7 Smart Ways to Cut Car Costs
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From monthly payments to repairs to insurance, a car can be one of your biggest expenses. But that also makes it one of your biggest opportunities to put money back in your pocket.
If you’re trying to make ends meet or want to simply save some money, here are seven ways to reduce your car costs.
1. Refinance your car loan
If your credit score has gone up since you bought your car, or the dealership put you in a bad loan, you may be able to find a new lender to refinance a car loan. Refinancing can lower your interest rate and may save you hundreds over the course of the loan.
For example, according to the most recent data from Experian, the average annual percentage rate for a used-car loan for a consumer whose credit scores fall in the subprime category (501 to 600) is 18.99%. For those in the next tier (601 to 660), the average APR was 13.74%.
On a 60-month car loan of $20,000, a borrower who refinanced from 18.99% to 13.74% would save about $56 a month and more than $3,300 over the life of the loan.
Refinancing will also give you the chance to adjust your payment schedule. In an emergency, you can extend your loan term. Or, perhaps you can even pay the loan back sooner.
on CarShield's website
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on Premier Auto Protect's website
2. Review or change your insurance
Chances are, it’s been years since you reviewed your auto insurance policy. By changing your existing policy — reducing coverage, lowering mileage limits or comparing car insurance rates — you can start saving immediately.
It’s a competitive market, and companies are hungry for your business. If you're driving less than in the past, you may qualify for a low-mileage discount — or now drive so little that a pay-per-mile policy makes sense.
3. Sell your second car
How often do you drive that second car? Even if it just sits there most of the time, you still have to register, insure and maintain it. Why not turn it into cash?
Even old beaters might bring in enough money to help you make a few payments on your remaining car. And there are convenient ways to sell used cars online.
4. Downsize to a cheaper car
Maybe you overspent at the dealership and now you regret having to pay for the top-of-the-line model with all those options and features. The fastest way to make the switch is by trading in — and there are numerous online car retailers, such as Carvana, to help you do that. But selling your car to a private party is apt to snag a few grand extra. Then, you can shop for a reliable three-year-old car that will save you money and serve your needs.
5. Save money on maintenance and repairs
The best way to save money on car repairs is to be vigilant about routine maintenance. Check your owner’s manual — many of which are now online — to find out exactly what has to be done and when. If repairs are needed, find a trusted mechanic and ask what has to be done immediately. Some repairs can be postponed to spread the cost out over time.
6. Boost your gas mileage
If you have a big truck or SUV, a fill-up can easily cost $75. Driving smarter and following a few simple tips will turn a weekly visit to a gas station into every two weeks or perhaps longer. Spoiler alert: The biggest gas wasters are rapid acceleration and high cruising speeds.
7. Cash in your extended warranty
An extended warranty can bring you peace of mind. But if money is really tight, you may be able to get a prorated refund on the remaining balance of the contract.
Not sure where to start?
Here are a few quick ways to figure out where you could slash car expenses:
Use a car cost calculator to list all your regular expenses such as car payment, insurance and fuel costs. Once you get a handle on where your money is going, you can see where the fat is and figure out how to take action.
Estimate how much you will need in the year ahead for maintenance and repairs.
Create a separate account for maintenance and repairs. Any time you have extra money, tuck it in the car account so repairs won’t break the bank.
Check your driving record to see if past traffic tickets have dropped off, which could get you a better insurance rate.
Review your insurance policy to make sure you have taken advantage of all discounts.