You’re not alone if you’re under estimating just how much you’re spending on your car.
For the most part, we as a culture have come to understand the cost of a car in one of two ways:
- The sticker price
- The monthly payment
And while those numbers are certainly a big part of the equation, they both fail to tell the whole story.
The truth is that the ongoing costs of owning a car are so numerous and so significant that addressing just them, and nothing else in your budget, could be enough to put you on track for your biggest financial goals.
The Real Cost of Owning a Car
The amount it costs to buy your car is just the start. Because whether you buy it outright or take out a loan, you still have to factor in all of the ongoing costs:
- Registration fees
Add all those up and you’re likely spending at least a few hundred dollars per month on your car, on top of any monthly payment you might have. Nerdwallet has a helpful tool for putting them all together, and you can also use the tools provided by KBB and Edmunds to get an estimate.
The fact of the matter is that even a relatively “practical” car will likely cost you thousands of dollars per year just to keep it running, and it could be much more depending on how new, big, and fancy the car is.
All of which means there’s an opportunity to save a meaningful amount of money by making a few smart decisions. Here’s how to do it.
3 Ways to Save Money on Transportation
1. Buy Used
You may have heard that a car loses value as soon as you drive it off the lot. That is, simply by buying the car and bringing it home, you have, often significantly, decreased its value.
That’s a tough pill to swallow if you’re buying new. But it also means you have a big opportunity to save some money if you’re willing to buy a car that’s even a little bit used.
Edmunds estimates that the average total cost of a new compact SUV is $33,682, while the average total cost for a 3-4 year old used compact SUV is $24,966. That’s a difference of $8,716, and it doesn’t even factor in the likelihood of cheaper insurance and lower taxes!
The bottom line is that you can save yourself a meaningful amount of money if you’re willing to buy a car that’s even just a few years old.
And in some cases you might even be better off leasing, especially if the alternative is taking out a loan on a brand new car.
2. Go Down to One Car
With the availability of services like Lyft and Uber, is it still really necessary for you and your spouse to have two cars? What would you sacrifice by going down to one? How inconvenient would it really be?
And what’s the worst-case scenario? Maybe you find that you end up spending a little more than you would have otherwise, in which case you can simply buy another car down the line. But in the end there really isn’t much risk to trying one car.
This is something that’s at least worth considering the next time one of your cars needs to be replaced. There’s little downside and the potential for some huge savings.
3. Negotiate Like a Millennial!
We, millennials get a bad rap for constantly being “connected”, but in this case you can use those skills to your advantage and negotiate your car price over email.
That’s right! You no longer have to negotiate face-to-face, which both plays to the dealer’s strengths and can be more than a bit nerve wracking.
By leveraging the power of email, you can negotiate with multiple dealers all at once, securing a great deal before you even walk in the door.
Your Money or Your Car
There’s nothing wrong with spending money on a car if it brings you joy and you have the money to spend.
But if your budget feels tight, or if you can’t seem to find the room to save for the goals you care about most, this is one of the first places to look.
You may find that a few changes can make a difference.
Image from: https://www.moneycrashers.com/benefits-of-buying-a-slightly-used-car/