Save Money on Cars |
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[Each Monday for the next couple months, I'm going through many of the ways to save money. Read the whole Save Money series. Last week we looked at how to save money on movies, music, television, and books.]
This Monday, I’m focusing on covering some ways to save money on cars - or just about any vehicle. Since a car is many people’s most expensive depreciating purchase, saving money in just this area can make a huge difference in your bottom line.
- Stay with the car you have - With a few exceptions, the cheapest car is the car you already own. When you buy a new car and sell your old one, you typically end up paying a little extra either to a dealer or in advertising your previous car.
- Some Exceptions:
- If you have a long commute with a car with very inefficient fuel mileage, you can save money on gas.
- If you own a really, really expensive car and can’t make the payments, trading down to something used and/or cheaper can make a big difference.
- Buy used - Cars can lose 50% of their value after three years. If you buy a $30,000 car, that means that you’ll spend around $15,000 in the first three years - or about $5,000/yr on the car itself. However, if you bought the same car after those three years were over, you could probably get another 8-10 years for $15,000. This translates to around $1,500-$1,875 a year. That’s a difference of $2,500 a year or over $200 a month.
- Consider resale value - If you take the previous advice to buy a car used you want one with a low resale value. These cars will have lost much of their value and you should be able to find a bargain on them. Cars.com has a list of cars with the best and worst resale value. According to that data, the Kia Rio retains just 30% of it’s value. This means that you could pick up a 3-year old Rio (MSRP: $13,495) for just $4050. If you drive that for 8 years, you’ll pay around $500 a year on the car itself.
If you must have something new, consider cars with a high resale value. For the same Cars.com data, a Mini Cooper retains 68% of it’s value. If you bought a new Mini Cooper (MSRP: $18050) and had to sell it after three years, you could still get more than $12,000 for it. You’d have paid about $5775 for three years of driving - or $1925 a year. It’s not as cheap as the Kia Rio, but for the ownership of a new car it’s not bad.
You might not want to confuse these because if you buy a car with a poor resale value new, you could end up paying thousands per year.
- Consider fuel efficiency - This can be a significant factor if you drive a lot and/or you think gas prices will be high. At 10,000 miles a year, 20mpg, you’ll buy 500 gallons of gas. If you buy a car that gets 25mpg you’ll buy 400 gallons - a savings of about $300 a year if gas is $3/gallon. With the rising gas prices, this is becoming more and more significant. I won’t go into the environmental and political side of driving a highly fuel efficient car simply because it doesn’t apply to this topic or blog. However, it is another thing to consider.
- Consider gas credit cards
- Consider maintenance costs - This is where research from Consumer Reports and Edmunds.com can really come in handy. Edmunds.com factors this into the price of the car directly. Consumer Reports gives extra information about how well-built a car is giving you an idea of what the maintenance costs could be.
- Consider getting a gas credit card as long as you pay it off each month. I save 5% off gas with my Chase card. I couldn’t find the same promotion, but I found one that will get you 6% for the first 90 days and 3% after that. That would be the Chase PerfectCard. At $3 a gallon, that can add up to more than $1 a fill-up.
For some, driving is a luxury and worth every penny of the vehicle they decide on. When I was younger, I would classify myself in this group. However, I have done a lot of changing with the way I view money. For my next car, it will be really tempting to purchase that used Kia Rio. I’ll have to look into the maintenance costs before I make the plunge. At $500 a year, my cost for that car would be less than $50 a month, where many people pay $300 or more. I’ll be able to put $250 a month more than many people towards appreciating investments. Over a long time, with compounding interest, I might be able to retire years early just due to this decision.
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August 26th, 2008 at 3:00 am
[...] Car - I was the one with the car. Many people may say that you don’t need a car in college. It depends on the college, but at many it’s very important. I defer to the PCU quote, “Will you have a car? … Someone on your hall will, find them and make friends with them on the first day …” If you are going to be the one with the car, here are some tips to save money on cars. [...]
May 28th, 2008 at 1:34 pm
[...] Save Money on Cars - If you wanted to make a single change to save a lot of money, this might be the best way to do it. [...]
January 28th, 2008 at 11:47 pm
[...] you enjoyed this article read how to save money on cars or subscribe to my RSS feed and read all my articles.] Featured Information work at home business [...]
September 13th, 2007 at 1:10 pm
[...] Save Money on Cars - when to buy, when to sell, and how to know the difference. [...]
September 10th, 2007 at 5:56 am
[...] [Each Monday for the next couple months, I’m going through many of the ways to save money. Read the whole Save Money series. Last week we looked at how to save money on cars.] [...]
September 7th, 2007 at 7:40 am
I’ve only had two cars so far, but I always buy new and use it until it turns to dust. Of course, I’ll admit that part about buying new is somewhat of an extravagance, but I can be frugal in other ways.
September 6th, 2007 at 7:17 pm
According to my research…
The most reliable brands are: Honda, Toyota, Lexus, Acura, Scion, Subaru, Mazda, and Buick.
The least reliable brands are: Chevrolet, Kia, VW, and older Hyundai models (newer models have gotten better).
Any brand not listed falls somewhere in the middle.