It was a perfect first vehicle and I think his approach was pretty good. What he bought me wasn't an unreliable rusty bucket of bolts. It was a solid truck. But it was also a nutless, gutless embarrassment to drive. It's humbling to pull up to a friend's party and park your dinosaur next to everyone else's nice shiny rides, and get out with your chest stuck out like you're somebody. And you can't even say to the other kids "wow, nice ride, how much did your daddy pay for that?" - because your daddy bought yours, too. It left me wanting more, and I used that truck to get to work, save up my money, first to get the A/C fixed, and then about a year later I bought my own, much nicer truck.
In my opinion, there's no shame in paying for your kids' first vehicle. But it should be outside their comfort zone. If you get them something that elevates their status, then they have no incentive to work towards improvement.