Should You Help Your Grandchild Buy a Car?

Does the thought of your grandchild behind the wheel of a potentially lethal weapon send chills up your spine? In my case, it brings tears to my eyes!

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If your grandchild has started to talk about having their own car or driving yours, it’s time to take this topic of teens and cars seriously.

The Good Old Days

Baby Boomers like me couldn’t wait to get our driver’s licenses. It was our coming of age; our badge of honor and a clear sign of being cool. We cruised; we were “free”; we packed our friends into every inch of the car; and, “Yes, Mom, even nice girls parked and made-out.”

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Our grandkids may have seen American Graffiti, but they sure don’t identify with the car culture depicted in that flick. Interestingly, the trend of obtaining driver’s licenses is decreasing. University of Michigan researchers found that the trend now is for fewer teens to drive. Michael Sivak and Brandon Schoettle confirmed this in their study that noted the number of 18-year-olds driving “fell from 80% in 1983 to 60% in 2014, 17-year-olds decreased from 69% to 45%, and 16-year-olds plummeted from 46% to 24%.”

There are several reasons for the reduction in registrations, including the high costs for purchasing a car and the increase in urban living. It is also no longer the “badge of being cool” that it once was. Sivak and Schoettle also found that teens are; too busy to get a driver’s license; prefer to bike or walk; use public transportation and some were concerned about the environment.

For concerned grandparents, all this may mean that you have bought some time before you need to have “the talk.” Driving a car is serious business, as captured by the Centers for Disease Control and Prevention, which noted that “Motor vehicle crashes are the leading cause of death for U.S. teens. … In 2014, 2,270 teens in the United States ages 16-19 were killed and 221,313 were treated in emergency departments for injuries suffered in motor vehicle crashes.”

The thought of more than six teens dying every day from car crashes is tragic. The point is, safety first. Teens can be distracted drivers and thus careless. I am not going to directly deal with those sobering (no pun intended) issues; however, I do want to look at the financial implications of teens behind the wheel. Why? Because your grandchildren may very well hit you up to help buy them a car.

Begin The Car Talk

Start the car conversation by telling the grandkids about your first car and how much it meant to you. Hopefully, you worked and saved up your hard-earned money for this cherished possession. Kids love to hear stories about grandparents. I remember when my husband and I paid $1,600 for a new Triumph. My grandchildren can’t believe a car could ever cost that little. They did remind me that a good lawn mower costs more today.

Make this “talk” a learning moment about safety … and about money. You want them to have skin in the game, even if you end up paying the majority of the cost.

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The Car Cost Quiz

Your grandchild may think that since they have been stashing away money for months, they finally have enough to go car shopping. They may have found an online ad for a 1998 Mustang with only 350,000 miles on it for only $5,000 — a steal! But do they really understand the true cost of buying a car?

Here is a short quiz for your grandchild on buying an auto:

What are all the different costs associated with buying a car? How much are they?
What are all the different costs associated with operating a car? How much are they?

Go over your grandchild’s list and find out if they left out any of the costs on either list. (Leave off the cost of accidents, for now.) They need to think about all the “upfront” costs when purchasing a car, which include:

Financing the purchase
Sales tax (state and local)
Insurance premiums
Registration fees
Inspection extras

With all this in mind, the cost of the car may be more than your teen was expecting. The point of this lesson for your teen is, “Welcome to planet Earth.” Even if you are footing the bill, have your grandkids do online research on all of the costs as if they are paying for the car themselves.

Grandparents Need to Be Tough (and Generous, Too?)

And after all the cost considerations, what if your grandchild still has their heart set on that $5,000 1998 Mustang? This is where you put your foot down. Remember the safety issues? This is time for you to step in and say that, no matter what, you are going to have your mechanic make sure the car is safe.

You may now consider adding some of your money to the pot to increase their car-buying budget, because it is worth it to have all the current safety equipment: new tires, brakes, air bags, etc. There is no price you can put on your grandchild’s safety. (For some cars to consider, check out Kiplinger’s The Safest Cars for $30,000 or Less and The Safest Used Cars for $20,000 or Less.)

The Bottom Line

This car conversation is not easy, and it may take the wind out of your grandchild’s sails. But, as much as a car is a rite of passage to freedom, it is also the rite of passage to adulthood. As a grandparent, it’s your job to make sure that you are the teacher. Just remember the words of Mark Van Doren, the famous poet and professor of English at Columbia University, “The art of teaching is the art of assisting discovery.”

It’s time for your grandchild to discover the full truth — and responsibility — of driving a car.

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Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Neale Godfrey is a New York Times No. 1 bestselling author of 27 books that empower families (and their kids and grandkids) to take charge of their financial lives. Godfrey started her journey with The Chase Manhattan Bank, joining as one of the first female executives, and later became president of The First Women's Bank and founder of The First Children's Bank. Neale pioneered the topic of "kids and money," which took off after her 13 appearances on The Oprah Winfrey Show.