Once your teen knows how much he can afford, it’s time to decide how to buy: with cash or financing. While paying cash is usually the most cost-effective method, it is also unlikely that many teens have such funds readily available.

If your teenager is considering financing the purchase, look around together for preapproved bank or credit union financing, so you know exactly how much you can spend when negotiating with an auto dealer or private seller.

Your teen can also consider dealership financing, but this isn’t a recommended option. It is often structured so that very little of the principal is paid until the interest is almost completely paid off—so if you wanted to sell or trade the car in a few years, you might find that you still owed more than the car was worth.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The type of savings and investment strategies mentioned may not be suitable for everyone. Each investor needs to review a security transaction or strategy for his or her own particular situation. The examples mentioned are for informational purposes only and are not intended to represent results you should expect in the future. Data contained herein is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.