How to cut teen driving costs, insurance rates

As Alice and Rick Sofield of Alexandria, Va., recently discovered, being the parents of a teenage driver can be an expensive proposition.

The Sofields’ 16-year-old daughter, Charlotte, earned her driver’s license last March. Since then, she has been in two car accidents. The first was in May, when she pulled out of a 7-Eleven parking lot and sideswiped a small car.

The result: some $2,500 damage, which insurance paid for, and dents and scratches on her mother’s Chevrolet Suburban.

The second accident was in mid-September, when Charlotte was driving a gift, her late grandfather’s 1998 Subaru Forrester. She totaled that after hitting a fellow student’s vehicle on her way out of the high school parking lot.

The Sofields’ insurance was swiftly canceled.

Passing a driver’s exam is a rite of passage for many teenagers, but it can be a sizable expense for parents. Driver education courses, higher insurance premiums, increased fuel costs, the occasional fender-bender and locksmith visits can really add up, especially if children aren’t sharing the costs.

In one year, Mark Faust, a management consultant in Cincinnati, Ohio, saw insurance rates for his four cars go from $5,000 to $10,000 a year after adding his 18-year-old son and 17-year-old daughter to his policies. "The majority of the increase was because of my boy," says Faust, whose rates will remain high for a while as he has three more daughters, ages 15, 13 and 12.

According to InsuranceQuotes.com, the national average premium increase after adding a 16- to 19-year-old driver to your car’s insurance policy is 84 percent. (Premiums rise 99 percent if you have a 16-year-old and 65 percent at age 19.)

It is also a lot pricier to insure a teen male than a female - typically a 96 percent premium increase for a boy and 72 percent for a girl.

Arkansas is the most expensive state to add a teen driver - expect your rates there to jump by 116 percent. Hawaii has the smallest premium increases for teen drivers with only an 18 percent rise. That’s because insurance companies aren’t allowed to factor in a driver’s age when they calculate insurance coverage in that state.

The high cost of insurance may be why so many teens these days don’t get a license at 16. While plenty do still get theirs at the earliest chance, the majority do not, according to numerous surveys. Forty-four percent of teenagers get a license within 12 months of the minimum age for licensing in their state, and only 54 percent of teens were licensed before their 18th birthday, according to an August study by the AAA Foundation for Traffic Safety.

Thirty-six percent of those surveyed said that either gas or driving in general was too expensive. Low-income and minority teens are most likely to delay a license, the study also found.

There are ways to bring down insurance rates, however. Many insurers offer discounts on rates, generally between 15 percent and 35 percent, if students maintain a "B" average in school. You’ll need to have your school send a letter proving the grades or send your insurer or agent a report card. Just remember to do it every year before renewal.

Some insurers will also lower rates by 10 percent to 15 percent, in addition to the good-grades discount, if students go through the insurer’s approved driver education course. Putting a teen behind the wheel of an inexpensive car can also help cut costs.

Your costs will be lower if your teen isn’t driving his own car but yours. Peter Keenan, a financial executive in Evanston, Ill., made himself the official owner of a 1995 Jeep he bought for his son - a car that cost just $1,500 and "had over a billion miles on it" - and cut the monthly premium in half, to $60.

Hidden Costs

Driver education classes generally aren’t free, even when public schools offer them, with prices ranging from $150 to $800 for classroom and driving time. You’ll also want to talk to your teen about driving safely. If you sense they feel invincible to injury, maybe they’ll pay attention when you tell them about the costs of being pulled over by a cop.

Michelle C.F. Derrico, a criminal defense attorney in Roanoke, Va., says her firm frequently gets phone calls from parents whose teenagers have been cited for traffic infractions like speeding - which will likely nullify any insurance discounts your teen gets.

"From a financial standpoint, the parents are on the hook whether they just pay the fine or whether they contest the ticket," Derrico says. Contesting a teen’s ticket isn’t cheap, though. Paying lawyer fees, court costs and enrollment in a driver improvement program could run to more than $500, Derrico says.

With more drivers and cars (four) in the family, Keenan pays for a lot more oil changes than he once did. Fortunately, he says, he has a great, inexpensive mechanic.

Keenan also has a tip for parents of teen drivers: Pay for a membership to a motor club to neutralize the cost of a locksmith when keys - inevitably - get locked in the car.