Teen Drivers Increase Costs, Worries

by Darla Dernovsek

	Introduction
	Recognizing "parent power"
	Learning to drive
	Insuring teen drivers
	Getting wheels and more
	Sidebar: One Family's Costs
	Sidebar: Related Home & Family Finance Resource Center articles:

Putting your teen behind the wheel of a car is going to cost you.

While most parents tend to put insurance, fuel, and maintenance costs at the top of their list of expenses, you also can expect to make significant outlays of time and worry. And that's before you start considering the little accessories that may accompany teen drivers, like cell phones, parking tickets, and tow trucks.

Recognizing "parent power"

Paying the bills for teen drivers gives parents control over driving privileges. Parents can use that control to manage the costs--and the risks--of having a teen driver in the family.

"Parents have a lot of power," says Allan Williams, Ph.D., chief scientist at the Insurance Institute for Highway Safety (IIHS), Arlington, Va. "Up to age 18, parents have to sign for the teen's driver's license in order for them to get it, and they can also take it away from them until they're age 18." Parents can write to the Department of Motor Vehicles in their state to have the license revoked.

Williams says the risks of teen driving include a significantly higher rate of accidents, with roughly one of five 16-year-olds involved in an accident. Factors that make teen accidents more likely include nighttime driving and driving with other teens in the car. Many states seek to address these risks with "graduated license" programs, which limit the number of passengers that can accompany teen drivers and the hours when teens can drive. More information about safe driving and graduated license programs is available at the IIHS Web site.

"Parents need to do what's required and more," Williams says. "Make the rules and stay on top of the situation."

Learning to drive

Parents should start influencing the driving experience by setting rules before the teen starts driver's education courses. Once the teen gets a learner's permit, parents should aim to provide as much behind-the-wheel training as possible.

"The more supervised driving, the better driver the teen will be," Williams says.

Teen driving expenses begin with driver's education fees. Some states still offer driver's education in the public schools, but charge a fee for the privilege. Even when public schools offer the course, many parents prefer to pay for courses at private driving schools that offer flexible scheduling. Expect course fees to run in the $250 range, which may increase when schools offer convenience services like door-to-door drop-off and pick-up for behind-the-wheel training sessions.

The Department of Motor Vehicles also will charge fees for both learner's permits and the probationary license. In Wisconsin, teens pay $25 for their learner's permit, which is good for 12 months, and $18 for a probationary license. When they turn 19, they pay another $18 for a permanent driver's license.

State and local authorities also will charge traffic fines if a teen disobeys driving laws. Fines can cause other costs to rise rapidly, especially insurance.

Insuring teen drivers

Even if your teen follows all the rules, vehicle insurance is a major cost for teen drivers and their families. The increase in your insurance bill can range from several hundred dollars to several thousand dollars a year, according to Tom Ellefson, actuary auto lines director for American Family Insurance, Madison, Wis., and board member for the Highway Loss Data Institute, which works with the IIHS to study driver and vehicle safety issues.

Ellefson says contacting your insurance agent is the best way to determine how much your insurance will increase when your teen obtains a driver's license. Some factors that affect costs are within your control, while others reflect an objective assessment of the increased risk that results from having a teen at the wheel.

• Gender: Males have more accidents than females, so they cost more to insure.
• Residence: If you live in an area where repair costs are higher or accidents are more frequent, rates will be higher.
• Grades: "The assumption is more studying equals less joyriding," Ellefson says. Good student discounts granted to teen drivers who maintain a B average or better can reduce rates by 10% to 25%.
• Type of vehicle: More expensive vehicles cost more to insure. So do sporty models known for speed; vehicles that are at a higher risk for certain types of accidents, such as sport utility vehicles' (SUVs) increased likelihood for "rollovers"; vehicles that perform poorly in crash tests; and vehicles that are more likely to be stolen.
• Operator status: Some insurance companies allow you to designate the teen as the "principal operator" of a particular vehicle. If you have more than one vehicle, check with your local agent to find out which vehicle costs less to insure for teen drivers. In some states, you also can obtain an "excluded driver endorsement," which delivers lower rates by removing the teen from insurance coverage for specified vehicles. Consider that making this decision may limit family flexibility, for example, when you're driving on vacation and swapping time at the wheel.
  Consider asking teens to share the cost of driving, from gasoline to insurance.
• Insurance coverage and limits: If your teen drives an older vehicle, it may be worthwhile to drop its collision and comprehensive insurance coverage so you're paying only for liability insurance. If the vehicle crashes you'll have to bear the full cost of replacing it, but you'll save on ongoing premiums. Increasing the deductible also can lower the costs, but you'll have to pay more if the vehicle is damaged or destroyed. "Insurance helps offset the big gambles," Ellefson notes. "You have to decide which little gambles are worth taking."
• Driving record: Teens who get speeding tickets or are involved in accidents will cost more to insure. When that happens, some parents will move the teen driver and his or her vehicle to a subsidiary company that specializes in coverage for high-risk drivers. That tactic can hold down insurance costs for other family vehicles.
• Defensive driving courses: Some insurance companies offer discounts to teen drivers who take driver safety classes. Check with your insurance carrier for availability.

Getting wheels and more

Parents who choose to buy a car for their teen should consider more than the vehicle's cost. For example, buying a car equipped with air bags can greatly increase your teen's chance of survival after an accident. So can the vehicle's weight and body style. The IIHS Web site can help parents learn more about the safety of individual models and provides publications aimed at selecting a safer car. As a general rule of thumb, Ellefson says larger vehicles tend to be safer because they protect occupants better in a crash than smaller ones. Persuading your teen to always wear a safety belt also will increase significantly the odds of surviving an accident.

Many parents give teen drivers a cell phone so they have access to emergency aid if an accident occurs. Yet that decision might increase the teen's risk if he or she drives while talking on the phone; Williams says teens probably are more susceptible to the distracting effects of cell phones.

Both Ellefson and Williams advise parents to consider asking teens to share the cost of driving, from gasoline to insurance. Teens also should pay for consequences of poor decisions or irresponsible driving, such as fines or increases in insurance premiums after an accident.

"The quicker you can get that young driver to understand that there's a responsibility in driving and the way that they drive, the better that driver is going to be," Ellefson says.