Top 5 Ways to Cut Car Costs
written by Mike Ballew August 2, 2020

If you want to pump the brakes on household spending, cars are a great place to start. We spend far too much on automobiles; it's time we made a U-turn.

According to the Bureau of Labor Statistics, Americans spend 16 percent of their income on automobiles. We only spend 13 percent on food; i.e., groceries plus dining out. Does it make sense that we spend more on cars than our most basic need? 

Buckle up people because it’s time to get this show on the road. Here are the top 5 ways to cut car costs:

Number 5: Think Normal not Extravagant

There are plenty of ways to stand out in the world. You can dye your hair orange or ditch your wardrobe in favor of form-fitting spandex. That said, one area not to be extravagant is car-buying. Choosing the wrong vehicle can make your budget blow a gasket.

The average new car costs $48,000 according to Kelly Blue Book. People are financing their vehicles for 5, 6, 7 years. That is too long for an auto loan.

Unless you are independently wealthy, there is no reason to spend that kind of money on a vehicle. When even the average car costs too much, we need to stay in our lane when it comes to car shopping. We have no business trying to impress our friends or one-up our neighbors with our choice of automobile.

Number 4: Classic Cars – Look but Don’t Touch

There is a thirst for nostalgia in America, particularly among Baby Boomers. When you pass a classic car on the road, who do you see behind the wheel? Chances are it's a seasoned citizen.

You can spend an inordinate amount of time and money restoring a classic car. Everyone needs a hobby, but restoring cars can really guzzle your resources. 

If you love classic cars, go to a car show. Look around and you will find a pop-up car show most every weekend. You’ll come out miles ahead if you let someone else spend all the time and money it takes to keep a classic car on the road.

Number 3: Buy Used

We've reached the halfway point in our countdown of the top 5 ways to cut car costs. Coming in at number 3 is buy used.

The best car to shop for is one that is a few years old and gently used; i.e., low mileage and a clean Carfax report. As pointed out in How Often Should I Buy a New Car?, you need to steer clear of new car deprecation.

Depreciation is one of the biggest costs of owning an automobile. Unlike real estate which appreciates in value, cars decline in value and the steepest drop-off comes in the first two years. Driving a new car off the lot can cost you as much as 25 percent of the manufacturer's suggested retail price.

Number 2: Just Say No to Trucks

America’s love affair with the pickup truck is wasteful both in terms of dollars and energy. If you have ever been to Europe, one of the first things you notice is there are no trucks.

Trucks are built tough to withstand the abuse they take when they are used as trucks. That is why they cost so much. You can buy an upscale car for what a basic truck costs.

Unless you have a business such as landscaping or construction, chances are you don’t need a truck. The majority of truck owners use their trucks primarily as passenger vehicles. When that is the case, the cost to build in all that brawn and haul it around goes to waste. 

If you're looking to win the race, own a car instead of a truck. You can rent a truck the few times a year that you actually need one. 

Number 1: Kiss it Goodbye

We've reached number 1 in our countdown of the top 5 ways to cut car costs. Coming in at number 1 is kiss it goodbye. The best way to save money on a car is not to own it in the first place.

According to the Bureau of Transportation Statistics, the average American household has two vehicles (1.9 to be exact). The question is, do we really need them?

Every minute that you own a car it costs you money. It gets closer to its next scheduled maintenance, it consumes insurance dollars, it depreciates in value, and if it’s financed it burns through loan interest. If there is any way you can eliminate a vehicle in your household, you should do it.

Is it possible that your significant other could drop you off and pick you up on their way to and from work? Could you substitute public transportation for one of your vehicles? What about ride sharing?

Let’s look at an example. Liam and Ava have no driving-age children at home, they are both employed, and they each have a car. Ava commutes to work each day while Liam works from home. Except for the occasional lunch out or run to the store, Liam’s car sits in the driveway. With no loss of freedom or independence, how many Uber rides could Liam take each week and still come out ahead if he sold his car?

Five*. That’s a lot of Uber rides.

End of the Road

There you have it! The top 5 ways to cut car costs. Consider these cost-cutting measures and how they might apply to your household. It's the best way to save money on vehicle expenses and rev-up your budget.

*Nerd Math:

The average round-trip errand is 4 miles. The average cost per mile for an Uber or Lyft ride is $2. A 4-mile trip including 20% tip is $10 ( ( 1.2 x ( 4 x $2 ) ) + keep the change). The average vehicle age is 12 years. The annual depreciation for a 12-year-old vehicle is 2%. The average new vehicle price 12 years ago was $30,400. The annual depreciation for a vehicle purchased 12 years ago is $608 ( 0.02 x $30,400 ). The average annual vehicle insurance is $1,427. The average annual maintenance for a 12-year-old vehicle is $700. The average annual cost to own a 12-year-old vehicle is $2,735 ($608 + $1,427 + $700). The comparison-winning number of Uber rides per week is 5.258 ( ( ( $2,735 – 1 ) / $10 ) / 52 ).

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