7 Ways To Spend Less on Your Car Without Making Life Harder
For many younger drivers, it’s easy to think of the car payment as the main expense. But the real expense of owning a vehicle is the many other costs that can eat into your budget.
Experts offer that cutting those costs doesn’t necessarily mean giving up convenience or reliability. Here are seven ways to spend less on your car without sacrificing your lifestyle.
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1. Budget for All the Costs of Car Ownership
Most drivers underestimate what their car actually costs because they focus only on the monthly payment and gas.
“Many drivers budget for the car payment and gas and stop there, which means they are leaving out roughly 40% of the actual cost," he said.
The biggest expenses are often the insurance, fuel, maintenance, depreciation, financing and registration, according to Brennan Kolar, a CPA with Atlas CPA Index.
2. Skip New Cars and Avoid the Biggest Cost
One of the easiest ways to save money without sacrificing your driving experience is to avoid buying new, Kolar said. Depreciation is the single largest expense, averaging over $4,300 per year.
A new car loses about 20% of its value in the first year and nearly 30% by year two, he said. That’s why he recommends going slightly used: “A three-year-old version of the same vehicle with 30,000 miles on it might be $30,000 to $35,000.”
Always look for certified pre-owned deals to get the most for your money.
3. Lower Your Insurance and Financing Costs
Changing your insurance and refinancing an auto loan can lead to meaningful savings without affecting your day-to-day life.
“Refinance your auto loan if rates have dropped since you bought the car,” Kolar said. He pointed out that while a 1% rate reduction may not sound like a lot, but on a $25,000 balance that saves roughly $600 over the remaining term.
Also, compare insurance quotes from different companies and pick a higher deductible if you can afford it, said Ashley Akin, a CPA and senior contributor to CEP DC. “The difference can be hundreds of dollars.”
4. Make Small Driving Habit Adjustments
Small driving habit changes can also reduce fuel use and wear and tear without adding effort. Kolar pointed out that “hard acceleration and braking reduce fuel efficiency by 15% and 30% in highway driving, according to the Department of Energy.”
Even simple maintenance habits matter, and can help you get better gas mileage, make your tires last longer and keep you safer. Underinflated tires, for example, can increase fuel consumption by about 3%, Kolar said.
5. Keep Up on Preventive Maintenance
Keeping up with routine maintenance is one of the easiest ways to avoid large, unexpected expenses later. Simple things like changing the oil on time, rotating your tires and checking your brakes can keep your car running well.
“A $40 oil change every 5,000 to 7,500 miles … prevents a $4,000 to $6,000 engine repair,” Kolar said.
6. Repair Your Car Instead of Replacing It
When faced with a big repair bill, many drivers assume it’s time for a new car — but that’s often the more expensive choice.
“A $2,000 transmission repair sounds painful until you compare it to $400 to $600 a month in new car payments for the next five years," Kolar said.
Taking on a new car payment, plus higher insurance premiums, is almost never the correct financial decision, he stressed.
7. Make Sure Your Car Isn’t Breaking Your Budget
Even if you can afford your car on paper, it may still be crowding out other financial goals like saving or paying down debt.
If car payment and other expenses exceed 15% of your monthly take-home pay, Kolar said, “the car is stretching your budget. At 20% or above, it is actively hurting your finances.”
Cutting car costs doesn’t require a lifestyle overhaul. As Akin said, “A car is expensive, but you can easily make a few adjustments to lower your costs.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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