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I think that there aren’t many people today who would argue against having a car as being a major financial commitment – both in terms of time and cost of ownership.
However, there are several things that can be done to wisely and efficiently manage these various costs so that they don’t defray your personal finance goals. Three of these car costs and management strategies are discussed below:
1. Fuel
With gas prices being what they are in the world today (~$3.50 per gallon in the United States being some of the cheapest prices of any country), people who drive a lot each week have to commit major financial resources to filling up their car with fuel.
The unfortunate truth is that short of trying to drive less (which is often very hard for normal folks to do), there is no simple way that is going to automatically save you hundreds of dollars each year.
However, the most effective way that I’ve personally found to easily save at least SOME money with gas is to use a cash-back gas credit card. The one I like the most is the Chase BP Gas Credit Card. It gives ~5% cash back for all BP purchases I make!
2. Periodic Car Repair
Without a doubt, if you own a car, it will NEED to be taken in to a repair shop for both routine/scheduled and emergency maintenance. This is especially true with older cars. When I take my car in to the Honda Repair Shop in town, I generally walk out of there spending no less than $200 each time.
To help manage the cost of car repair, there are two important things to do.
First, it’s important to have a certain amount of money in your emergency fund that you can access if your car (that you depend on for your livelihood) breaks down and needs repair.
Second, when you take your car in to be repaired, make sure that you have a LIMIT in mind about how much repair work they will do. If you’re like me, when you take your car in to the shop, the ENTIRE car is by no means in perfect working order. For example…
- Maybe the A/C needs to be recharged?
- Maybe the tire rim is slightly dented?
- Maybe the drive belt is slightly worn?
- Maybe the check engine light is coming on?
The car mechanics have a fiduciary responsibility to their company/boss to make as much money as possible. I get and accept that. And, as such, it is their job to point out what is wrong with your car, but it is up to YOU to decide whether or not it is required to fix based on what you can afford and what you think is required for the car to run safely.
To try to save some money, one question I often like to ask to the mechanic or service rep when they call with the laundry list of possible repairs is the following – “I’m running pretty low on money these days, so what repairs are ABSOLUTELY required to make the car run safely that you, the mechanic (or service rep), could sleep at night if you were in my shoes?”
When I ask this, I generally get a feel from them what is truly required to repair and what is not. Or, another thing you can do is simply only fix the one thing you took the car in to repair in the first place.
3. Car Insurance
Whether you pay monthly or twice a year, car insurance is a significant expense associated with owning a vehicle. However, this expense is also somewhat of a necessity since it is one of the types of insurances that you are most likely to have to tap in to because car wrecks (whether large or small) happen frequently. By having auto insurance, you only need to have enough money in your emergency fund to cover the deductible, instead of the $15,000+ that it would take to purchase a new car in the event that your current car is totaled in a wreck.
To save some money on this expense, it’s a good idea to shop around and get auto insurance quotes from multiple online quote providers in order to make sure your insurance needs are met while also ensuring that you pay a reasonable price year-to-year. Often times, by simply searching for a quote online, you can save $200 on average from your current policy.
How about you all? What car ownership cost is the most significant for on a monthly basis right now? What steps do you take to work that cost in to your financial planning?
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/uggboy/4460795995/sizes/l/in/photostream/
