlete, and has a job, we have decided to go ahead and get a 3rd car for our family. Like all big decisions, we will be mindful and intentional with this purchase. The goal will be to make a good money decision for our family while also helping him to learn valuable money lessons that will stay with him for life. Listed below is the process we have gone through.

What Car To Buy

First things first, what car to buy? Here are the criteria we are using to zero in on a car:

Car Buying Criteria
  • Used
  • $15,000 or less (preferably less)
  • About 4-5 years old to optimize depreciation but not too old where there isn’t a lot of life left
  • All Wheel Drive
  • High Safety Rating
  • Reliable Make/Model
  • Good fuel economy (30+ on the highway)
  • Low cost to fix/own
  • On the smaller side (4 passenger max–we don’t want a car full of teens)

We have not finished our search but we have a few cars in mind right now:

Possible Cars
  • Subaru Impreza (sedan or hatchback)
  • Subaru Outback
  • Mazda CX-3
  • Mazda 3 (sedan or hatchback)

How We Will Pay For It

My wife and I will buy the car. We plan to pay cash for it. We set a goal to save $15,000 in cash (high-interest savings account via Marcus) between now (started last year) and when he’s 16.5 (February 2022). In the event we come up short, we will finance it through whatever means has the lowest interest rate. All options will be available, including our local credit union, the dealer, a HELOC, or a loan through M1 Finance. At the time of purchase, we will go wherever the money is cheapest.

There are a few reasons we are buying the car vs. having him buy it himself. He does work and has been saving for a car. At the time of this post, he still believes he will be buying at least 50% of it, and we plan to keep it this way (he doesn’t read the blog because I embarrass him…LOL).

The main reason we are buying the car is that we want to have control over it. If he buys it with his own money, it limits our ability to hold him accountable for the car’s condition, safety, and other aspects of car ownership that we want some control over.

We are also buying it because we do not want him draining his account on one purchase. We do like that he is learning to plan and save for a big purchase, so we have not told him the real plan as of yet. But when the time comes, I want him to have a cash cushion for other purchases, school, etc…

The final reason for us buying it instead of him is that we think he can and will learn more money and other life lessons how we plan to do it.

How He Will Pay For It

Our plan is for us to lease him the car. The more I think about this plan, the more I love it! He will essentially be renting the car from us. We maintain control of it and as long as he follows the lease agreement, it’s his to use at will. If he violates the agreement, then we get to hold him accountable. I will detail the lease agreement below, but it will involve monthly payments, car condition, upkeep, maintenance, safety, and fees/penalties for agreement violations. This will be a very real life way for him to learn about all of this and more.

Lease Agreement

When it comes to writing the lease, I will use an online legal company such as Rocket Lawyer or another to create a boilerplate agreement that we can customize to our situation. Here is an example lease that has not been filled out yet. We haven’t gone through all of the details, but here are some things we will include for sure:

Car Lease Agreement Inclusions
  • Length of Lease
  • Monthly Payment (~$100 + insurance + excise tax)
  • Buyout Price (optional)
  • Maintenance Responsibilities (Ours & His)
  • Excessive Wear and Damage Clause
  • Condition and Upkeep Expectations
  • Safety Expectations
  • Penalties/Fees For Violating Condition, Maintenance, Safety Expectations
  • Late Fees
  • Non-Use Provision (i.e., if he goes to college and can’t or doesn’t bring the car)
  • Authorized Users and Non-Users
  • Our Responsibility As The Car Owner (maintenance and other)

Those are the areas we have identified for lease inclusion so far. I am sure we will think of more, and we will add them as we do up until the lease is signed. If we think of others after that, then too bad for us! Our goal is to structure it very much like a normal car lease combined with a rental property agreement.

Money Lessons Learned

The money and life lessons embedded in this plan are almost too many to count. As anyone who knows me will tell you, I love a good lesson! Here are a few:

Money Lessons
  • Learning to budget and make a monthly payment
  • Accountability to a legal agreement
  • The devastating effect of fees and penalties
  • Art of negotiating
  • Car shopping skills
  • The true cost of car ownership

I know there are many more, but those are some of the big ones that I look forward to the most. By creating a monthly experience vs. a one-time purchase, I believe we are creating more learning opportunities.

Other Plans

As with anything I write about on this blog, this is what we have chosen to do and not the only way to do it. I am sure there are things we haven’t considered with this plan: negatives or possibly even other ideas that may be better. Please send along feedback about our plan and/or your plan in the comment section below. We still have a year or so to make ours perfect, and your feedback can help!

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