Car ownership goes beyond the price of your car’s for sale sticker. Besides the monthly car loan payments, there are other running expenses that you’ll have to incur, including gas, car insurance, parking fees, repairs, and maintenance, just to name a few. This makes car ownership the second largest expenditure after housing. With a few simple measures and tips, you’ll learn how to cut down car expenses in no time! (Plus a ton of other great info you wish you knew years ago!)
How much should you budget for car expenses?
Experts recommend that your car expenses be around 10% to 15% of your monthly income. That includes your car note (if you have one), insurance, repairs, and other car costs.
How much does the average person spend on a car per month?
Surprisingly, many people spend more than their 10% income on cars. In 2021, the average car cost was about $42,258, which equals about $563 a month in car payments. That’s not including maintenance, insurance costs, repair costs, and gas.
In other words, you’d have to make about $10,000 a month to have your car expenses be just 10% of your income.
Related: How to Save Money When Buying a Car
Car payments are the greatest expense when owning a vehicle (for most people). If you can find a way to lower those car payments or not have any at all, you’re spending less than most Americans.
What are the 6 main expenses of owning a car?
After a car loan and note, the next 5 main expenses of owning a car are (in order);
- Gas (on average, $1,681.50 per year)
- Insurance (on average, $1,630 per year)
- Maintenance (on average, $766.50 per year)
- Licensing, registration, and taxes (on average, $668 per year)
- Tires (on average, $147 per year)
If you add these average costs up, that’s about $4,893 a year, not including your car note!
Why is owning a car so expensive?
It’s just the way of the land. People must get paid for their work, and items must be purchased for maintenance and repairs. That’s just supply and demand. And when demand is higher than supply, it will also cost you more.
The best thing that you can do is prepare for your car’s expenses. That way, they aren’t so hard on your wallet.
How To Cut Down Car Expenses – 10 Ways To Do It!
Now, let’s talk about how to cut down car expenses, so you aren’t spending a small fortune each year.
Asking, “How can I cut down my expenses?” Here are our top tips!
1) Take It Slow
Your car burns more fuel when you drive like a race car driver. For example, driving at 100 mph can double your fuel usage compared to driving at 50 mph.
The ideal speed range is between 45 and 75 mph. Besides fuel efficiency, driving within this speed range allows you better control over your vehicle and minimizes the risk of accidents.
Your driving style could be why you’re spending lots of money at the pump. According to the U.S Department of Energy, aggressive driving behavior like speeding, quick acceleration, and hard braking reduces your car’s fuel efficiency by 10-40 percent.
To save on fuel, you need to drive smoothly. Ideally, accelerate the vehicle gradually and change the gear smoothly. Another fuel-saving tip is turning the engine off when not in use because your car keeps using fuel as long as it’s on.
3) Maintain a Clean Driving Record
Want to learn how to cut down car expenses? Here’s a good one – one that you probably wouldn’t immediately think about.
Traffic violations like speeding tickets affect your driving record, which raises your insurance premiums. You might benefit from a good-driver discount from your insurer if you have a clean driving record with no accidents or tickets.
4) Lower Your Car Insurance Premiums
Want to know how to cut down car insurance costs?
You’ll need to do some research if you want to lower your insurance premiums and save on your monthly car expenses. The below tips are a few clever options to consider.
5) Enroll in a Defensive Driving Course
Your insurance provider may offer up to a 10% discount on your car insurance coverage if you complete your state’s approved defensive driving lessons. These courses equip you with accident-prevention techniques, reducing the likelihood of getting involved in an accident. And some good news is you can complete some of these defensive driving courses online.
It’s easy to become complacent about your insurance premiums—you pay for the policy, and you get the coverage. But what if you could pay less for the same coverage? Shopping around for your auto insurance is a great way to ensure you’re paying the best premiums based on your circumstance.
It’s just like buying a car or a house. You’ll want to compare the prices, quality, and features. It could be a complex and tiring process, but it’s worth every minute of your time.
(Pro Tip: If shopping around for car insurance sounds terrible to you, contact our affiliate partner BillCutterz to do it for you! If they don’t find you savings, you owe them nothing! If they find saving, you just pay them a portion of that savings! It’s a pretty awesome win-win. Check them out!)
Here are the best times to compare auto insurance quotes:
- When your policy is about to expire
- When you get married
- If you relocate to another area
- When you get a new job or retire
Also, don’t be afraid to shop around for other costs too! For instance, if you need to move across the country or overseas, you can hire affordable car shipping companies when relocating instead of incurring the expense of a long-distance road trip.
7) Bundle Up Your Policies
Bundling insurance means buying different insurance policies, like home, car, boat, and life insurance, from the same insurance carrier.
Insurance providers offer a bundle discount as an inducement to insure different policies with them. This means you’ll find everything under one roof instead of shopping for separate insurance carriers.
For example, a home and car bundle can net you an average cost reduction of 16%. Many people can save upwards of $600 to $800 a year!
Ask your insurance carrier about the cost savings you can make by increasing your deductible on your car collision coverage. For instance, increasing the deductible from $150 to $550 may save you up to 30 percent in monthly premiums. Good driving history may also work in your favor.
9) Keep Up With Routine Maintenance
Looking for more ways to cut back expenses?
There are also money-saving opportunities when it comes to your car maintenance costs:
- Regular tune-ups will help keep your vehicle in good condition and improve your fuel economy. The good news is a tune-up isn’t costly, considering its huge savings down the road.
- Replace your oil filter after the 3,000-mile mark. Regular oil changes will extend the life of your engine and save you from costly repairs and engine deterioration.
- Safety aside, proper tire inflation will save you money on gas. According to Transport Canada, driving your car with one underinflated tire can reduce the tire’s service life by 15,000 km and increase fuel use by 4%.
10) Refinance Your Car Loan
You’ve probably taken out a car loan to purchase a new car. Car loans are secured by the vehicle and serviced in monthly payments over the loan period. The good news is you can refinance your existing car loan to reduce your financial load.
Refinancing your auto loan means getting a new loan to clear your existing car loan. Drivers often look to refinance their car loans as a cost-saving measure. But how exactly does it save you money?
Loan interest rates change frequently. So there’s a chance that rates have come down since the last time you took your existing car loan. A drop of 3-4 percentage points may translate to huge savings over your loan period.
Refinancing may also help you find a new loan with an extended repayment period. So you could pay lower monthly payments and free up cash to focus on other expenses. On the flip side, a more extended repayment period may add to your total interest amount for the loan period. So be sure it makes sense financially!
Related: Can I Pay Off a Car Loan Early?
How To Cut Down Car Expenses: The Bottom Line
Owning a car is probably one of your most expensive investments. It has many recurrent expenses like fuel, auto insurance, loan payments, repair, and maintenance.
Looking for ways to cut expenses?
Luckily, you can keep your auto expenses to a minimum by using the tips we’ve mentioned above!
What’s your favorite method to cut down your car expenses?
AUTHOR Kimberly Studdard
Kim Studdard is a project manager for online entrepreneurs and small businesses. When she isn't spending time with her daughter and husband, or reading her growing pile of horror books, you'll find her working on her HR degree and working towards FIRE.