Have you ever sat down and figured out how expensive it is to maintain and pay for your car? Whether you realize it or not, I bet that your car is one of your biggest expenses. I mean think about it, unless you pay cash for your car you are making a monthly payment, an insurance payment, putting money into the fuel, and also to maintenance! How much do you figure your car is costing you? $500 a month? $700? Maybe even more?
The Average Cost of Our Cars
The average price of a new car today is about $28,000, which makes the average loan payment about $470 a month. Then, you need to insure that car, and typically when you get a loan for a vehicle, it is a requirement of the bank that you get full coverage insurance, which will cost you upwards of $150 a month. So already, you’re at $620 per month, and you haven’t even put gas in it yet! With the high prices of fuel, it is not uncommon for a single driver to spend $300 at the pump each month. Add a couple bucks for your oil changes and random fixes and you’re at a cool $1,000 a month. That’s right, it costs you $12,000 per year to drive your car. Surprised? I know I am!
How to Keep Your Vehicle Costs Down
Some personal finance sites suggest doing without a car altogether, but that’s really not all that practical (unless you live in New York City). You still need to make trips once in a while, get a load of groceries, and maybe you’re nowhere near a bus station. Let’s assume that you absolutely need a car. How can you save on your vehicle expenses?
First of all, you definitely don’t need a brand new car. By purchasing a vehicle that between four and eight years old, you will be buying a fairly reliable car and avoiding all that depreciation that comes with a brand new ride. Plus, by owning a less expensive vehicle, your insurance costs will decrease.
Here is what I deem the ideal vehicle purchase if you put on quite a few miles each month. Find something that is eight years old and only one style behind the most up-to-date model. Purchase the car with just under 100,000 miles on it. If you buy a small Honda or Toyota, you will get another 100,000 miles out of it (at least). Plus, these cars are extremely cheap on gas.
Instead of making payments on a brand new car, you can buy a slightly used one with $6,000 in cash. This makes your total monthly payment zero dollars – we’re off to a great start already! The insurance on a smaller vehicle is still pretty high – we’ll say $100 a month – but it is still better than a brand new car. Then, there is the gas. With the smaller vehicle, I bet you could get by with $250 in gas instead of $300. Finally comes the maintenance. Many of you might be squawking right now because you assume the maintenance costs are going to be huge, but quite honestly, with the many Hondas and Toyotas around, the parts are very attainable and cheap. My friend owns a 2001 Honda Civic and has only paid $300 in maintenance over the past two years. To be fair, let’s just say that maintenance comes to $50 a month (which is 4 times what he has experienced).
By purchasing a smaller used car, your monthly cash outflow comes to $400 (instead of $1,000). Over the course of the year, you are spending only $4,800 compared to $12,000! That is one huge difference!
Are you ready to drive something different and save thousands of dollars per year?