Teenagers Should Not Finance Cars

"M-Powwerr Drives a Ford" (straight6fun) 05/24/2015 at 19:07 • Filed to: None

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A friend of mine just bought a new Chevy Spark (1LT I think). She is paying for it, and financed it for 72 months. Now for anyone, I think financing a car for more than 4 years isn’t a good idea, but for a 16 year old in particular. The loan will likely be underwater for 3 years. She will have to work during college to make sure her car payment is made, and when it’s paid off and she’s 22, she will have paid over $18,000 for the privilege of purchasing a rebadged Daewoo with double digit horsepower. I could afford to do this too, actually cheaper, because I would buy the manual version ($2500 down, $199(MT)/($216(AT)) but it makes no sense to me, because I don’t want a car note tying me down. After college, sure, I would consider financing a new car (foST/Miata/M235i/CivicR) #entrylevelengineersalary, but for 3 or 4 years, not 6. Buying a car for $4000-5000 cash at 16 makes much more sense and should still last through college.

mazda616 > M-Powwerr Drives a Ford 05/24/2015 at 19:12

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Who gave a 16-year-old a car loan? I guess she had a co-signer or two.

jvirgs drives a Subaru > M-Powwerr Drives a Ford 05/24/2015 at 19:12

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I’d say 60 is the highest you should go. And depending on your credit, the more favorable options are usually around 60. Given that she is 16, her interest rate is probably really high for a new car purchase as to the reason she dragged the payments out for 72 months to keep the payment low. When that is the situation, I would definitely re-evaluate

JQJ213- Now With An Extra Cylinder! > M-Powwerr Drives a Ford 05/24/2015 at 19:12

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I guess it depends on the person...

I just got my C30 and I’m financing that for 60 months and I’m 17. I’m a car nut and having this gives me a sense of responsibility; incentive to keep working. I know it’ll be reliable and safe and is a better choice than a little beater car.

I do have to laugh a bit though since the C30 was less than the Spark and I think most everyone can agree that my car is better (not trying to be a dick but its a Spark for heaven’s sake)

jkm7680 > M-Powwerr Drives a Ford 05/24/2015 at 19:14

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That she’s paying for it is pretty awesome. Usually most parents either pay for their kids car, or let them use one of theirs.

Twingo Tamer - About to descend into project car hell. > M-Powwerr Drives a Ford 05/24/2015 at 19:16

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People do this a lot. I paid £3300 cash for a car in perfect mechanical condition that’s a couple years old. Several of my partners friends bought Citroen C1s on lease and pay around £2500 a year for 3 years. Big money for a kinda meh car.

M-Powwerr Drives a Ford > JQJ213- Now With An Extra Cylinder! 05/24/2015 at 19:22

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I hope I didn’t offend you, what was the interest rate on the C30? I understand why you financed the C30, but because I don’t know where I’m going to be in 2 years, I don’t want to have to worry about a car payment right now.

M-Powwerr Drives a Ford > jvirgs drives a Subaru 05/24/2015 at 19:22

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My guess is, her parents co-signed for her

Dr. Zoidberg - RIP Oppo > jkm7680 05/24/2015 at 19:23

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I agree with the spirit of your post, but a 16 year old may not fully be aware of their needs in the near future. She’ll be out of high school in less than two years. Is she going to college? Where does she have to move? Will owning a financed* vehicle be viable at that point? You can bring up these issues with adults in general and their various life choices, I know, but... I dunno. My two cents.

M-Powwerr Drives a Ford > jkm7680 05/24/2015 at 19:23

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I totally respect her for buying her own car, that’s what I’m doing, but a 6 year car loan on a Chevy Spark when she’s 16 seems a little crazy.

M-Powwerr Drives a Ford > mazda616 05/24/2015 at 19:23

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her parents either co-signed or bought the car and she’s making the payments

JQJ213- Now With An Extra Cylinder! > M-Powwerr Drives a Ford 05/24/2015 at 19:25

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Not offended at all. Everyone has different views. My dad was the kind of person who wanted me to have a $1500 beater for a first car. Grandma was the kind of person who wanted me in a brand new safe thing; which was why I leased a Civic.

I’m at 3.49% percent on it. I’ll be a senior in high school next year and will be hopefully going to FGCU for business. I have most of it planned out so I figured I could lock into this since it was something I wanted so badly.

BeaterGT > M-Powwerr Drives a Ford 05/24/2015 at 19:27

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That’s quite a commitment for a Spark, I hope she plans to stick with it. I too, use four years as a rule of thumb. Sign up for four, aim for three, pay in two, and happy since day one.

Logansteno: Bought a VW? > M-Powwerr Drives a Ford 05/24/2015 at 19:27

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My parents have always told me 60 months in the max you should ever do on a car loan, period. Anything longer and it just doesn’t make sense.

But, if she wants to pay on a Spark for 6 years, more power to her. I'd have gone used and got myself a Charger R/T (which I actually plan on doing) but that's just car enthusiast me.

Henners > M-Powwerr Drives a Ford 05/24/2015 at 19:30

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Sometimes considering how much insurance costs for young drivers in the UK, finance deals that include free (or very cheap) insurance then make more sense...

M-Powwerr Drives a Ford > Logansteno: Bought a VW? 05/24/2015 at 19:31

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I go by the warranty, finance up to the warranty period and no more. I would so much rather have the Charger R/T than a spark. I am currently looking at buying a ‘98 328i, and driving it until I leave for college, then paying cash for e90 with my savings accumulated over the 2 years.

M-Powwerr Drives a Ford > JQJ213- Now With An Extra Cylinder! 05/24/2015 at 19:34

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The GM Promo rate is 4.9 which is crazy, considering Ford and Honda both have .9%. I’ll admit I just checked the Ford site for a fiST rate, but at almost $300/month I don’t feel comfortable with it at all. But for 30 seconds I considered it.

M-Powwerr Drives a Ford > BeaterGT 05/24/2015 at 19:35

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That’s why I’m waiting until I graduate from college, then I’ll likely buy a M235i

jkm7680 > M-Powwerr Drives a Ford 05/24/2015 at 19:35

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Yup, maybe her parents will throw her some money or something to help out.

jkm7680 > Dr. Zoidberg - RIP Oppo 05/24/2015 at 19:36

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Then she’ll be like “WHY DID I BUY THIS SHITTY ASS DAEWOO?”

M-Powwerr Drives a Ford > jkm7680 05/24/2015 at 19:37

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Considering she works at Panera, I wouldn’t doubt it

M-Powwerr Drives a Ford > Dr. Zoidberg - RIP Oppo 05/24/2015 at 19:38

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That’s why I’m buying cash cars, at least until I graduate from college, if not always.

M-Powwerr Drives a Ford > Henners 05/24/2015 at 19:39

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This is in the USA though, and I know that scenario doesn’t exist, because if it did, i’d have a new fiesta 1L ecoboost

LongbowMkII > M-Powwerr Drives a Ford 05/24/2015 at 19:40

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Doing my STRONG research on small cheap cars I can’t see why anyone would finance that long. Seriously, pay the extra $30 bucks a month and save a year of time and money.

Dr. Zoidberg - RIP Oppo > M-Powwerr Drives a Ford 05/24/2015 at 19:40

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Incoming hot take: I do not enjoy Panera

BeaterGT > M-Powwerr Drives a Ford 05/24/2015 at 19:43

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That’s a tall order, no student loans to take care of?

Dr. Zoidberg - RIP Oppo > M-Powwerr Drives a Ford 05/24/2015 at 19:45

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You can get a Mitsubishi Mirage for like $13k instead. $300 a month is serious money.

Alex B > jkm7680 05/24/2015 at 19:48

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There is nothing wrong with parents buying kids for their cars or using their parents cars. In fact, I don’t know anyone in my high school who has had to actually pay for their own car. When they crash it/abuse it, it’ll teach their parents a lesson as well. ¯\_()_/¯

JQJ213- Now With An Extra Cylinder! > M-Powwerr Drives a Ford 05/24/2015 at 19:55

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That’s surpringly high honestly. But then again when I looked into leasing a civic was only $15 a month more than the Spark because the civic blows it away in residual.

I did go through a third party though. Volvos I’m house was 6% since it was an 08.

That’s not too bad on the FiST though honestly but I’m sure quite a bit had to be put down. That’s where they get you. Oh and tax title and fees. Dealers suck for that

M-Powwerr Drives a Ford > Dr. Zoidberg - RIP Oppo 05/24/2015 at 20:06

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or a e36 for the price of the down payment

M-Powwerr Drives a Ford > BeaterGT 05/24/2015 at 20:09

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exactly, so I’ll be able to afford something stupid (and mechanical engineers make $60k entry level)

M-Powwerr Drives a Ford > Dr. Zoidberg - RIP Oppo 05/24/2015 at 20:10

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As a straight guy, I feel uncomfortable going in there alone

BeaterGT > M-Powwerr Drives a Ford 05/24/2015 at 20:12

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Don’t put the cart before the horse!

jkm7680 > Alex B 05/24/2015 at 20:41

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I mean more of new/expensive cars than anything.

BugEyedBimmer - back in the Saddle Dakota Leather > M-Powwerr Drives a Ford 05/24/2015 at 20:55

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I wish I had financed a vehicle when I was younger. It was pretty embarrasing having to have my mother-in-law having to cosign MY lease at MY dealership because I had no credit at 24 years old.

With today’s credit driven world, loans are a necessary evil. This young woman will have a low, steady payment that won’t stress her during college. (I think that she should be working anyway), and will come out with enough credit to be able to do pretty much anything she wants. She’ll probably be able to get a house at 25 with less than 5% down because of her good credit history. Good on her.

M-Powwerr Drives a Ford > BeaterGT 05/24/2015 at 21:04

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as long as I can get through college in 4 years, I’ll be fine

M-Powwerr Drives a Ford > BugEyedBimmer - back in the Saddle Dakota Leather 05/24/2015 at 21:05

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Wouldn’t having 2 credit cards that are paid in full every month satisfy that need too?

mazda616 > M-Powwerr Drives a Ford 05/24/2015 at 21:19

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For what she spent on that Spark, she could've gotten a decent used car. Low mileage, even. I don't get it.

Rusty Vandura - www.tinyurl.com/keepoppo > M-Powwerr Drives a Ford 05/24/2015 at 21:20

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Like the color.

Rusty Vandura - www.tinyurl.com/keepoppo > jkm7680 05/24/2015 at 21:21

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jkm, I think that intensifier should be hyphenated ( shitty-ass ). This is Oppo; we’re classier than Jalo.

jkm7680 > Rusty Vandura - www.tinyurl.com/keepoppo 05/24/2015 at 21:23

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Thanks to the miracles of Kinja, I can no longer go back and edit that.

Kinja, you are truly something.

BugEyedBimmer - back in the Saddle Dakota Leather > M-Powwerr Drives a Ford 05/24/2015 at 21:24

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Not necessarily. The limits of the cards, and what they’re used for determine if it’s a big enough credit line. If you have 2 $500 credit cards, or only use them for a couple hundred every month, it’s not really a big help. A car is “big” credit, and that’s what you really need. When you purchase a house, you need 4 lines of credit, with at least 2 of them being “big” expenses (usually a car and rent). This was going to be necessary at some point, and the sooner she starts, the longer her history. The little bit of interest she’s paying now may decrease the amount of interest on her home loan to where it pays off much better in the end.

M-Powwerr Drives a Ford > BugEyedBimmer - back in the Saddle Dakota Leather 05/24/2015 at 21:29

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Fair point, I still wouldn’t want a 6 year car loan at 16

M-Powwerr Drives a Ford > mazda616 05/24/2015 at 21:30

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she could have gotten an e90 (albeit an early one) or a TL, or a 2 year old civic

BugEyedBimmer - back in the Saddle Dakota Leather > M-Powwerr Drives a Ford 05/24/2015 at 21:36

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Okay. Doesn’t mean it wasn’t the right move for her.

Rusty Vandura - www.tinyurl.com/keepoppo > jkm7680 05/24/2015 at 21:37

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You can for a short time after you post...

Does somebody pay rent to Kinja for us to all be here?

jkm7680 > Rusty Vandura - www.tinyurl.com/keepoppo 05/24/2015 at 21:39

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Yup, I think it’s like a 15 minute range or something. Another reason why I generally stay away from commenting on FP.

I think that Kinja probably has to pay rent to be here.

M-Powwerr Drives a Ford > BugEyedBimmer - back in the Saddle Dakota Leather 05/24/2015 at 21:45

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Agreed

Dr. Zoidberg - RIP Oppo > BugEyedBimmer - back in the Saddle Dakota Leather 05/24/2015 at 22:03

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Do you still have that Beetle?

Et tu, Hellcat? > M-Powwerr Drives a Ford 05/24/2015 at 22:07

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I know a girl that managed to get into a financing plan on a fully loaded Wrangler that ran around $50k CAD. Considering she’s marginally employed and only had about $2k for a downpayment, she’s going to be making payments for the next 8 years. That is utterly miserable.

BugEyedBimmer - back in the Saddle Dakota Leather > Dr. Zoidberg - RIP Oppo 05/24/2015 at 22:12

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Indeed I do. That was less than a year ago. Needless to say, holding off until adulthood to start taking loans and building credit has set me back.

Michael Maguire > M-Powwerr Drives a Ford 05/24/2015 at 22:43

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All I'm going to say is everybody is different. I bought a brand new mustang at 18...and I'm fine. I work 20-30 hours through college and I'm just fine with the added responsibility. As an enthusiast I wanted what I wanted and I got it. Don't regret it one bit

boxrocket > M-Powwerr Drives a Ford 05/24/2015 at 22:54

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Speaking from experience, it’s best to fully own a car until one has a career that pays double the cost of an average car, that is, save money, buy the car that can be afforded then, and keep saving for future repairs and the next vehicle. In case school workload increases, or job is lost, the car is still owned and no worry about making the next payment. Insurance is cheaper too.

Also, a Spark? Poor thing. Not terrible, but there are nicer, better vehicles for less than the cost of a new one...

Manwich - now Keto-Friendly > M-Powwerr Drives a Ford 05/25/2015 at 00:31

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“I think financing a car for more than 4 years isn’t a good idea, “

Personally I think financing any car for longer than the comprehensive/bumper-to-bumper warranty is a bad idea.

In the case of the Spark, that warranty is 3 years. Thus the financing period should not be over 3 years.

Flavien Vidal > M-Powwerr Drives a Ford 05/25/2015 at 06:03

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I ONLY pay cash for the cars I buy (by cash I mean with money I have, not cash as in “with big envelopped”). No freaking way I’m getting anything financed for a 2015 POS that will be worth 1/3 of its value in 5 years.

My cars are old, fun, sometimes practical but most of it, I don’t loose much money of them, all that while driving them daily.

M-Powwerr Drives a Ford > Flavien Vidal 05/25/2015 at 09:41

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I would agree, there are only a few circumstances that I would finance a car and both of them involve just finishing my higher education and not having the savings to buy a new car

M-Powwerr Drives a Ford > Manwich - now Keto-Friendly 05/25/2015 at 09:42

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The warranty is my rule, but I know 4 years is the absolute maximum you should go

Flavien Vidal > M-Powwerr Drives a Ford 05/25/2015 at 09:44

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yeah but I just would get a 2000$ mustang or miata if I were to not be able to buy it right away... until I can save enough for something proper, good job or not :)

especially since mustangs and miatas are awesome cheap fun haha

Eric @ opposite-lock.com > M-Powwerr Drives a Ford 05/25/2015 at 10:45

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Going in there with a woman that doesn't scream straight makes me feel like a beard.

Eric @ opposite-lock.com > Logansteno: Bought a VW? 05/25/2015 at 10:53

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It sounds like a rule of thumb thing. My rule is do whatever you can to minimize what you pay and maximize the amount of time you have with your money. Don’t take a loan you need (that is, only take one when you can afford to pay it off immediately) for something you want. If you absolutely must take a loan for something you need, the first rule still applies: minimize the amount you pay and maximize the time with your money.

Eric @ opposite-lock.com > BugEyedBimmer - back in the Saddle Dakota Leather 05/25/2015 at 12:28

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I bet the loan isn’t in her name. I took a loan at 16, but they put it on my parents alone. I spent many years trying to establish credit. She isn't doing herself any favors.

Eric @ opposite-lock.com > BugEyedBimmer - back in the Saddle Dakota Leather 05/25/2015 at 12:31

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The amount of use doesn't matter. Limit and low utilization matter. The only jump start is being included on well-used cards of others with tens of thousands in limits. Even then, it's risky until she's collecting cards and loans in her name.

BugEyedBimmer - back in the Saddle Dakota Leather > Eric @ opposite-lock.com 05/25/2015 at 17:40

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If that’s the case, she’s doing herself no favors