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4 Ways to Save Money on Car Expenses

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Did you know that housing and car expenses add up to about 50% of the average person's spending? Over time, smart choices in those areas could be the difference between living paycheck to paycheck and have a million dollars in the bank. Today, I'd like to cover a few ways to save money on the car expense side of the equation.

  • Buy at the Right Time - At luck would have it, the best time to buy a car is at the end of this month. December is when many dealer want to move the old models to book money to close out the year. In addition, there's not a lot of competition people are focused on the holidays. It's not like they are going to give cars away, but you might be able to shave a thousand or two on the final price.
  • New or Used? - Deciding between whether to buy a new and used car can make a difference in costs. I used to recommend that people buy used cars letting others pay for the big depreciation. However, in recent years, I've noticed that the discounts on cars a couple of years old were minimal. Maybe dealers realized that people were using this tactic to avoid buying new cars.

    I try to figure out how much a car is going to cost per year and use that a starting point. I make an assumption that a car should last around 12 years. So a new $36,000 car is about $3000 a year. If a car is already a couple of years old, it might only last 10 more years. I'd want to try to get it less than $30,000. Otherwise, I might as well get a new one.

  • Get an Affordable Loan to Start With - It always helps to have a good credit score. After that, you'll want to shop around and look for the best rate on a car loan. Fortunately, credit rates are still low. As long as you look like a responsible borrower on paper, you'll should be in great shape.
  • Choose the Right Car - This is an obvious one. There's a big difference in price between our Subaru Forester and our Acura MDX. The Forester is good for muddy dogs, the beach, and trips around town. The Acura MDX is a better option for longer trips where we focus on comfort. If you can get by with a Forester-level of comfort, you can save a lot of money.

Posted on December 9, 2015.

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2 Responses to “4 Ways to Save Money on Car Expenses”

  1. Big-D says:

    I don’t know about your new/used calculation as depreciation is hit hardest in the first couple years of car ownership. I would never pay 83% the value of a car that is two years old (even with low mileage). Now this all depends on the market, the manufacturer, etc. however this is a rule I live by. I guess that is why I never want to purchase used Japanese cars as their depreciation is just way off the charts for me (on the high side, and I don’t think they are worth it).

    • Lazy Man says:

      I think there’s a disconnect in reported depreciation. If you look at what the experts say there’s 69% depreciation after two years and 49% after 4 years.

      So my plan was to go to a dealer and buy a 4 year old car… maybe settle for a 2 year one. If I can get it at half price (essentially 50% depreciation) and drive it another 8 years (remember I’m assuming I can drive a car for 12 years) it is a really good deal compared to buying it new.

      The problem came when I tried to implement this plan. The dealer’s price didn’t reflect 69% or 49% depreciation after 2 and 4 years respectively. To them, the cars depreciated a lot less (perhaps because they have to make their money and they aren’t a private owner selling it). So in this scenario, I couldn’t see a way to take advantage of that rapid depreciation… only be a victim of it.

      Thus, I’m leaning towards buying new, as you might as well enjoy the new car smell if you can’t save money buying used.

      (Admittedly, I could look for a private party selling a slightly used car and negotiate with them citing the rapid depreciation rates. That might be a fine tactic.)

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