Help your teen make a smart choice.

The late teens and early twenties are a critical period for everyone — you don’t know a lot about how the world works yet, but you’re expected to make decisions that will affect your life twenty, thirty, even forty years from now. If you have children in their teens, you understand how exhilarating and nerve-wracking this time can be. While you may not have as much influence as you’d like when it comes to who they date or what they choose to major in at college, you probably can steer them in the right direction when it comes to managing their money, choosing the right car, and applying for a car loan.

Going on the car search with a parent can be an ideal way for teenagers to learn about making smart choices the next time they need an auto loan. Our First-Time Buyer’s Guide offers sound advice for anyone who’s a novice to the car loan financing process. Read over it with your teen or come in together to talk about car loans. Here are a few more tips to make buying your teenager’s first car a great experience for everyone.

Set clear expectations.

Make sure you lead the car buying discussion with a few clear-cut rules. How much are you willing to spend to add another vehicle to your household? What safety features are non-negotiable to you? Who will pay for gas? Will you set limits on when your teen can drive or how many passengers can ride in the car? It’s important that new drivers understand early on that the rush of freedom they feel behind the wheel also comes with a lot of responsibility.

Decide how to share the costs

Teenagers don’t usually have the resources to afford an auto loan, let alone to carry the entire cost of car ownership. You probably don’t want your teen neglecting schoolwork or skipping out on extra-curricular activities just to make car loan payments, but that doesn’t mean that teens shouldn’t contribute at all. In fact, studies show that teenagers who are involved in the car buying process and who contribute to car costs take better care of their cars and drive more cautiously. Expecting some contribution will keep your teen safe in addition to teaching responsibility and financial management.

First, discuss the full cost of car ownership with your teen. Most young people don’t consider the added costs of insurance, taxes, maintenance, and repairs. After you lay out all the costs, decide if, when, and how your teen will be expected to pitch in. Perhaps you should have your teen set aside a certain percentage of each paycheck to save up for routine maintenance and repairs or ask your teen to cover your insurance increase. Whatever you decide, this is an excellent chance to discuss money management, engage with your teen, and work toward a mutual goal.