How to Cut Down on the Cost of Owning a Car
February 15, 2024
In 2023, the average cost of owning a new car was $12,182 a year or $121 a month according to AAA. In addition to car payments, insurance, and maintenance costs, the price of gas is $5 a gallon,, which means that most U.S. households will spend $2,750 on gas per year. “If you are living paycheck to paycheck, it could put you over the edge,” says Ivan Drury, senior manager for Edmunds.com, a car shopping site. “But even if you are not, it’s very emotional. It’s in your face twice a week.”
The good news is that by cutting your expenses in other areas, such as with car insurance, you can save money and make up for the added charges at the pump. Besides simply driving less, which isn’t an option for many people, here are a few ways to make car ownership more affordable.
1. Shop Around For Car Insurance
According to J.D. Power, only 1 in 7 drivers changed auto insurers last year, but shopping around for lower premiums could save you a lot of money. In addition to your location and the type of car you own, other factors affect your rates, including your age and credit score. If you’ve improved your score within the last year, this one factor may lower your car insurance bill.
You can collect quotes through an insurance agent or use an online search engine, such as Experian, who claims to have saved drivers an average of $961 a year or $80 a month in 2021. Calling around or doing a quick search takes only fifteen minutes and could shave a lot of money off of your premium.
2. Check For Discounts and Adjust Your Existing Policy
Your existing carrier may offer discounts you don’t even know about, such as for paying your bill online and in advance. According to Zebra, paying your bill early online saves the average customer $170 a year. Bundling insurance policies, such as combining your homeowners and auto insurance, is another way insurance companies incentivize their policies through discounted rates.
There are usually three types of coverage on any given insurance policy, including liability, collision, and comprehensive. While most states require drivers to carry some amount of liability coverage, eliminating collision and comprehensive coverage could save you up to $900 a year. You may also opt to lower your car insurance premium by raising your deductible from $500 to $1,000. This makes sense if you don’t have a new or expensive car and can afford to pay the deductible if anything were to happen.
3. Outside Financing And Refinancing
One of the smartest ways to avoid high interest rates on a car payment is by securing outside financing. Compared to what the dealership will offer you, this can save you a ton of money in interest alone. Your local bank or credit union can help you shop around for the best offer. If you already have a monthly car payment, the next best thing to do is to look into refinancing your loan. Drivers who benefit the most from refinancing are those who have improved their credit score since initially securing their loan.
Of course if you can purchase a car outright, avoiding any kind of financing is always the very best option. If it’s possible for you to stick to a budget and save up, you may even be able to negotiate a better deal on the purchase price of your desired vehicle. Forty percent of the cost of owning a car is actually depreciation, which can equal more than $3,000 annually. That means that buying a gently used car is a great deal, without the rapid decline in value.
4. Sell One of Your Cars or Trade it Out
If you have a luxury or oversized vehicle, then trading your vehicle or a more practical car is always an option. Once you have a simpler car, you’ll save money on gas, insurance, and even maintenance costs. “Less fancy cars are more reliable,” says editor of Autotrader Brian Moody. “They have fewer gadgets.”
If your family has more than one car, then you may be able to sell one of them and end up saving a lot of money every month. Many families find that they adjust to sharing a vehicle, and when you need your own car for some reason, using Uber or Lyft periodically may still cost less than owning a vehicle.
5. Save on Gas
Nearly twenty percent of the cost of car ownership comes from fuelling up. Unless your vehicle requires premium fuel, save by filling up with regular gas. You may also choose to slow down as gas mileage increases at lower speeds. If you can, try driving less, such as by walking to close destinations or starting a carpool for work. If you are able to get your annual mileage below 7,500, then your insurance company might even give you a discount on your coverage for that too.
6. Save up for Maintenance
The cost of vehicle maintenance is equal to fourteen percent of the total cost of owning a car. By keeping up on routine maintenance and using synthetic oil, you will avoid more expensive issues down the road. When a large repair does arise, always call around to get quotes and go with the best deal. Since emergencies happen, setting up a sinking fund for unplanned car expenses is always a good idea. By putting away only $83 a month, you’ll save up $1,000 a year, which could be used for an unforeseen mechanic bill. “You could set aside money every week,” suggests Lauren Fix of Car Smarts. “Then the money will be available rather than using a credit card at a high interest rate.”
The less money you spend on your car, the more you’ll have for other expenses in your life, from groceries to vacations. With Insureyouknow.org, you can store all of your vehicle and financial records in one place. That way when it’s time to refinance, shop around for better insurance, or sell your car, everything you need will already be at your fingertips. There’s never a good reason to throw away your hard-earned money on unnecessary expenses.