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When Helping A Kid With A Car Purchase, Should We Finance To Build Their Credit?
When Helping A Kid With A Car Purchase, Should We Finance To Build Their Credit?-September 2024
2024-02-19 EST 22:09:29

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As Jalopnik’s resident car-buying expert and a professional car shopper, I get emails. Lots of emails. I’ve picked a few of your questions and will try to help out. This week we are discussing whether it is better to pay cash or finance a car for a kid, and trading two cars for one.

“We are helping our 19-year-old son with a car purchase. It’s a $17,000 car and he is contributing about half. We can certainly pay cash for the balance but since he is young with limited credit history we are wondering if getting him a loan would be a good way to build credit? However, we are worried that he either won’t qualify or only get a sky-high interest rate.”

There is a certain freedom in just paying cash and being done with the purchase, debt-free. However, since playing the credit game is a bit of a necessity when navigating the financial world, successfully managing a car loan is a good way to get started—though it’s not the only way to get started. You could have your son apply for the loan with you as the co-signers. That way he gets the benefit of the payments positively contributing to his score, and your credit scores mean that you would qualify for a reasonable APR. I would strongly suggest shopping these rates around as you do not want to be at the mercy of whatever the dealer offers yoeu.

Next up, what’s the best way to manage selling two cars and buying one?

“I have a 2004 Discovery 2 in pretty great shape, and a 2016 Mazda 6GT also in good condition. The dealership dropped off a 2019 cx-5 GT Premium today and I LOVE IT. But the monthly is gonna be higher than I wanna pay. They offered me 11,400 for the 6 on trade and I owe 15,382. I’m fine selling off both my current cars for the new CX-5. Should I private sell? What should I list the Rover for? It has a 2.5" lift, steel front bumper and like I said, is in great condition. I’ve heard of them going for around $10k. “

So it sounds like you are a bit underwater on the Mazda but I assume the Land Rover is paid off. I would suggest getting some other offers on the Mazda via Carvana, Vroom, and Carmax. They may give you something a little closer to your loan balance. As for listing the Discovery, I would suggest you review some comparable listings and then price it accordingly. Perhaps a Land Rover forum or even an auction site like Cars and Bids would get you a more targeted audience that would be willing to give you top dollar.

All that said, you have a reliable daily driver and a cool off-roader. You are entering a market where deals are minimal to non-existent yet you have two cars that you still enjoy. You also said that the payments on the Mazda were “too high.” I’m of the opinion that owning two cars is better than one especially if they each have their own specialty. Maybe the best play is to just keep what you have.

Got a car buying conundrum that you need some assistance with? Email me at [email protected]!

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