How to Save on Your Automobile Expenses

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Next to housing and food, transportation costs (owning and operating a private automobile plus the cost of public transportation) represent the third largest expense for many people.Most people want to own one or more automobiles for social status, indication of success, recreation, a good feeling, or simply as a means for getting from one place to another.

But, the cost of owning and operating an automobile is probably more than you think.Even if we use the 1997 standard mileage rate of 31.5 cents per mile (for business use) allowed by the IRS, it would cost you $31.50 to drive 100 miles, $315 to drive 1,000 miles, and $3,150 to drive 10,000 miles.

Many people fail to take into consideration that the cost of owning and operating an automobile includes such items as insurance premiums, fees for registration, any personal property taxes you must pay on your automobile, parking costs at work or where you go shopping, cost of renting garage space at your apartment, depreciation costs, washing and waxing your car, gasoline, oil, maintenance, highway and bridge tolls, driver’s license, repairs, annual safety inspections required by some states, new tires, and interest on the automobile loan. Furthermore, consider the interest you could receive on the money you are paying for owning and operating your automobile.

If you will follow the suggestions in this section, you should save hundreds to thousands of dollars each year on your transportation costs.


1. Ask yourself, “Do I really need an automobile?” “Is it absolutely essential that I have one?” “Could I take the bus?” “Could I car pool?” “Could I walk?” “Could I take a taxi in an emergency?” Do some real thinking before you rush out and buy an automobile. If you don’t own one, you won’t have the many expenses listed in the introduction to this section.

2. Ask yourself, “Do I really need to trade my present automobile for a different one?” “Is my present one still performing satisfactorily?’ “Are the repair bills still quite low?” Even if your present vehicle needs some major repairs, would it be cheaper in the long run to have it repaired rather than trade it in for another one? Check with an auto mechanic whom you know and trust and get his or her opinion.

3. Ask yourself, “Do we really need a second or third automobile?” ‘Could the family get along without this additional car?’ An additional automobile means another insurance premium, more personal property taxes, more maintenance costs, another registration fee, etc. Could the family plan and coordinate the use of the present vehicle or vehicles?

Sit down with your family and write down the alternatives to owning another vehicle. Could public transportation be used? Could one or more family members car pool? Could one family member walk? Could grocery shopping be done in the evening? Could you make arrangements with other parents to share the tasks of picking up and delivering school children? Owning more automobiles than is really necessary is spending money that perhaps could be used better elsewhere.

4. In general, try to keep your automobile for as many years as you can rather than trade it in for another one every year. Generally, the longer you keep your car, the lower will be the cost per mile to own and operate it. Of course, there will be eventually a point in the life of your car when it is just worn out and must be replaced. Proper care and maintenance will lengthen its life.

5. When shopping around for an automobile, consider how well the particular makes and models hold their values. Some makes and models have lower annual depreciation rates than others. The depreciation rate will make a big difference (money-wise) when you get ready to sell or trade in your car. Check at your library for the depreciation rates of various makes and models.

6. Check on buying this year’s model “Demonstrator” automobile with very low mileage. You should be able to buy it much cheaper than a comparable new model. In addition to initial savings on the purchase price, the “Demonstrator” should require fewer trips to the dealership for minor repairs and adjustments, since, hopefully, it has received regular professional care and maintenance. Generally, you can expect that the “Demonstrator’ will carry the full new automobile warranty--insist on it.

7. When a model of an automobile is being discontinued, haggle to get a much reduced purchase price on it. Dealers normally like to clear their stocks of these models before new models come in. Discontinued models should be much cheaper than models not being discontinued. Dealers might even be willing to take a loss on discontinued models just to get them off the lot. Their loss is your gain.

8. Consider buying a new automobile during the year-end closeout sale. You should realize significant savings.

9. Consider that it might not be wise to buy a new model of an automobile during its first year on the market. The bugs can be worked out usually during the first year, but it should not be at your expense.

10. When shopping around for an automobile, consider the cost of upkeep. For example, generally, the more accessories, the more expensive the upkeep; automatics normally are more expensive to keep up than manuals; and large tires are more expensive than small ones.

11. When shopping around for an automobile, a major consideration probably will be fuel economy. For instance, a small car generally gets better gas mileage than a large car, and a four-cylinder generally gets better gas mileage than an eight-cylinder.

Check the ‘fuel economy label” attached to the window of a new automobile for the average estimated miles per gallon for city and highway driving. Also, check the pertinent publications listed under “Sources for Additional Information” at the end of this section.

12. When you are shopping for a car, truck, or van, buy one with only the features, optional equipment, and accessories you really need and want. For example, if you never drive outside of the city, you probably shouldn’t pay the added cost for a cruise control. If you don’t really need an air-conditioner, then don’t buy it. Not only does an air-conditioner cost hundreds of dollars, but it adds to the weight of the vehicle, thus reducing fuel economy.

If you never listen to the radio while driving, try to purchase a vehicle without one. Limiting the extras to only what you really need or want could save you hundreds to thousands of dollars on the purchase price, maintenance, and fuel costs. You may have to order the vehicle to get exactly what you want, which might take up to several months; but you will have and be paying for only what you really need and want.

13. Know what the warranties cover when comparing various automobiles. Warranties do vary with different makes and models. The extent of the coverage of a warranty could make a difference between your having to be out none, a little, or a lot of money should your automobile have problems.

14. Ask your friends, relatives, co-workers, and others about experiences they have had with particular dealers in buying a car and receiving service after the purchase, and whether they would buy another car from these dealers. Steer clear of those with ‘bad’ reputations. For example, poor service or the lack of prompt service could result in your missing work or an important appointment.

15. Be careful about buying on impulse. Impulse buying could result in your paying more than what is necessary for an automobile. Get the information as suggested in this chapter before purchasing your vehicle. If you have your facts and figures, you should come out better, dollar-wise.

16. In general, the “smaller” the automobile, the less expensive it is to purchase, own, and maintain.

17. Never pay the “sticker’ price for a new automobile. Instead, follow these steps:

a. Determine for yourself the dealer’s cost (the price that the dealer must pay to the automobile manufacturer) for the particular new automobile in which you are interested. Refer to the pertinent publications listed under “Sources for Additional Information’ at the end of this section.

b. Determine the trade-in allowance you should receive for your used vehicle. (Use the wholesale price, because this usually is what the dealer would be willing to allow you.) Again, refer to the relevant publications listed at the end of this section.

c. Determine how much profit you are willing for the dealer to make. Remember, however, the dealer might have expenses such as rent, utilities, advertising, taxes, the salesperson’s commission, etc. Start out low in your offer--you can always increase the offer. Because the profit margins do vary (perhaps as low as $100 or as high as $800 or more), you should shop around to locate a dealer who is willing to sell at the lowest profit.

18. If there is a glut on the “car lot” of the particular make or model of the automobile you want to buy, you should be able to get a better deal on that vehicle than on one that is such a “hot” seller that the dealership does not even have a single one on the lot and would have to order one for you. Make your offer accordingly.

19. Consider purchasing your automobile with a friend or relative with each paying one-half of the down payment, monthly payments, and upkeep. Ask a lawyer about the legal aspects of such an arrangement before finalizing the agreement. In general, co-ownership could cut your costs for purchasing and maintaining the vehicle in half.

20. Consider buying a good used automobile rather than a new one. Refer to the Official Used Car Guide listed under ‘Sources for Additional Information” at the end of this section for the retail prices of used vehicles. Then, you will have the money facts when dealing for the used automobile. Because profit margins on used cars do vary from dealer to dealer, you should shop around to find a reliable dealer who is willing to sell at the lowest profit.

21. If you decide to purchase a used automobile, check with places which replace their “fleet’ vehicles on a regular basis, such as: businesses, various organizations, universities, state governments, and companies with outside sales people to inquire about purchasing one of their vehicles when they are replaced with new ones. Also, check with private owners whom you know and trust. Of course, you can also check with new and used automobile dealers. Consider a “Program Car.”

22. If you are looking for a used vehicle to buy, visit car rental agencies. Normally, their automobiles have been regularly serviced and properly maintained for customer use.

23. Before you purchase a used automobile, it would be wise to have a reputable mechanic whom you know and trust (one not connected with the dealer or other agency or individual who has the automobile for sale) to evaluate the vehicle for you. The charge for this service usually is low, but ask beforehand what the charge will be. The examination could save you from buying an automobile with serious problems or potential problems. It also may point out several minor problems which can be corrected easily but which you can point out to the seller and request a reduction in the asking price.

24. You might want to consider selling your used vehicle yourself through an advertisement in the newspaper if you feel you might get more for it than the dealer is offering you as a trade-in. You may be able to get several hundred dollars more by selling it yourself. Try this approach before you finalize arrangements with the dealer. If you can’t get more by selling the vehicle yourself, then trade it in on the vehicle you are purchasing.

25. When trying to sell your used automobile, place a “For Sale” sign on the window of the vehicle, use word-of-mouth, put up notices on bulletin boards at your workplace and in your community, and place ads in organizational newsletters. The more outlets you use for advertising, the larger your audience of potential buyers and the greater your chances for getting more money for your vehicle.

26. Before you try to trade in or sell your used automobile, wash the outside, and follow your owner’s manual relative to waxing the outside; clean well the entire interior, the trunk, and glove compartment; check the oil, water in the radiator, fluid in the windshield washer reservoir, and, transmission and brake fluids; put enough gasoline in the tank so potential buyers won’t run out of fuel while testing the vehicle on the road; check the tires and tire pressure; replace burned-out bulbs and headlights; and. try to make the interior smell as pleasant as possible. All of these things will cost very little, and the returns should far outweigh the small investment.

27. If you must borrow money to purchase your automobile, find out the annual percentage rate (APR) the dealer charges on a loan. Then, check with your credit union and bank on their rates. In 2009, three automobile manufacturers were offering (through dealers) rates on new cars as low as 2.9 percent to just a bit over 3 percent. In March, 2009, at least one manufacturer was offering (through dealers) 1.9 percent on selected models of new cars. In the past couple of years, similar, low-interest rates occasionally have been offered by some automobile manufacturers. If you are offered a low interest rate by a dealer, make sure you are not paying a higher purchase price for the vehicle which might offset the advantage of the low interest rate.

28. When you are thinking about buying an automobile, consider how much your insurance on it will cost. Some vehicles are very expensive to insure, such as high powered ones. Also, because of such factors as age and/or driving record of the operator, insurance rates could be extremely high for some people. Make sure you will be able to afford the insurance before you purchase the vehicle. If you purchase the vehicle and later realize that you can’t keep up the insurance payments, owner ship will become a great financial risk.

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