How To Save Money #15: Reduce Transportation Costs

One way to save a fair chunk of money every year is to reduce your transportation costs. A vehicle is one of the larger investments you make. Here are some easy things to do to keep your costs down:

  • Keep your vehicle for a longer time.
  • Keep your vehicle maintained.
  • When it is time to replace your vehicle, buy used instead of new.
  • Be smart about vehicle loans.
  • Save money with everyday choices.

Keep Your Vehicle Longer

When I was younger, I knew a family that purchased a new car every year. They didn’t need a new car; the father just liked the idea. And he wasn’t the only one.

In these times, this practice is much less common, but there are still people who want to buy a new car every few years or as soon as they pay off the loan on their current car.

But if you keep your car longer, the average cost per year of that car will decrease. Let’s say you purchased a new car with a loan of $20,000, paid the loan in full in five years, and then immediately purchased another new car, again for $20,000, and again kept it for five years before selling and buying yet another new car. That’s $4,000 you are making in payments every year, year after year. Or in other words, the price of the car is $4,000 a year. (I’m not including the price of fuel, maintenance, insurance, and so on, not to mention depreciation. Here is a more thorough look at the costs of purchasing a new [or newer] car, plus some handy tools for calculating the true costs of ownership.)

But what if you kept that same car for ten years? In this highly simplified example, you make car payments of $4,000 a year for five years, and then you have no car payments for five years. Averaged out over ten years, the price of that car decreases to $2,000 a year.

Keep Your Vehicle Maintained

Your car will last longer with fewer repairs if you keep it maintained. That means regular oil changes as well as other recommended regular maintenance.

For oil changes, you can generally save money—sometimes a lot of money—by using a good mechanic rather than one of those oil-changing places. (This advice assumes you have an honest, reliable, and skilled mechanic—granted, they can be hard to find.) Those oil-changing places may sound cheap, but they will do their best to sell you on services you don’t want or need. Your mechanic won’t. And as a bonus, for no extra charge, your mechanic may check other points of your car while changing the oil. Mine does that and also does a road test. At times, these extra tests have caught a problem early enough that I could pay for a simple repair, saving me the price of much more costly repairs down the road. (And in one case, possibly saving my life, as a potentially hazardous problem was found early.)

Buy Used Instead of New

As soon as you purchase a brand-new car, the value of that car drops through instant depreciation, sometimes dramatically. Even if you were to try to sell that new car that same day, you would take a loss, because now you are selling a used rather than new car. You can save yourself that value drop by purchasing a used car. Yes, your used car will continue to depreciate, but in most cases more sedately than the instant drop when you purchase a new car.

When you are purchasing a used car, be canny. Some factors that affect depreciation are how much in demand a particular model is, safety and reliability records, recalls, and the like. So do your research to find a car that will hold its value better.

Also, you will generally find better prices with a private party than through a dealership, but be wary of frauds and lemons; always have your mechanic check out a used car before you purchase it. It may cost $100 for that mechanic’s check, but that $100 may save you thousands. If the person you want to purchase from is unwilling to have a mechanic check out the car, that tells you something right there.

Use online resources to figure out what that car is really worth. Kelley Blue Book and Edmunds are two good sources. Most of us have inflated ideas of how much our used car should be worth; using these resources, we can make a good argument for a price that is fair to both parties. Also, for a very low fee, Consumer Reports offers a car pricing service for new and used cars.

Be Smart About Loans

It’s best if you can pay cash for your car, but most people aren’t going to be in the position to do that. But if you get a car loan, you can still be smart about it. Some things to keep in mind:

  • Keep the loan as short-term as possible—no more than three years is best. Can’t afford making the payments on your proposed new car if it is only a three-year loan? Buy a less expensive car.
  • Check out different loan offerings before committing to one. Even if a car dealer offers what sounds like a great interest rate on a loan, it may not be the best deal in the long run. For one thing, they might convince you to buy a car based on what the monthly payments will be, so that you don’t negotiate for a lower overall cost.
  • Make a 20% downpayment, and pay cash for the extras (tax, licensing, etc.).

Oh, and while we’re at it, don’t trade in your old vehicle, but instead sell it yourself. The dealer will do his or her level best to give you the very least amount of money for your old car; it’s another way to increase their profits—pay you as little as possible, then mark it up by thousands of dollars.

If you don’t want the hassle of selling your vehicle yourself, at least use the resources mentioned above (Kelley Blue Book and Edmunds, and the Consumer Reports car buying guides and pricing service) so you can come armed to the negotiating table.

Save Money with Everyday Choices

There are several things you can do to save money every day:

  • Use alternative means of transportation, such as the bus, carpool, train, etc.
  • Buy an electronic toll collection device such as the San Francisco Bay Area’s FasTrak. Even if you only use it a few times a year, there is no ownership cost and you will save a few dollars. If you use it more often, those dollars will add up fast. Plus you can use the lane(s) reserved for those using the toll collection device, which means you get through the toll area faster (sometimes much faster), saving you time and fuel.
  • Combine errands so that you aren’t making multiple trips when one will do.
  • Plan your errand runs so you aren’t zig-zagging around, but instead are driving the shortest distance between each place you need to go.
  • Use driving methods that get more miles per gallon (such as accelerating and slowing gradually).
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