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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. 

Image: kali9

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