Teen Car Buying and Building Good Credit


Buying a car can be a scary and exciting time in a young person’s life.

So when it came time for our 18 year old to get her own car – we decided to draw up a “contract” and help her build her credit.

Here’s how we did it.

For background – Nina just turned 18 and is about to graduate high school. She plans to attend college locally and work while living at home.  She was driving a car that we own outright and sharing it with her 16 year old brother, River.  With the new car – River will now drive the older car.


Since we intend this to be one of the very last big purchases we provide for her as parents – we wanted her to drive a new car.  Before we took out a loan – we also drew up a parental contract with her.


I am a huge Judge Judy fan (and fun fact, my husband, Louie, was actually on an episode of Judge Judy back in 2018, season 22 episode 153). So I know enough to be dangerous.  We wanted to buy her the car but we also wanted her to have some responsibilities regarding it.  

Here are some of the highlights of the contract the three of us signed (myself, my husband and Nina)

  • As long as Nina is a full time student with a 3.0 GPA – we will pay the car payments
  • Upon high school graduation – Nina will start paying for her insurance payments
  • If Nina drops out of school – she will take over the car payments
  • If Nina gets into trouble with the law for any reason – we have the right to confiscate the car.
  • If Nina refuses to make her insurance payments – we have the right to confiscate the car.
  • Nina is 100% responsible for all gas, maintenance, repairs, insurance deductibles, etc.
  • Once the car is paid off – the title will be turned over to Nina to do as she pleases.
  • If Nina wants to buy a new car before the loan is paid off – she will need written permission from us and she will be responsible for getting a new loan on her own.

We had to take out a loan for the car – so we added her as a co-signer.  While we do trust her – we also wanted to protect ourselves in case something happens.  Because unfortunately – teens are teens.  And my credit will crash – if she somehow does not uphold her end of this deal.


Did you know that Americans aged 18-24 are the largest age group to have the lowest average credit score?  

Credit scores are used to determine a person’s creditworthiness (or your ability to get and pay off a loan).

Average FICO score Credit Range

(source: Experian)

Credit FICO range Americans (2019)
Very Poor 300-579 16%
Fair 580-669 18%
Good 670-739 21%
Great 740-799 25%
Excellent 800-850 20%


[Before we continue – I am not a financial advisor and you should always seek professional advice from a financial expert]

We do not want our children to run into problems with credit at a later date – so we have been talking to them about credit and the value of money since as early as elementary school.  They have their own debit cards and manage their own checking accounts.

If you recall – I used to teach middle school math.  In Texas, financial literacy is taught as early as third grade.  In the middle school years – students are first taught about credit and debt.  Click here for all of the financial literacy topics taught in Texas.

When I would talk to my students (who were about 11-12 years old) – many of them had no clue the difference between a debit card and a credit card.  And when we would figure out interest charges – they were shocked at the charges.  

I am sure my kids would say we are hard on them when it comes to money – but we wanted to prepare them properly.


So instead of just handing her the keys to a new set of wheels – we made her sit at the financing table of the dealership and sign all of the documents with me.


Just buying the car – isn’t going to magically give her credit. 

We have done some research and another way we plan to help her build her credit score is by making her an authorized user on a credit card with us.  

After about 6 months of paying on the new car – and we have established a good payment history – she should be able to apply for her own credit card.  We will look for one with a small limit that she can easily manage and pay off monthly.

This will help her to build credit and learn healthy spending habits -so that one day she can buy her own home or another car or really anything she may need/want.

And as a parent – this is pretty awesome. 

Maybe when she gets her own home – I’ll leave my shoes in the middle of the hallway and turn on ALL of the lights.  LOL  #Payback

Have you started talking to your kids about proper financial responsibility?  Let us know some of your unique ideas to make money matter. And if you need budgeting tips for your family take a look at How I Budget Our Family’s Finances here! 


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Darcy Esparza
Darcy started her professional career in CC in 1994 and immediately moved away for her job, got married to her husband, Louie, and started her family before moving back to the Coastal Bend in 2012. Darcy grew up in Florida before making Texas her home. She has a journalism degree from the University of Florida but is more known for her middle school math teaching career and her now title as co-owner of a local mattress store, BoxDrop Mattress (social medial handle @boxdropcc). Darcy and Louie have been married for more than 20 years, have 4 children, 2 granddaughters, and 2 dogs.