Purchasing a vehicle can be an exciting milestone in a teenager’s life. However, there are important legal and financial considerations for teens and parents when buying a car under 18. This guide covers age requirements, financing, insurance, titling, and more.
Legal Age to Purchase a Car
The legal age to buy a car varies by state, but is typically 18 years old. This is because minors cannot legally enter into contracts like auto loans or sales agreements until they reach the age of majority.
That being said, a few states allow minor purchases with parental consent/Co-Signer.
You might also be interested in: How old do you have to be to lease a car?
Dealership Purchases
Most dealerships require buyers to be at least 18 years old or have a parent/guardian co-sign the sales contract. Some states like Wisconsin allow minors to enter contracts for vehicle purchases if a parent agrees to take liability.
Private Sales
While private party sales may have more flexible age requirements, lenders often will not provide financing to minors unless they have a co-signer. Minors may also have difficulty properly registering and titling the car without adult involvement.
Financing Options for Teen Drivers
Financing from traditional lenders usually requires borrowers to be at least 18 years old. Here are some potential options for teens to pay for a car:
- Savings – Paying in full with cash upfront
- Parent/Guardian Co-signer – Co-signer agrees to be responsible for loan terms
- Buy Here Pay Here Dealerships – Higher interest rates but may work with limited credit
- Peer-to-Peer Lending – Borrow from individuals instead of institutions
When applying for financing, minors should have a co-signer and provide proof of regular income. Building credit beforehand can help teens qualify for better rates.
Insurance Requirements for Minors
Liability insurance is required for all drivers. Most insurers prefer drivers to be at least 16 years old and licensed. To get teen drivers coverage:
- Add them to the parents’ policy as a named insured
- Consider pricing from multiple carriers
- Ask about discounts for good students and driver’s education
Registration and Titling Process
The vehicle seller must properly sign over the title to register the car. To title a vehicle in a minor’s name, parents will typically need to be involved in the registration process.
Requirements vary by state, but often minors cannot solely own a titled vehicle until reaching the age of majority. Check your state’s DMV policies.
Guidance for Parents of Teen Drivers
- Help explore insurance and financing options
- Co-sign loan and sales documents if needed
- Consider holding the title yourself until adulthood
- Set ground rules and boundaries for driving privileges
- Lead by example with safe driving habits
Common Mistakes Teen Car Buyers Make
| Mistake | % Making Mistake |
|---|---|
| Not inspecting vehicle | 62% |
| Not comparing insurance | 58% |
| Overpaying down payment | 53% |
| Skipping test drive | 44% |
| Not negotiating price | 37% |
Source: UsedCarBuyersReport.com teen buying habits survey
In Closing
With some planning and guidance, teens can gain valuable experience buying and owning a car before turning 18. Consult experts like lawyers or financial advisors as needed throughout the process.
