Cars Have Never Cost So Much To Own — 5 Ways To Make Them More Affordable
Many people see their cars as a source of pride and enjoyment, but when the costs start to rise, they can quickly become a source of stress.
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For 2023, the average total cost of owning and operating a new car is $12,182 per year, which comes out to $121 more per month than a year ago, according to AAA.
These costs stem from a record-high MSRP of $34,876, along with factors like high fuel and financing costs, finds AAA.
Plus, since 2020, there have been double-digit percentage increases in categories like parking fees and tolls, insurance, and maintenance and repairs, according to a New York Times analysis of Bureau of Labor Statistics data.
But that doesn’t mean car owners have to just sit back and absorb higher prices. There are still ways you can make car ownership more affordable or at least manageable.
Planning Ahead for the Total Cost of Ownership
If you haven’t bought a car in a while, you can overcome high costs by looking beyond just the sticker prices.
Tom Hosepian, chief financial officer at Soapy Joe’s Car Wash, said, “It is easy to forget the secondary cost of car ownership such as insurance, gas and maintenance. This is even more important with luxury brands where the car can only use premium fuel, an oil change can cost $400+ and insurance coverage can easily exceed your home insurance.”
Finding out ahead of time what the maintenance schedule looks like, for example, can help you anticipate extra costs.
“I myself was surprised to find that the enjoyable ‘comfort ride’ of my new car was due to extremely soft tires that needed to be replaced after 18,000 miles,” said Hosepian.
Planning ahead can also mean thinking twice about what you can actually afford to spend over the long run, rather than whether you’re technically able to qualify for buying a car. You might find you’re better off buying a used car to save some money.
Used cars can also be expensive, with prices rising by 40% since 2020, a Times analysis finds; but they’re starting to trend back down, according to Edmunds.
“Even if you can afford to buy a new car, it often makes more sense to buy a car that’s one to two years old, especially if you plan on keeping your car for five to seven years. In addition, try to buy a car so that any car loan is paid off in four years or less. This helps keep your car costs proportional to your income and ensures that you will have a few years to bank some cash for another car,” added Hosepian.
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Lower Your Car Insurance Rates
One way to save money on an existing car is to lower your car insurance rates.
“This takes negotiation skills with your insurance provider to see if and where you can lower the cost,” said Hosepian. “Taking a defensive driving course, cutting back on or changing the coverage or even shopping around for another provider are a few creative approaches.”
Another idea could be to raise your insurance deductible. While that could potentially mean paying more if you get in an accident, it could also lower your monthly or annual premiums.
And if you’ve planned ahead like by buying a car that doesn’t stretch your budget in the first place, then you could be in a better position to pay the higher deductible if need be.
Stay on Top of Maintenance
Another way to cut down on car costs is to stay on top of maintenance. Some maintenance moves like changing your oil can be preventative and save you money in the long run, advised Hosepian. But you also should stay on top of maintenance in terms of knowing what your car needs so you don’t overpay.
“Knowing what service needs to be done based on what’s in your owner’s manual is always helpful to not overpay for services that are not due yet. Check the service schedule and always follow that plan unless there’s a problem,” said Lauren Fix, sector analyst and industry expert at The Car Coach and Car Smarts.
She also recommends using online maintenance marketplaces such as CarAdvise or Openbay to find the best prices on servicing.
And while purchasing maintenance packages can help you avoid uncertainty and potentially save you money if you need enough service work, it’s also possible you could overpay this way. So, if you have the budget, you might decide to instead proactively save for maintenance costs.
“Instead of purchasing a service contract, you could set aside money every week,” said Fix. “Then the money will be available rather than using a credit card at a high interest rate.”
Refinance Your Car Loan
Buying either a new or used car is often more expensive overall than it was in recent years, as monthly payments now tend to include high interest costs. But you can potentially save money by refinancing your car loan.
For some drivers, you might have to wait to see if interest rates start to fall before refinancing. Others, however, may be able to refinance now and still get a better rate than their initial financing costs, such as if you’ve since improved your credit score.
In the Times analysis of car prices, the article shares the story of one driver who bought a car in 2019 at a 12% interest rate, and a few months later was able to refinance at a 6.6% rate after improving his credit score. That type of move can potentially save you thousands of dollars over the course of the loan.
Improve Your Fuel Economy
Lastly, you can save money on fuel costs by driving more efficiently. You can’t control the price of gas, but you can control how much gas you use. Taking it easy on the road can be one way to save money while making your drive more relaxing.
As FuelEconomy.gov notes, cutting down on aggressive driving — e.g., speeding and rapidly accelerating/braking — can save on gas. The government site also notes that driving above 50 mph decreases gas mileage, so racing to your destination can get expensive.
Plus, maintenance moves like keeping your tires properly inflated can help you maximize your fuel economy.
Altogether, these steps can help you better manage the high costs of car ownership. Still, there’s only so much you can cut, besides foregoing a car entirely.
That’s why, in addition to finding ways to make car ownership more affordable, it’s important to consider how car ownership fits into your overall finances before you get drawn in by the appeal of a vehicle.
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This article originally appeared on GOBankingRates.com: Cars Have Never Cost So Much To Own — 5 Ways To Make Them More Affordable
