AARP Hearing Center
Ryan Inzana
Jeff Judge is preparing for the sticker shock of buying his son a car — even though his son doesn’t turn 16 until September 2028.
It’s not just the price of the vehicle that he’s worried about. He’s also concerned about how much it’s going to cost to add his son to his auto insurance plan.
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“The premium jump is significant enough that I started planning for it now,” Judge says. Depending on the vehicle he purchases, his policy’s annual premium could jump by $4,000 to $5,000, he says.
As a certified financial planner in Forest Hill, Maryland, Judge often helps clients navigate the process of buying a car for a teenager. Many parents, he says, are surprised by the insurance costs and other hidden expenses. “Most parents think a car purchase is a one-time budget hit,” he says. “It’s not. It’s the start of a multiyear expense stream that catches families completely off guard.”
Here’s what to know about the true cost of buying your teen a car — and some smart ways to save money.
Car purchase: $49,758 for a new vehicle on average, or $27,027 for a used vehicle on average
Gone are the days when you could buy a new car for less than $20,000. “The market has changed drastically,” says Ronald Montoya, manager of consumer advice at online car shopping resource Edmunds. “Cars have gotten more expensive. Interest rates have gone to record highs. All of that amounts to sticker shock when you come to the dealership.”
The average price paid for a new car in June 2026 was $49,758 according to Kelley Blue Book, while the average price for a used car was $27,027.
Although used vehicles are typically less expensive than new ones, prices remain high, Montoya says. To find a used car for less than $10,000, he says consumers would have to look at vehicles that are more than 10 years old with more than 100,000 miles.
How to save: Don’t be afraid to buy a used vehicle, especially a reliable brand, Montoya says. Not sure where to start? Consumer Reports publishes a list of the best car brands based on survey data, safety assessments and hands-on road testing.
Once you’ve found a car you’re interested in buying, check its vehicle history report, Montoya suggests. The report shows the car’s ownership history, accident history, repair and service records, and other information. Many providers let you view the report for free — you just need to provide the car’s vehicle identification number (VIN).
Sue Plisch, a certified financial planner in Champaign-Urbana, Illinois, says her ex-husband recently bought their 16-year-old son a 2009 Toyota Prius with 400,000 miles for $1,750. It required a few repairs, but her daughter and her daughter’s boyfriend, who have taken auto repair classes at a community college, saved money by making the repairs themselves.
Insurance: $5,740 per year for full coverage on average
Young drivers cost more to insure because they’re more likely to get into accidents and file claims with insurers, says Erika Tortorici, owner of Optimum Insurance Solutions, an independent insurance agency in Hamilton, Massachusetts.
Adding a 16-year-old to a parent’s auto insurance policy with full coverage — liability, collision and comprehensive insurance — costs $5,740 per year on average, according to Bankrate. Liability insurance, which is required by most states, covers injuries to others and damage to other people’s property if you cause an accident. Collision insurance covers damage to your car from a collision, while comprehensive insurance covers damage from theft, fire, natural disasters and incidents other than collisions.
Your insurance rate will largely depend on the vehicle you purchase, where you live and your teenager’s gender, Tortorici says. Generally, auto insurance rates are higher for men, according to online insurance marketplace The Zebra. Only a handful of states ban gender-based insurance pricing.
How to save: A used car is cheaper not just to buy but also to insure. And typically, the older the vehicle, the lower the premium. Plisch says that insuring her son’s 2009 Prius added only about $600 to her annual premium.
You also can save on car insurance by taking advantage of discounts. Having your child take a safe driving course can knock up to 25 percent off your premium, Tortorici says. A “good student discount” — typically defined as a B average or higher — can result in up to 15 percent off. Opting into a telematics program that monitors your teen’s driving may provide a 5 to 10 percent up-front discount and up to 20 percent off at policy renewal if your child has demonstrated safe driving habits, Tortorici says.
When adding your teen to your insurance policy, make sure your provider assigns your kid the correct vehicle, says Ted Rossman, a former principal analyst at Bankrate. “Sometimes, they assign the teen driver to the most expensive vehicle,” resulting in a higher premium, he says.
Car loan: 7 percent interest rate for a five-year loan on average
Auto loan rates have increased significantly over the past five years, Rossman says.
The average interest rate for a five-year new car loan is 6.98 percent as of August, up from 4.15 percent in August 2021. The average rate for a used vehicle is 10.6 percent. If your credit score is below 600, your rate for a used car loan could be as high as 15 percent, Montoya says.
How to save: Get at least three auto loan quotes. Consider obtaining offers from a variety of lenders, such as a local credit union, a national bank and an online lender, before you negotiate a car purchase with a dealer. “You want to go in with financing offers,” Rossman says. That way, you won’t feel compelled to go with dealer financing, which could be a less favorable rate.
Repairs: $840 per year on average
“When you’re young, you’re going to make mistakes” on the road, Montoya says. Those mistakes can be costly to fix: According to Cox Automotive, the average spent on car repairs is $838.
Considering buying your teenager an electric vehicle? Be prepared to shell out more for repairs because parts and labor are often more expensive for EVs than for gas-powered cars. If your kid gets into an accident, your insurance company might even consider it a total loss because the battery alone is expensive to replace, Montoya says.
How to save: Regular maintenance can help avoid costly repairs. The car’s manual can be a good source of information, like how often to perform oil changes and tire rotations.
Shop around when seeking repairs. Prices and services can vary widely between mechanics.
Gas: $4.01 per gallon on average
Fuel prices are ticking down, but the average cost per gallon still clocked in at $4.01 in August, according to AAA. That means, unless you’re buying your teenager an electric vehicle, your kid may need to budget a significant amount of money to fill up their tank.
How to save: Consider having your kid shoulder gas expenses. Both Judge and Plisch say their sons will have to pay for gas out of their own pockets.
There are steps they can take to pay less at the pump. Encourage them to sign up for gas station loyalty programs and to compare prices at nearby stations using a mobile app such as AAA Mobile, GasBuddy or FuelUp. If you’re a member of a warehouse club, your kid can fuel up there using your membership to get discounted gas.
Your teenager’s driving behaviors matter too. Speeding, rapid acceleration and hard braking can reduce gas mileage by up to 40 percent.
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