7 Things to Know About Giving (or Getting) a Car for Graduation

If you're planning to buy a car for the new grad in your life, here's some advice on making the right choice.

Behind every diploma bestowed at high school and college graduations is a lot of hard work. And for some lucky grads, that hard work gets rewarded with a milestone gift: their own car. If you’re planning to buy a car for the new grad in your life, we’ve got some advice on making the right choice. And if you’re the recipient, we’ll share a few tips to help you drive into the future with confidence.

What to Consider If You’re Giving a Car to a New Grad

You’re so proud of your new grad for all their hard work that you’ve decided to shell out for a set of wheels to carry them on to their next adventures. Whether you’re getting your grad started with a well-loved (read: used) older car you bought from a neighbor or you’re splurging for a brand-new ride with all the bells and whistles, it’s important for you, the buyer, to take a moment to consider the realities of this major purchase — and of the needs of its soon-to-be owner.

1. Consider Total Cost of Ownership When Choosing a Car

First, let’s talk money. The car you buy should fit into your own budget, of course. But you also have to consider the total cost — including ongoing costs — of the car. Here are some things to think about.

Gas: If, for example, your child will be driving the car back and forth between home and an out-of-state university, would they (or you, if you’re footing the gas bill) be burdened by the costs of a gas-guzzling vehicle? If so, a fuel-efficient car might be a better option.

Insurance: This is the most expensive consideration after the vehicle itself. Neil Richardson, licensed insurance agent and adviser for The Zebra, says to keep insurance in mind right from the start as you shop for cars. If insurance is an afterthought when you’ve already purchased the car, you could be in for some unpleasant surprises. Further, the car you select will affect your insurance premium if your grad will be on your insurance policy (more on this below).

Maintenance: Consider the expenses related to repairing or replacing parts on the vehicle if it’s damaged in some way. Foreign car repairs may be much more expensive than domestic, but that’s not a hard-and-fast rule. Further, new cars may include manufacturer warranties or maintenance as part of your package, but if your grad is savvy with tools or has an interest in cars, they can take care of plenty of at-home car maintenance issues.

2. Prioritize Safety & Utility

When car shopping, safety should stay top of mind. The Insurance Institute for Highway Safety ranks the safest cars in different categories, from minis to large pickup trucks.

Also think about where and how much your recipient will be driving. If they’re headed for college or a new job in a crowded city, they’ll need a car that fits cramped streets and narrow parking spaces. A new college grad with a quick commute will appreciate a different kind of car than one whose new job requires them to be a road warrior.

3. Insure it

If your gift recipient is a high school grad who lives at your residence, they may get lower premiums if they stay on your policy, but whether that’s possible depends on your situation. If they’re headed to an in-state college or university, they can stay on your insurance policy as long as their primary residence is still your home address, Richardson says. Students leaving the state for college, though, may have to get coverage on their own, as rates are dependent on where the driver lives and “garages” the vehicle.

Remember that if your new grad is on your insurance policy, you could be held liable for damage they cause in an accident. For this reason, Richardson says it’s generally a good idea to go beyond the state-required minimums in liability coverage.

4. Get Your Paperwork in Order

Getting close to a decision? Before you seal the deal, prepare for some extra paperwork. Whether you’re heading to the dealer or buying a car privately, you’ll need to be prepared with the right documentation, such as the recipient’s driver’s license and current insurance, an IRS cash-reporting form and a security report. (Questions? Read more details about each of these documents.)

If You’re a New Grad Who’s Been Gifted a Car

So now you’re the proud owner of a new diploma and a car. Sweet! Take a moment to savor the payoffs for your hard work and generosity of your gift giver.

Once you’ve posted lots of photos of your new ride, you might be thinking about all the new freedom your car gives you or how you’re going to upgrade the stereo system. But there are some other things you need to keep in mind when it comes to how this car will affect your life. Nail down these details and you’ll be well on your way to acing this whole “#adulting” thing.

1. Know the Impact on Your Wallet

Even if you aren’t making payments on your new vehicle, a car can still have a huge impact on your wallet. (Here’s how car insurance affects your credit.) How much will you need to budget for gas, parking, insurance, registration and regular maintenance? Your folks or your generous benefactor may be picking up some of these expenses for you, at least in the short term. Be sure to establish clearly with others about who’s paying what and check in regularly to make sure necessary expenses related to your car are taken care of.

2. Your Insurance History Starts Now

We know that dealing with auto insurance for the first time is complicated, so it’s extra important to be clear on how your policy works, whether it’s in your name or you are on your parents’ policy for now. If you’re a registered driver of a registered vehicle, your insurance history starts now (even if you’re not paying for it), and a clean driving record and demonstrated history of continuous insurance coverage will mean huge savings on your insurance in the future.

If you’re in college, you can start building your insurance record by staying on your parents’ or legal guardians’ policies if they OK it. According to Richardson, as long as the parents’ address is still the primary residence of the student, on-campus housing is considered temporary since students have to leave at the end of each semester, so students can still be covered on their parents’ policy. Once they move off campus to a more permanent situation, i.e., a house or apartment, then they will need their own coverage. (Here are the states where your credit score really matters for car insurance coverage. No matter where you live, it’s a good idea to know where your credit stands — you can find out for free on Credit.com.)

If you’re not in college and you’ve moved away from your parents or guardians altogether and no longer share an address, you’ll have to have your own policy.

3. Keep That Car in Tip-Top Shape

Finally, regular preventive car maintenance will probably be the last thing on your mind as you adjust to college life or settle into a new job. So go ahead and set some reminders in your calendar to take care of oil changes, wiper fluid and other routine maintenance for your car. You’ll prolong the life of the car and make it less likely that problems will pop up just when you don’t need them — like on your Spring Break trip or on the way to a job interview.

Car not in your budget for a graduation gift? Consider these eight graduation gifts your kids will actually use. 

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6 Car Insurance Discounts You Should Ask About


Insurance is the costliest car-related expense for drivers after the vehicle itself (recently surpassing gas), so it’s no surprise that consumers seek discounts to reduce their car insurance rates. Car insurance companies spend exorbitant amounts of money each year on advertising, and they’re certainly not shy about promoting discounts that supposedly make them more affordable than their competitors. No accidents? Discount! Defensive driving course? Discount! Good student? Discount!

But do these discounts actually reduce what consumers end up paying? Or are they just fluff to make you feel better about shelling out for your premium? Does the degree of the discount really offer relief to your wallet, or could you end up actually paying more by chasing discounts with one company than you would with a company that offers fewer discounts but a lower rate on your premium?

You may also wonder how insurance companies determine your rates. It’s important to note that while factors such as age, marital status, education level and employment have an affect on your rate, they are considered rating factors and not discounts since they directly impact your rates as determined by insurance companies’ unique pricing algorithms.

Here, we’ll discuss some common car insurance discounts, how difficult they are to qualify for and if they really make a dent in what you pay.

1. Anti-Theft Discount

If your vehicle has some type of alarm (in most cases it can be a factory alarm or aftermarket product that you may have added), most car insurance companies will offer a discount on your auto policy. This particular discount can be easy to verify because most new vehicles with a factory alarm can be identified using your vehicle identification number (VIN). This discount is normally fairly small, just a few percentage points off of your premium.

2. Defensive Driving Discount 

This is one of the most misunderstood discounts offered by auto insurance companies. Unfortunately, drivers are often told with a degree of certainty that they will get a discount after completing a defensive driving course. But this just isn’t true in a lot of cases. Yes, there are some insurance companies that will offer any driver a discount for completing a defensive driver course, but most companies have stipulations on how you may qualify. Chances are high that you can only apply the discount if you are 55 or older, have a clear driving record, didn’t take the course as a court-ordered requirement or live in a certain state.

Because you must pay for the course before completing it, you should always call your insurance company to check if they offer a discount for completing the course, what the stipulations may be and what percentage of a discount you’ll receive. Even if you do qualify for the discount, the cost of the course compared to the amount of the discount may tell you it’s not worth the time — or hassle.

3. Good Student Discount 

Young drivers are some of the most expensive to insure due to their lack of experience behind the wheel, and whether parents add their teen to their policy or a young driver secures his own coverage, the rates will be high. Insurance companies often offer discounts for good students, helping to offset the high costs of insuring a young driver who’s still in school. Commonly, a student (whether in high school, undergraduate or occasionally graduate programs) has to maintain a 3.0 GPA or better to qualify — and proof is generally required in the form of a report card, transcript or Dean’s letter.

Still, as is the case with insurance pricing, the good student discount varies by company, state and other circumstances. Certain insurance companies will only offer the discount if the student is listed on a parent’s policy; others will offer it only if the student is covered on his or her own separate policy; others don’t offer a student discount at all. Your best bet is to contact your insurance provider and ask about the discount, as it is normally a significant percentage.

4. Homeowner Discount

A homeowner discount is quite literal, though the discount will vary based on the type of residence, be it a single-family home, condominium or a mobile/manufactured home. Simply let your insurance company know you own your residence (and what type of dwelling it is), and they’ll let you know how the discount will affect your rate — it’s normally fairly hefty. You’ll also have to submit proof that you own your home, such as a home insurance policy, tax statements or a deed.

The homeowner discount is completely separate from the bundle discount that many insurance companies now offer for insuring your home and car through the same company, which is another great way to lower your rates. The bundle also benefits renters who purchase renter’s insurance through the same company.

5. Multi-Vehicle Discount 

Another simple-but-helpful discount may apply for multiple vehicles covered on the same policy. With auto insurance, there is a base cost of each policy that has nothing to do with your actual coverage. (In addition to rating factors, insurance pricing is affected by the company’s own level of financial solvency and overhead costs like paying employees.) If you were to insure two vehicles on two separate policies, then you would be paying two base costs. Combining those two vehicles on one policy allows the insurance company to offer a discount and you avoid paying multiple base costs. It’s a win-win scenario. (Note that additional household members will need to be listed.) This discount can be fairly significant and is easy to get — in most cases, it automatically applies when you add a vehicle to a policy.

6. Proof of Prior Insurance Discount (POP) 

One of the largest discounts applies for drivers who maintain their prior insurance coverage until starting a new policy. Gaps in insurance coverage are not good for your rates. Insurance is all about risk, and auto insurance companies see a driver with existing coverage as a much lower risk. Therefore, they are willing to offer hefty discounts to entice those drivers to switch companies for lower rates. The POP discount is fairly simple to qualify for in most states and only requires you provide proof that you were insured without any break or lapse in coverage for at least six months prior to starting your new policy. (California is the exception — it does not allow insurance providers to offer this discount.)

Seeing Through the Discount Fog

It’s easy to get sidetracked by all the persuasive “money-saving” advertising insurance companies put out there, but being a smart and informed shopper will help you cut through the fog. Do the research so you can answer the following question: How much is this particular coverage from this insurance company going to cost me? If discounts make it the best deal for you, great, but it’s also a real possibility that you can find a rate that fits your budget without them. Discounts and low rates aren’t always mutually exclusive, even if the TV ads say otherwise.

Remember, it pays to read the terms and conditions carefully on any financial paperwork so you can find the deal that’s best for you. It can also help to have a good credit score, since it may qualify you for better rates on auto loans, for example. (You can see where your credit score stands by viewing your two free credit scores, updated monthly, on Credit.com.)

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