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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How to Avoid Car Repair Gotchas

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A captive consumer is someone who isn’t in a position to bargain and, in turn, could overpay. For example, a traveler purchasing Wi-Fi on an airplane is captive because there’s only one option and a pay TV subscriber is captive if there’s only one cable company in the area, or if it’s difficult to install a competitive satellite service.

Drivers facing car repairs are often captive, too. When your car breaks down and you have it towed to a repair shop, you don’t have a lot of options but to get it repaired. And, for most drivers, pulling into a car dealership shop for “regular” repairs can create almost the same situation. Few consumers are car-savvy enough to know if they really need new brake rotors or a transmission fluid flush, so they end up doing what they are told by the expert, and paying the bill.

Gotcha.

Car repair shops routinely attract a high level of complaints at state and federal offices related to overcharging and “gotcha” methods. (Read this guide to find out 7 ways to avoid getting overcharged by your mechanic.) Auto mechanics may work on commission or at an hourly rate, which may incentivize them to perform unnecessary repairs that can turn $40 oil changes into $600 bills. Plus, repair shops have the advantage of using the “safety” tactic in their sales pitch (as in, “Well, you don’t have to change your brake pads, but they are below 50%. I would, to be safe.”)

Consumer Reports’ chief mechanic John Ibbotson puts it this way: “High scare equals high profit.”

It’s hard to give anti-gotcha advice in the face of safety warnings – I have no intention of suggesting that you do anything to make you or your family less safe. But it is possible to do that and avoid ripoffs.

It’s Not The Nickels & Dimes — It’s The Dollars

You’ll probably end up overpaying for a repair at some point in the life of your car. That’s not the end of the world. What’s important is to not get routinely ripped off, and discover that you’ve spent $1,000 or more year after year on repairs that may not be essential. AAA reports the average driver pays $766 per year on maintenance and repairs, which of course can vary based on the age of the car. But if you are spending more than that, ask yourself why. And remember, the nice service manager at your repair shop is in the sales business. If your oil changes routinely end up costing $500, you may want to consider breaking up with the shop.

The Medium Bills Are What Will Get You

Transmissions fail and engines give up the ghost. It happens. Major repair bills often have as much to do with bad luck as anything else, so I’m not going to dwell on them. This repair tech at Edmunds.com revealed that shops often don’t make that much money on big, expensive and complex jobs. Where the real financial win comes into play for them are on the medium-sized jobs that are easy and can be done quickly. They make money on brake jobs, engine flushes, and so on. Keep that in mind for your next visit to the mechanic and you’ll likely have more confidence as a consumer, giving you an advantage.

“Service advisors are wary of customers who look like they know what they’re doing,” the shop worker told Edmonds.com.

Just Say No

Repair shops may tell you your bill is about to balloon, and get your permission, usually with some friendly language like, “You should really get this taken care of now.” But do you really need that transmission flush? There’s a big difference between dealer recommended service and manufacturer recommended service. A good rule of thumb is to follow the later, which you can find in service manuals and on carmaker websites.

Diagnostic Fees

One of the most popular and lucrative gotchas at repair shops is the dreaded “diagnostic fee,” a service charge for establishing the problem with your vehicle. Sometimes it genuinely takes an hour or two to diagnose a repair problem. But Kristin Brocoff of CarMD.com said that it is also possible for techs to plug into the car’s computer and get a diagnosis in seconds.

“It takes less than two minutes for the service writer or tech to use a scan tool on your car,” Brocoff said. “If the problem ends up being something simple like a loose gas cap, most shops waive or discount the diagnostic fee, but some charge upwards of $100. Ask a lot of questions and know what tests they’re running on your car.”

If you want to run a test yourself and compare your results to what a service tech is telling you, you can purchase a OBD2 reader that can read the car’s computer diagnostic codes. It’s important to note that the codes they generate don’t always tell the whole story, and they can be misinterpreted.

Brake for Second Opinions

Car brake repairs range from simple and cheap (brake pad replacement) to the really expensive (rotor and even caliper replacement). It’s easy for shops to say you need the expensive work when you could get away with the cheaper job. They might even show you what looks like a terribly dirty, worn rotor. But rotors can be repaired (turned) instead of replaced, for example. If a shop tells you that you need a full brake replacement, go to another shop and get a second opinion. The variety of quotes you’ll receive for repairs like this can be eye-opening. (Last time I replaced my tires, I was told I needed $500 worth of repairs on my front brakes. A month later, they were fixed elsewhere for $200.)

Smell, Listen, Look, Feel

This leads to perhaps the most important piece of gotcha-fighting advice. You have a relationship with your car. Treat it like a friend, and it’ll do the same for you. Listen to it; look at it; smell it; feel it. Listen to the sounds it makes. Hear a sound like an airplane landing when you press on the brakes? Take it in before a cheap repair becomes and expensive repair. See a puddle stain in your parking spot? Get help. Smell something unusual when you turn it off? Open the hood and look around. Feel a drop in performance when you accelerate on a highway? Notice a drop in gas mileage? Take it in. The most important way to avoid overpaying is to avoid the captive consumer situation. A good rule of thumb: You want to drive to a repair shop, not get towed there. Avoid letting things go until the situation is dire, and it’s not really possible to get second opinion quotes.

Question Line Items

When Popular Mechanics interviewed an anonymous repair tech a few years ago, he shared that many shops add annoying tack-on fees like “shop supplies.” That means you might be getting charged $20 for a shop rag. Feel free to ask and challenge the shop on these charges. Doing so is fair and can put the shop on notice that you aren’t a pushover.

Use Online Tools for a Reality Check

Finally, there are plenty of clever tools now that can give you a rough idea of what repairs should cost in your area. Consumer Reports has one; So does RepairPal.com. They won’t be exact, but you’ll have a good idea if the quote you are getting is fair. Also keep in mind that if the quote is too low, ask questions to help make sure your shop isn’t planning a bait and switch.

Even if you do avoid a car repair gotcha, it’s important to have an emergency fund so a pricey repair doesn’t turn into unwanted debt. Having outstanding or large debts can hurt your credit score and you’ll want a strong score in the event that your car is damaged beyond repair and you need to get a new one. Having a good credit score may make it easier to get approved for an auto loan with an affordable interest rate. You can keep an eye on your credit score by viewing two of your credit scores for free each month on Credit.com.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

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The Most Common Car Repairs You Have to Make

How to Read a Car-Repair Estimate

When your car’s check engine light flicks on, the first thing that pops into your head is probably “how much is this going to cost me?” But new data show that for newer cars about half the time the problem is often as simple as a loose gas cap.

That doesn’t mean you should ignore the warning light, however. Common check engine repairs can range from a $15 gas cap replacement to a $1,100 catalytic converter replacement and everything else in between. The most common repair across makes, models and years is oxygen sensor replacement, whose average cost is around $250, according to the annual CarMD.com Vehicle Health Index, released Tuesday.

Repair costs around the country remained just about flat over 2015, with a 1.5% increase in parts costs offset by a modest 4% reduction in labor costs, CarMD.com Corp. says. (The firm gets its data from car computer readings — i.e., OBD2 codes — submitted by repair facilities; for the 2015 study, CarMD examined 1,019,904 repairs.)

Overall, the average repair cost in 2015 was $387.31 ($155.15 in labor, $232.16 in parts). That’s 8% less than the 10-year high of $422 in 2006. One big takeaway from the data: If you have a new car and the check engine light goes on, check your gas cap.

“The most common reason the check engine light comes on in a brand-new model year 2016 vehicle is due to a minor loose gas cap problem, accounting for 46% of check engine incidents on new vehicles last year,” the report said.

Another lesson: Mother Nature has a lot to say about car repair costs. “Vehicle owners in the Northeast saw the largest drop in average repair costs, which were down 6.5% from $418 in 2014 to $391 in 2015 due in part to the mild El Niño weather pattern,” the report said.

That’s the good news. The bad news is perhaps self-evident: The average cost to repair 2006 cars was $399, double the average repair cost of 2016 models (whose repairs were usually covered by warranty). Worse still, the second-most common repair involved those pricey catalytic converters. Rounding out the top five were replacements for the “ignition coil and spark plug” ($390), gas cap replacements and checks and thermostat replacements ($210). New to the top 10 most common repairs were evaporative emissions purge control or solenoid replacements, which both cost just less than $200.

“One of the best ways to minimize cost of ownership and help reduce unforeseen car repairs is to follow a regular maintenance program and take care of small problems as soon as you’re aware of them, particularly as vehicles age,” said David Rich, CarMD’s technical director. A simple spark plug failure can snowball from a $50 part into a $400 repair, the firm said.

“Over the years, we have observed that climate and weather patterns has some impact on type and frequency of repairs,” Brocoff said. During 2013, when the Polar Vortex hit, car repair costs were up 6% across the U.S. and 9% in the hard-hit Midwest and Northeast. Battery, transmission and thermostat repairs shot up. Also, spark plugs were the fourth-most common reason for check engine light issues.

“This past 2015 calendar year, during which the U.S. experienced an El Niño weather pattern, spark plugs were only the eighth-most common reason for check engine light issues,” she said. “Battery replacements are not listed on the 10 most common repairs this year.”

Take a look at the top 10 car repairs of 2015:

  1. Replacing an oxygen sensor – $249
  2. Replacing a catalytic converter – $1,153
  3. Replacing ignition coil(s) and spark plug(s) – $390
  4. Tightening or replacing a fuel cap – $15
  5. Thermostat replacement – $210
  6. Replacing ignition coil(s) – $236
  7. Mass air flow sensor replacement – $382
  8. Replacing spark plug wire(s) and spark plug(s) – $331
  9. Replacing evaporative emissions (EVAP) purge control valve – $168
  10. Replacing evaporate emissions (EVAP) purging solenoid – $184

For those who lose sleep over repair bills, owning a car may not be the best option. But if you’re eyeing a lease, you still need to make sure your credit score is up in good shape, lest you get turned away. You can view your two free credit scores, updated monthly, on Credit.com.

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