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What's a good car budget for a new driver?
Old 01-15-2008, 08:53 AM   #1
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What's a good car budget for a new driver?

Here's the question: When your kid started driving, how did you share the expenses?

Here's the issue: Fair disclosure if you're planning an Oahu trip-- our kid is eligible for her learner's permit on 1 May 2008.

Here's the long-winded discussion:
She'll be learning to drive our 1994 Ford Taurus wagon (two tons of decaying plastic, 110K miles, an automatic transmission, and anti-lock brakes). Its days are numbered and it may not survive her efforts, so this summer we're buying a Nords engineering project used 2004-07 Prius. Those decisions are family consensus and we're not planning to change them.

Those decisions are also part of her financial education. On her 8th birthday we started a "Kid 401(k)" to show her how a few dollars a week (with employer's matching funds) and a lot of deferred gratification could compound to a big payoff. She's watched it grow (for nearly half her life!) and it'll hit $5000 on her 16th birthday. The idea was that she could use it to buy her own island beater and pay for her own gas/insurance, or she could borrow a parent's ride while investing her money for college expenses.

Well, the Law of Unintended Consequences has kicked in. She wants to have our cake and eat it too, and she's proposed buying an equity share of our Prius. She wants to pay for her insurance and gas while having first claim to the car and then, 18 months later when she goes to a Mainland college, she'll sell back her share for $5000 to save toward her next clunker.

We're thrilled at her initiative and we'd like to reward this proposal just for its original thinking, let alone for all the other problems it solves:
- We want her to go to a Mainland school to learn for herself how Hawaii is better than winter finish establishing her independence, and Hawaii kids rarely take their cars to college (Mainland shipping is over $1000). $5000 in her pocket is a great incentive to avoid the UH "safety school" default.
- Her share would give her driving rights, and of course she'll try to take over the car. But we want her to drive (because Hawaii drivers don't get enough practice for the Mainland) and we can use her selfishness for running errands, doing the grocery shopping, and relieving us of other driving chores.
- If she wants to do the majority of the driving then she's gonna have to graduate from Dad's school of auto maintenance.
- She won't have to learn how to drive a stick shift-- unless she wants to.
- Any ride-pimping is her own expense (she has a part-time job and can do the $8.50/hour math).

We want to sidestep the argument about who's buying gas. (Dad: "You drove the car." Kid: "Yeah, but I was buying groceries!" D: "You ate most of them." K: "Yeah, but I don't have time to buy & cook my own food!" D: "Oho, we can fix that..." etc.) We also want her to realize how monthly expenses pile up and to learn how to manage money. Our thought was to build on her clothing/toiletries budget by adding a gas budget of $50/month. (Our Quicken records for two drivers are roughly $100-$150/month.) Since we'd almost never be driving the Prius anyway, she'd be on the hook for the vast majority of the fillups.

We'll be getting USAA's quote, although she's required to take driver's ed and she has good grades. Hawaii restricts under-18 night driving and passengers so we hope to avoid most of the party-car issues. She can afford to buy extra gas and her share of maintenance/repairs. Of course she'll sign a family driving contract and she'll see the article about the mom who sold the "son's" car when he broke the rules.

What worked for your young drivers? What are we missing? Any ideas on how to improve our system?


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Old 01-15-2008, 09:14 AM   #2
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You left out the annual IG visit and periodic no-notice emergency drills.

Sounds like you've covered most of the bases, but one big omission I see is laying out in advance the consequences of a moving violation citation. Or of being involved in an at-fault fender bender. Or two. Or three. (Don't ask me how I know.)

You have the disadvantage of heightened child abuse laws, something I was not burdened with when my two teenage daughters started driving, so you'll have to be creative and figure out something that doesn't leave marks.

Numbers is hard

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Old 01-15-2008, 11:09 AM   #3
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Looks pretty reasonable to me. One thing I don't see addressed is depreciation. If she buys a share worth $5k, that share would be worth slightly less 18 months later depending on how much the car depreciates. It's probably not that much money, but it might be worth mentioning just to point out that this would be a bigger issue with longer timeframes or a newer car.
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Old 01-15-2008, 12:06 PM   #4
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It sounds like you covered all the bases now what are you going to do if she breaks a rule ? I always confiscated the car keys and made them take the bus to school (ultimate teen age embarrassment ).
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Old 01-15-2008, 12:18 PM   #5
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Mine paid for close to half of her car, and it's all in her name. Her mom had this idea of a family car for them but that wasn't going to work when she was with me, so DD and I just went ahead with me helping her buy one.

She pays gas and maintenance and she's on her mom's policy for liability insurance. We agreed to take major mechanical repairs on a case-by-case basis, and hope that by getting the car checked out beforehand that there wouldn't be any for awhile.

Some of the colleges she's looking at don't allow cars for freshman so we're not sure if she'll keep it or sell it.

4 days after she got the car, she misjudged a stop and put her bumper into an SUV trailer hitch. About $1500 in damage to her car, none to the other. There had already been some bumper damage with the car that the repair guy said he weakened it and caused this damage to be worse, so I paid 1/3 of it. It had to be repaired because the hood wouldn't shut. So she's on a one year payment plan to me.

It kills me to see her struggling with money because she can't work much with her extracurricular activities and so most of her money goes to that payment and gas, and it would be nothing for me to bail her out. But it's a good lesson to learn so I'm letting her get the education. No other accidents since, so hopefully she learned with no one getting hurt and only minor damage but enough for her to feel the consequences.
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Old 01-15-2008, 02:16 PM   #6
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I don't have kids so never had to deal with it from parent's side, but here's what my father did and it worked for me. He bought a 10-year-old Plymouth for $50 from a junkyard that needed a transmission, a brake job, and some other minor work. This was in 1965. Walt had to replace the transmission - taken from another car at the same junkyard - and do the brake job, fix whatever broke, and do all the routine maintenance. In the driveway. In the winter. I won't claim in three feet of snow, but I do remember being under the car with about an inch or two.

I appreciated what I had since few others had their own wheels, and took care of it so I wouldn't cause irreparable damage. I had a job in a gas station as a "platform petroleum engineer" (remember full service?) and that paid for my fuel. Also I had to pay for the difference between the higher insurance rate for males under 25 since my parents had set a precedent when they paid for my older sister's insurance.

The maintenance issue is more difficult now, that was in an era when one could rebuild an engine in the back yard with one box of wrenches and an ohmmeter, which I did. Now you need $2 million in diagnostic gear to figure out what's wrong with it.
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Old 01-15-2008, 05:23 PM   #7
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Our Quicken records for two drivers are roughly $100-$150/month.
Is there a chance that these will stay the same since she will just be driving herself? It may eliminate some instances where you drop her off, drive home, and then go pick her up.
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Old 01-16-2008, 12:44 AM   #8
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No advice just amazed that kid would even think of a buying an equity share of her parents car.

Pretty cool.

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