YOUNGER AMERICANS WALK AWAY FROM CARS

According to CNNMoney, young Americans aren't buying cars like they used to.  In the last five years, the share of new cars bought by the 18 – 34 age group fell 30 percent. Is it a sign of the economy or are other social factors at play?

This age group has been hit particularly hard by the recession.  There is also a trend to re-urbanization which affords greater access to public transportation.  The expansion and popularity of car-on-demand rentals is off-setting some of the need to own and insure a vehicle that may not be used very often.

The ever-growing use of social media is reducing the traditional social importance of owning a car.  Now that this generation can meet and interact on the internet, the need to get in the car and go for a cruise downtown isn't as important.

According to a Deloitte study, forty-six percent of Generation Y kids “would choose Internet access over owning a car.” Recent increased driving restrictions such as raised age for licenses, restrictions on cell phone use and limits on car occupancy are taking away that appealing feeling of freedom.  The restrictions actually serve to “cut them off from their friends.”

Auto manufacturer analysts offer a rosier long-term-theory.  They tend to agree that, even though young people may hold off on buying new cars, at some point they will have families, move to the suburbs and need their own cars.

Whether or not you live in an urban location and even though trends maybe changing, you have to teach your kids the financial truth about car ownership.  The manufacturers are probably right in thinking that your kid will be buying a car someday.  Your child needs to know the real cost of having a car and the necessity to budget and save.

In Money Still Doesn't Grow on Trees, I have a chapter titled: TEENS AND CARS – HOW NOT TO DRIVE YOURSELF CRAZY.  I suggest a short quiz for your kids about the different costs associated with buying a car and different costs associated with operating a car. How much are these costs?

Go over your kid's answers with them.  Remember to include sales tax, registration and inspection fees, insurance premium and maintenance.  Don't forget the ever-climbing cost of gasoline. Have your kid do the research and put a realistic price next to each item.  The result is sure to be sticker shock.

I am not in favor of a generation of young people staying at home, tweeting and surfing the net as a substitute for face-to-face human interaction, but perhaps riding a bicycle and utilizing public transportation will continue to be an appealing, economic and Eco-friendly, alternative to owning a car.

Teens and Cars: How Not to Drive Yourself Crazy

We all want things we can’t afford, and we basically know that there are various ways to handle the problem:

• We can do without it.
• We can save for it.
• We can find ways to increase our income.
• We can buy now and pay later on some sort of an installment plan that we can or can’t afford.

But what happens if we plan carefully in advance—save up, increase our income, or set up a plan to make payments we can afford—and suddenly we discover that we still can’t afford it?  This is a situation that your teen may easily find themselves in when it’s time to buy a car or pay their share of insurance on a family-owned vehicle. This comes from making plans based on too little information.

Give your teen this quiz before they start the auto-buying process:

1. What are all of the different costs associated with buying a car? How much are they? (Have your teen make a detailed list.)
2. What are all the different costs associated with operating a car? How much are they? (Encourage teens to go on-line to research the answers.)

It’s heart breaking when you’ve seen your teen work hard and save up what they think is enough for a car . . . when they drag you to their computer to show you the ad for that perfect vehicle . . . it's only $6,000.  “I’ve saved the money, so let’s go buy this…now!”

But we all know that your teen will need more than the $6,000. They will also need money for:

• Sales tax
• Registration
• Inspection
• Insurance
• Extras

The extra price tag on all these? That’s for your teen to research, with your coaching.  They may be shocked at the insurance quotes, which vary greatly from state-to-state and even within different regions or locations in each state—not to mention—gender.  For instance, in New Jersey, for a male driver, who is 18-years-old, the average insurance quote is $2,999 or $250 per month versus an 18-year-old female driver at $2,267 or $189 per month.  After your son stops grumbling about the fact that his insurance would be lower if he were a girl—turn this into a “teachable” moment and ask him to think about why a male’s insurance is higher!

Also, I include a trip to the insurance agent before turning over the keys. Since we are parents and most of what we say is heard by our ever-so-smart teens, as “Blah, blah, blah,” let your insurance agent explain liability, collision, personal injury coverage and the facts-of-life if your child is caught speeding or under the influence of drugs and alcohol.  The facts are “sobering” and are more impactful coming from a third party.

If your teen is going to drive the family car, let them research the cost of adding a teen to your insurance policy. I’m a firm believer that they need to pay the extra cost. Make sure this is also on the list of questions for your insurance agent visit. In many states, for instance, the insurance company can cancel your policy after one accident, or even one moving violation, by a teenage driver.

Also, let your teen find out what they can do to reduce the cost of the premiums. This varies from state to state and carrier to carrier, but here are some things that will generally make a considerable difference:

• Have your teen take and pass a driver-training course.
• If your teen is a good student, make sure their grade record is part of the insurance package you give to your carrier. Explain that insurance companies have found that good grades correlate with being more responsible and actuarial tables show that good students get into fewer accidents.
• Put limitations on how much your teen drives the family car—and which car they are allowed to drive. Premiums may be lower if they are driving the older or cheaper car. (Also, if your teen is only allowed to drive occasionally, premiums may be lower.

The next thing teens have to figure out is the ongoing cost of gas, maintenance, and emergencies and how they are going to pay for that. If they are using the car to do chores for you, it’s only fair if you help with the costs—if not, they may be shocked when they spend $50.00  to $100.00 for gas per week!


Stay tuned for my next blog post where I'll show you the “contract” I want you to create with your new driver.  Until then, Happy Motoring! (I know you have a lump in your throat—“Teens and driving” always causes that!)