How to Buy a Used Car as a Teenager

A newly licensed teenager might want their own car. However, Experian explains that–in general—a buyer needs to be at least 18 years old to be financed for a loan.

For this reason, some teens might visit a dealership with their parents to buy their first car. Some teens might have saved up enough to buy a used car with cash, but others might need the financial help (or backing of parents). There are other features of cars that teens need to consider when making their first purchase, though. Here’s how to buy a used car as a teenager:

  • Know the budget
  • Understand driving needs
  • Understand safety ratings
  • Take a test drive
  • Get inspections
  • Get insured before driving off the lot
How to Buy a Used Car as a Teenager

The Budget Varies Per Buyer

A teen might not have a large budget for a used car. Some teens save up their earnings to make a used car purchase. Others, though, might get financial help from their parents.

Before shopping for a used car, buyers should understand their budget. Typically, experts recommend allocation less than 10 percent of monthly take-home pay for a car payment. However, teens might not have a steady job. In addition, the budget might depend on the lump sum they have saved.

No matter how teens determine their budget, they need to understand this important limitation. The budget also needs to include any additional costs for sales tax, registration and any other fees associated with the car purchase. The sticker price or purchase price might not be the full cost.

Once teens (and/or their parents) set a budget, shop for only cars that fit comfortably into this parameter. Again, remember that other fees and costs need to be paid. Make sure the budget accommodates these costs.

Understand Driving Needs

The price of used cars can vary by make/model, age, mileage and condition. To find the best car for the best price, buyers might have trade-offs. For example, if a buyer is focused on a Jeep Wrangler, they might need to choose an older model or a model with higher mileage to afford the car of their dreams.

Understanding driving needs and habits can help buyers also understand what they aren’t willing to sacrifice in their used car. A teen that needs to commute an hour to school per day might not want to choose a vehicle with a high mileage. Some teens might want specific safety features or high-tech options that won’t be included in older models.

Teens might make a list of the features they want in their vehicle. In addition, they also need to think about how many miles they might drive per day.

If the daily commute is long, they also might want to choose a more fuel efficient vehicle. The price of gas fluctuates; fuel is another cost of car ownership, but some cars get better gas mileage than others.

Understand Safety Ratings

Teen drivers don’t have the road experience as more seasoned drivers. Safety ratings of vehicles are important for many buyers, but teens might focus on choosing a car that has good safety ratings.

To understand the safety rating of a particular model, buyers can visit the Insurance Institute for Highway Safety’s website. The site lets buyers enter the make/model/year of a particular vehicle to review the safety report of the vehicle.

The IIHS also awards the safest vehicles with a Top Safety Pick+ or Top Safety Pick. The difference between these two distinctions is related to the headlights of the vehicles; those that receive the “+” offer good or acceptable headlights as a standard option. Those that are denoted as a Top Safety Pick offer these headlights as an option.

How to Buy a Used Car as a Teenager

Take a Test Drive

While a vehicle might seem like a dream model for a teen driver, taking a test drive can help teens find out how the car handles on the road. When taking a test drive, adjust the seat to understand the controls.

Some drivers don’t like manual seat controls and prefer power options. Others don’t care. In addition, drivers could have preferences related to tech options in the car.

Teens also should focus on how the car handles during the drive. Are there any issues? How does the car accelerate? Is the vehicle easy to maneuver?

Use the test drive to gain a better understanding about the car’s handling and mechanics. Listen for any odd sounds, too.

Get Inspections

Many teens shop with their parents. When looking at a used vehicle, inspect the car inside and out. Note any issues like rust or scratches.

Car buyers also can request a third-party inspection. This can help buyers understand any underlying issues with the vehicle. If the inspection reveals an issue, this could be a point of negotiation.

Teens (and parents) also should review the Carfax of the vehicle. The Carfax will include information related to the number of previous owners as well as any accidents and other details. In addition, ask about any warranty information related to the vehicle.

Get Insured before Driving Off the Lot

Before driving any car off the lot, teens need to be sure the car is insured. When buying the car, contact the insurance company to add the car to a policy or to start a policy. If the driver doesn’t currently have a policy, they will need to show proof of insurance before driving off the lot (this means starting a policy for the car). Again, don’t drive the car until all insurance is verified and in place.

For teens who are already insured, the car can be added to the policy. The grace period may vary per insurance provider; be sure to talk to the insurance provider about coverage before driving the car off the lot, though.

What to Know about Car Loans

Some teens are 18 or older and might be applying for their first car loan. This can be stressful and a bit intimidating. What should teen buyers know about car loans?

All consumers are entitled to receive a free credit report every 12 months. Teens who are of age to get financed for a loan should request their credit report to understand their credit score and how it could impact their financing options.

While a credit score on a free report won’t be the precise score lenders review, it should be close enough to help buyers get a sense of their creditworthiness or risk. In general, credit scores are divided into a few different categories: Excellent (720-850), Good (690-719), Fair (630-689), and Bad (300-629).

Those with good or excellent credit typically secure better rates than those who are a higher-risk borrower. Reviewing a credit score can help buyers prepare for the rates they might be presented.

Once a borrower understands their credit score, they can use this information to estimate their monthly payments via a car payment calculator. NerdWallet offers a calculator that allows buyers to input the price of the vehicle and choose a credit score range to understand interest rate info; underneath the credit score range, the tool shows an estimated interest rate associated with the credit score.

This tool is only for informational purposes and doesn’t guarantee a buyer a certain interest rate. However, it can help first-time borrowers review how their interest rate impacts the monthly payment.

Using the tool, the buyer also might be able to better understand how much money they might allocate for a down payment. While experts recommend that buyers allocate 10 percent of a used car purchase price for a down payment, buyers could opt for a higher down payment to help lower monthly payments.

When purchasing a used car, buyers also should understand the expected price of the car they are going to purchase. To research the prices of used cars in their area, buyers can visit Kelley Blue Book to search for used car prices in their area. If the price of a car seems high, the site can help buyers find other prices for the same car in the area; buyers might find that the price is fair and in line with the other dealerships.

Other Tips for Buying a Used Car

Teens who are buying a used car might also consider a few other factors when shopping for their car. For example, visiting a dealership on Monday might be a better option than going to the dealership on a weekend when it’s busier.

If older teens (18 and up) are shopping solo, they also should understand that they can (and should) take the time they need to consider a car. It’s ok to step away from the dealership and think about the decision; this can help buyers feel better about the purchase and not make a hasty decision.

In addition, many buyers opt to research cars online before they buy. Researching online can be a great option for first-time buyers to take all the time they need when considering a used car purchase. Visit different dealership websites and research via Kelley Blue Book. Some sites even let buyers get pre-qualified for financing and review all the possible loan options for which they might qualify.

Teens might feel better taking a parent with them when they are buying their first car. For those under the age of 18, a parent might need to be present. Regardless of age, though, a buyer might prefer having another person with them when shopping at a dealership.