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Totaling it Up: The True Cost to Drive Your Car
AUTHOR: MADISON HOMAN
Key Summary
The true cost to driving your car can include the following factors: financing, depreciation, maintenance and repair, insurance, and your driving habits. Learning how to save on these costs can make all the difference.
As every car owner knows, cars are expensive to run. According to the 2021 edition of the AAA’s “Your Driving Costs,” you could drive a small sedan 15,000 miles a year for 48 cents per mile. The cost can reach 66 cents per mile if you put 15,000 miles on a four-wheel drive. That’s an annual cost of $9,900. And that’s just the beginning of your annual costs. Many factors feed into the cost of driving: financing, depreciation, repairs and maintenance, insurance, and driving habits. Let’s take a look at how you can save on these costs.
Financing
Credit unions often offer the best rates on new car and used car loans, according to data from Datatrac—with an average of 48-month loans more than one percentage point lower in each category. But loan rates alone do not tell the whole story. On a 60-month, $20,000 loan, the monthly payment would be $378 at 5% and $387 at 6% — not much difference. A meaningful comparison must include other factors, like loan terms, fees, and prepayment penalties. If the dealer offers a rebate or low-rate loan, don’t automatically accept a low-rate loan. Use this calculator to determine whether the low-interest rate or the rebate is the better offer for your situation.
Depreciation
Depreciation happens after the salesperson hands you the keys and you drive off the dealers’ lot. Even before your new-car joyride is over, your car has lost value. The rate of loss can be considerable. In fact, AAA estimates the average annual depreciation on 20% to 30% by the end of the first year.
Maintenance and Repair
You’re going to need to keep your car in top shape, which isn’t cheap. AAA estimates the maintenance costs of sedans at about nine cents per mile.
Insurance
The insurance expense for the average sedan with full coverage is about $1,555 per year, which would cover a driver with a good record and good credit. Drivers who are male, younger than age 25, poor students, or have a record of moving violations and/or accidents are more expensive. Drivers who combine several of these drawbacks find insurance the most expensive. Regional factors can matter: Big-city rates tend to be much higher than rural ones. Raising the deductible and reducing the maximum coverage on the policy can lower premiums substantially, but both options also increase your risk. Make sure to ask about discounts for multiple cars, good driving records, lower annual mileage, and good grades (for students).
Driving Habits
The way you drive can make a huge difference in overall costs as well.
- Drive safely. Accidents always cost money, even if you’re insured, and you’ll be lucky if the consequences are limited to finances. Drive defensively and try to stay off the road late at night when accidents are most common.
- Keep tires inflated. This improves mileage, preserves tires, and decreases the chance of a dangerous blowout. Inflation pressures should be listed on the sticker inside the glove box, or in the owner’s manual.
- Drive mild, not wild. By accelerating slowly and coasting up to stoplights, you can save as much as 40% in fuel consumption. The higher your speed, the more fuel you will burn.
- Use cruise control. Tests showed a 4% to 14% improvement in mileage from this simple step. It may also prevent the dangerous speed creep that can lead to a costly speeding ticket, which may, in turn, increase your insurance costs.
- Drive less. This will reduce costs for gas, oil, maintenance, and depreciation.
- Don’t drive. Think about carpooling, taking public transit, biking, or walking. After all, a gallon saved is $3 or more earned—and remember, fuel is only a small fraction of the overall cost of driving.
Totaling it Up: The True Cost to Drive Your Car. (n.d.). Default. Retrieved July 14, 2022, from https://www.yourmoneyfurther.com/blog/post/YMF/2022/03/16/totaling-it-up-the-true-cost-to-drive-your-car
15 tips and ideas for cutting car insurance costs
Jan 27th 2021
Have you ever opened your auto insurance bill and wondered how you could save a few bucks? Wonder no more. We’ve got you covered. Let’s look at a few options.
The price of car insurance can be daunting. However, if you’re savvy about using the 15 tips and tricks listed here, you may be able to cut your costs.
First things first
Did you know your car’s make, model, and safety rating all play a role in the cost of your car insurance premium? Before you even buy a car, it’s a good idea to find out which automobiles get the lowest insurance premiums by consulting the Insurance Institute for Highway Safety (IIHS) ratings and asking your insurance agent for insight.
The biggest factor
The biggest factor in your premium is often your driving record. Most states use a “penalty points” system for driving infractions, giving a certain number of points for each motor vehicle offense. Some states will allow you to expunge your older points, while others will eliminate points if you take a driving safety course. You can learn more from your DMV.
Good credit
Insurance companies have done studies showing that people with good credit are less likely to make an insurance claim. If you make a point of paying bills on time and get rid of credit card debt before you purchase car insurance, you could be rewarded with lower premiums.
More than one driver on your policy
Generally, if you insure more than one driver on your policy, such as a family member or co-owner, your car insurance premium can be reduced. The downside is, any teenagers added to your policy will likely increase your premiums.
Teenagers can get insured with parents
Teens typically pay the highest insurance premiums on the road. However, if a parent simply adds a teen to his or her existing car insurance policy, the added cost will be only a fraction of the individual teen rate.
Group insurance plans
Some employers offer group car insurance plans with lower premiums than you would get on your own, so consider asking your workplace human resources department about this. You might also want to check if any organizations you belong to, such as professional associations or service clubs, offer group plans.
Shop and compare
The way companies insure different cars and people can vary by thousands of dollars. Insurance agents suggest you shop around, getting at least three different quotes from three different companies before purchasing.
Bundling
If you already have homeowner’s insurance or another kind of insurance, or if you are considering buying more than one insurance policy, ask your insurance agent if it is possible to “bundle” your insurances. Companies may offer significant discounts if you bundle.
Anti-theft and safety devices
Consider asking your insurer if they will lower your car insurance premium for installing anti-theft or safety devices on your vehicle. Usually, the company will require a specifically approved device in exchange for a discount.
Low mileage discounts
Don’t drive too often? This could mean you are a low risk for your insurer. If you keep your annual mileage under the limit set by some companies, you can reduce your premiums.
Higher deductibles
If you have a solid driving history and a healthy emergency savings fund, taking a higher deductible on your insurance might significantly reduce your monthly premium. It’s important to remember you have to pay that deductible if you have an accident.
Foregoing certain insurance
Many drivers carry collision insurance, which covers damage to your car in a collision, and comprehensive insurance, which covers theft and damage from natural disasters. However, if you have an older vehicle that is only worth $1,000, the added cost of these insurances might not be a good exchange for you.
Skipping the extra frills
Even if you cut collision and comprehensive insurance, there can still be other “extra frills” embedded into your standard liability policy, such as roadside assistance or rental car coverage, that cost you money. It’s a good idea to examine your policy word-for-word to make sure that you do not pay for frills coverage you don’t really need.
Avoiding monthly payments
Frequently it is cheaper to pay your annual insurance costs in one lump sum or in two six-month installments. Monthly payment plans can have additional charges for processing.
Other discounts
Happily, insurers provide all sorts of special discounts for long-time customers, good students, military veterans, and other groups. Your insurance company can tell you whether you fall into any of these cost-saving categories.
Source: Learn how to save money on your car insurance policy. (n.d.). TruStage Insurance. Retrieved June 23, 2022, from https://www.trustage.com/learn/managing-money/cut-auto-insurance-costs
Financing Auto Repairs
Financing Auto Repairs
Has your daily commute vehicle unexpectedly broken down and is in need of repair? While maintenance costs on most modern cars are relatively low, common repair costs average $500 to $600 and often go much higher. Agencies like AAA often encourage drivers to set aside a minimum of $50/month for routine maintenance and unexpected car repairs. Other than your home, a vehicle is still one of the most valuable you can make.
Here Are A Few Options On How To Finance Your Auto Repairs:
- Enbright Credit Union Personal Signature Loans
Some loans can be made without collateral other than the member’s signature. There is no minimum amount, and the maximum loan is $12,500. These smaller loans are great for financing appliances, computers, and smaller lawn equipment. Enbright also makes loans for holiday expenses, emergencies, and more. - Don’t have the best credit rating? Ask about Enbright’s Share-Secured Credit Card! With a Share-Secured Credit Card, your credit limit is determined and secured by a deposit you make to your Share Savings Account. Once you apply and are approved, the funds are held in your account to back your spending. Different from a prepaid card, this is a REAL credit card that lets you build/improve your credit history.
- Open A Special Share Savings Accounts:
Special Share Savings Accounts are perfect for setting aside the recommended routine maintenance costs so one of your most important investments (other than your home) is protected! With a special share savings account, you can automatically schedule your funds to be transfers and ready when you need them.