How to Afford a Teenage Driver

With today’s economic climate, adding a new household expense is daunting for many families. In order to weather a large expense increase like a teenage driver, saving early and formulating a solid plan are essential. Here’s how to add a teenage driver to your budget:

Start planning early

Once your child turns 13, begin planning how your family will afford a teenage driver. During the next 2-3 years, save a set monthly amount to cover the cost of driver's education and soften the projected vehicle insurance increase. It’s also important to determine whether you’ll be sharing a vehicle with your teen, passing down your existing car, or purchasing another vehicle. If you will be obtaining an additional vehicle, put aside a monthly amount for this. If your budget is already tight, try setting aside $50-$75 each month to partially offset the upcoming expenses.

Decide how teen driving-related expenses will be handled

If you’re passing down your existing vehicle, or decide to obtain a teen-specific car, work out how that expense will be handled. Will you be paying for it? Will your teen? Will costs be split? In my household, we decided to purchase an additional vehicle specifically for our teen. We felt this would give us greater control over when and how the vehicle is used. Additionally, our teen has a younger sibling who may share the vehicle in the future, so we felt this was the fairest situation.

Have your teen participate in the gas, maintenance, and insurance costs

In order to drive the car, our teen puts $150 each month towards the insurance and maintenance. Additionally, we provide gas money for driving to-and-from school, but our teen is responsible for all other fuel. Realistically, our teen’s total contribution covers about a third of the total monthly vehicle costs, but this responsibility helps teach our teen basic money management.

Have a backup plan if the car becomes unusable

If your teen crashes a vehicle, will it be fixed? Will insurance be liability-only, or will there be coverage with a deductible? If so, who will pay the deductible? In our household, we pay for our teen’s car to have full coverage with a $1000 deductible they would be responsible to pay in the event of an accident.

Work with your teen to come up with a future vehicle plan

At some point, your teen will need a different vehicle. Will that be your teen’s financial responsibility? Or will you help subsidize it? Have these discussions early on and teach your teen how to save for a future car.

Discuss what ownership, maintenance, and insurance will be after your teen is 18

The liability that comes with a teenage driver is immense. If you aren’t comfortable shouldering this liability long-term, consider having your teen take over vehicle ownership and obtain their own insurance policy after they complete high school. Consider subsidizing the maintenance and insurance costs to ease your teen into this adult responsibility.

Our household’s real-life example:

Our one-time teen driver expenses were $350 for driver’s education, $93 for two-hours of extra behind-the-wheel lessons, and a used compact car for $8200. These one-time expenses totaled $8643. Our ongoing teenage driver expenses include $42/year for annual registration, $140/month for maintenance ($50 paid by our teen), approximately $150/month for fuel ($100 paid by our teen), and $358/month for insurance ($100 paid by our teen). These ongoing costs total $652/month with our teen contributing approximately $250/month.

Final thoughts

Affording a teenage driver is exceptionally expensive, so it’s ideal to start planning well before driving age. Because of the financial burden, we highly encourage parents to have honest discussions with their teen and have them pay part of the vehicle costs.