Spend Less

How to Reduce the Cost of Vehicle Ownership

Written By: Eric Williams
Reviewed by: Mike Reyes
Last Updated November 1, 2023

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classic ferrari

Public transport in some places could be inadequate, making owning a car a must if you want to go around places. But if you think that the only expensive part of owning a vehicle is buying it, you couldn’t be more wrong. A car can be one of the most significant expenses you will have in your life because its cost does not end with the purchase. 

If it’s your first time purchasing a car, be ready to pay for insurance, maintenance and repair, gas, parking fees, licenses and registration, and traffic tickets. All of these could easily set you back $9,666 or $805.50 monthly if you refer to AAA’s 2021 Your Driving Cost study. Factored in this study is the slowdown in vehicle production from the worldwide shortage of semiconductor chips.

If you opt for a used car, you’d still need a used car warranty and pay for taxes and registration fees. The bottom line is that owning a vehicle is expensive, so you need to find ways to cut costs. Here are some tips on lowering the cost of vehicle ownership.

1. Get an Extended Warranty Insurance Policy

Getting a brand-new car comes with the security of a manufacturer’s warranty. It can cover different repair expenses, from labor costs to replacing faulty parts. But when this expires, you’ll be looking at spending your own money for repairs.

Get extended warranty insurance before the manufacturer’s warranty expires so you remain covered. Compare a few quotes from different providers carefully and choose the one that offers the services you need. The cost of an extended warranty is nothing compared to what you may face if your car breaks down.

2. Follow A Preventive Maintenance Schedule

You’ll do well not to take the car’s maintenance schedule for granted—instead, stick to it. These maintenance sessions will identify problems that need fixing before they can cause more severe damage. The most common issues you’ll encounter include leaks, worn-out parts, and wheels that need realignment. 

If you’re considering skimping and skipping a few of these sessions, you may end up spending more on repairs if your car suddenly breaks down. Don’t be swayed if other people have different views on the maintenance schedule. When in doubt, read the manufacturer’s manual.

Most cars have indicators that alert you once specific maintenance is due, including oil change and engine check. Don’t ignore these indicators—they were placed there by people who designed the car and know what it needs. Familiarize yourself with these indicators and immediately take the vehicle to a mechanic if you think there’s something wrong with the vehicle.

3. Know Your Car

Regarding preventive maintenance, keep a sharp eye on auto mechanics who will trick you into changing parts that don’t need replacing. An honest mechanic will tell you which parts need changing and which can still do the job despite some wear and tear.

To avoid being taken advantage of, familiarize yourself with your car and its quirks. Take the time to learn about the basic auto mechanic concepts. It allows you to communicate better with your mechanic and get the answers you seek. 

It will also help if you know how to tell if there’s something wrong with your brakes or a dishonest mechanic is just duping you. Avoid getting overcharged or advised to get services you don’t need. If you don’t have the time to do this, at least hire mechanics known for their honesty.

4. Learn Basic Maintenance Tasks

a mechanic fixing the brakes of a car

Since maintenance is a necessary cost of car ownership, the way to reduce it is to learn a few of the tasks and do it yourself. Your repair and maintenance bill will go down if you can cross out some of the tasks from the list. 

A few tasks that you can easily study are changing air filters and spark plugs. If possible, learn how to do an oil change since it’s one of the most common maintenance procedures that your car requires. 

An oil change bill can run between $30 to $100. If you do it yourself, you can buy the oil and filter from a store for just $10 to $25—clearly some savings for you.

5. Consider Car Loan Refinancing

There may have been changes to your credit score since you purchased your car, or you might have gotten a bad loan from a dealer. If so, consider looking for a new lender that can offer a lower interest rate, giving you significant savings in the long run.

Consumer credit reporting company Experian wrote in an August 2020 article that the average used car rate for borrowers with a subprime credit score was 17.74%, while non prime borrowers are only imposed an 11.26% average annual percentage rate (APR). The difference in APRs between the two categories is very significant, so refinancing can save you a lot of money if you recently moved from subprime to non prime.

6. Use OEM Spare Parts and Accessories

Original equipment manufacturer (OEM) specification spare parts are an excellent alternative to original ones, often sold at a premium. OEM parts are usually sold at significantly lower prices, although they work the same because they lack the original engravings and logos.

You have to do your homework and search for reputable sellers of OEM parts or ask the repair shop to make the order. Don’t skimp on critical components like brake pads and calipers, and use OEM spares for things like headlight assemblies and side mirrors.

You may also want to avoid purchasing accessories from manufacturers or dealers. Most of these items are overpriced if you buy from them. A better alternative is for you to search for accessories, like floor mats and dashboard covers, from retailers. There’s a chance you’d find higher-quality items at lower prices if you shop around.

7. Cut Gas Costs by Testing Fuel Efficiency

According to the U.S. Department of Transportation’s Federal Highway Administration, American drivers drive 13,500 miles on average per year. This mileage translates to spending $1,837 a year on gas alone.

To save on fuel costs, you need to understand your fuel consumption and improve fuel efficiency. There is no right way of knowing what brand and type of fuel offer the best efficiency to your car. You need to conduct tests and measure fuel to mileage ratios to decide. Plenty of tools are available, including websites and mobile apps to help you track your mileage.

Other factors may also impact fuel efficiency, including your driving style, road conditions, and the type of vehicle you own. Using monitoring tools can give you an idea of how much you can save on gas by driving a certain way or taking a specific route.

Aerodynamics is also something that contributes to fuel efficiency, but you may be unaware of how you affect it. Driving with your windows open creates strong wind resistance that the car’s engine needs to overcome, burning more gas in the process. 

If you really need to open a window, open it just enough to let air in and circulate rather than all the way down. Also, ensure that you properly inflate your tires to maintain a low drag. Keeping low air resistance and drag is good for your car’s fuel efficiency.

You may want to consolidate your errands to avoid multiple trips using your car. List down the chores you need to do and plan your route from one location to another. Doing this would be more fuel-efficient. You may switch to a more fuel-efficient car model if the budget permits.

8. Look for Cheaper Parking Spaces

People driving to work also spend a lot of money on parking fees, especially in busy cities where parking spaces are expensive and hard to find. Depending on your daily schedule, try to look for parking spots with lower rates, especially if the difference is a couple of minutes walking. 

Another option you can think about is carpooling with a family member or friend. This way, you can bring down your fuel costs and parking fees by sharing them with the carpool members instead of paying for them on your own. Carpooling is also beneficial to the environment.

9. Downsize Your Car

a woman showing off her car she just bought on credit

In most cases, the bigger the car, the more expensive it is. You may want to consider downsizing your car if your ultimate goal is to reduce the cost of vehicle ownership. Shifting from a larger, more expensive vehicle to a smaller one would free up equity allotted to it.

Downsizing offers several other benefits aside from the cost savings from the reduced equity payments. Smaller cars are cheaper to use in general because they’re more fuel-efficient and have lower insurance rates, road taxes, and servicing costs.

You will also find smaller cars easier to drive, especially in cities, because you can maneuver around tight spaces. In terms of repairs, smaller and less expensive cars are less costly to fix, and spare parts are easier to find and are more affordable. They are also more environmentally-friendly because they produce fewer emissions. You can even go full-electric.

Although it might be tempting to switch to a smaller car immediately, there are a few things you need to consider first. Downsizing means less capacity and storage space, so ensure that you still have plenty of room for your family and belongings. If you’ve been using a pickup truck to transport furniture, you can no longer do this with a sedan or hatchback.

Smaller vehicles might be more fuel-efficient, but they’re usually less powerful. Truck and SUV users might get disappointed to find that smaller engines have slower acceleration and struggle with sustaining high speeds and climbing steep inclines.

You must also note that the safety features of smaller cars could be underwhelming compared to a high-end vehicle. They are also more prone to damage when they get involved in accidents. Lastly, some smaller cars may offer excellent mileage, but they have very low resale value.

10. Sell Your Extra Car

Before even thinking about downsizing, you should at least think about selling your second car, or backup car as others might call it. Second cars usually serve as a backup for whenever the main vehicle isn’t available or when you need more than one vehicle for a trip. But most of the time, it just sits there in your garage unused.

An unused second car may not be consuming fuel, but it still needs to be maintained, registered, and insured. All these things will add up to your car ownership costs without getting anything in return. 

If your goal is to lower costs, the logical thing to do is to sell that second car. You may even use the proceeds of that sale to pay for the remaining vehicle. There’s a huge market for used cars right now, so take advantage of it.

11. Buy a Used Car

Depreciation is considered one of the highest costs of owning a car. The saying that a new car loses 25% of its value as soon as it leaves the dealership is entirely accurate. After five years, a vehicle can lose more than half of its initial value.

Going for a used car instead of a new one makes the most sense in this situation. Also, think about what type of car you need instead of what you want. You may be eyeing a pickup truck, but you don’t need one if you’ll only use it to drive to the office or pick up the kids. 

Look for a car that’s one to two years old and is coming off a lease so that the previous owner already covered the depreciation cost. A good rule of thumb is to buy only what you can afford. You can create a budget based on how much you can spend on vehicle payments, gas, and maintenance costs per month. Stick to this budget when you make your purchase.

Some experts believe that you shouldn’t pay for a car worth more than 50% of your annual salary. This means that if you’re making $60,000 a year, you shouldn’t go beyond a budget of $30,000 for your car.

12. Re-evaluate Your Insurance Coverage

Shop around and compare at least three quotes if it’s the first time you’re getting car insurance. Only consider reputable companies as your insurance provider. Keep in mind that it’s not always the cheapest that’s best for you. Consider other factors, such as inclusions and customer service, in your decision.

The AAA encourages owners to look at new insurance coverage yearly because cheaper options may be available. One way to reduce insurance costs is to examine the discount offerings from the providers. You may qualify for specific discounts for safe driving history, installing anti-lock brakes and anti-theft devices, and undergoing a safe driving course.

There may be teenagers in your family who are eager to drive and should be included in the car insurance policy. Make them wait a few years before you let them drive, if possible, to avoid getting significantly higher rates. A 16-year-old could raise your rate by 92%, but a 19-year-old could increase your insurance bill by only about 60%.

You can also save money by completely removing your comprehensive and collision coverage from your car insurance. You may cover the difference between the vehicle’s actual cash value and the comprehensive and collision deductible through guaranteed auto protection coverage provided by some insurers.

Another option you may consider is to increase your deductible. This applies to older cars that are no longer under lease or loan. Take note of your state’s minimum car insurance requirement. Understand that lower coverage means not only lower rates but also a higher risk of an out-of-pocket payout when an accident happens.

As with loan refinancing, you can also raise your credit score to get better insurance rates. If you have traffic violations on record, wait for them to expire and apply for new coverage with lower rates due to your improved credit standing and better driving record.

13. Build a Car Fund

One thing that could hurt you financially is unexpected car expenses. It’s good to have insurance and an extended warranty that can cover most of your costs, but sometimes you still have to dole out money for expenses that are not covered. Building a car fund is one way to address this.

If you still have extra cash after making your monthly loan payments and insurance, you might want to set that aside to start a car fund. Once your car is paid off, you can continue making those payments to the car fund. Plan out how much you can put into the fund and your target amount. You can open a savings account with your bank for this purpose.

14. Clean Your Car Regularly

old unreliable car-compressed

It may seem trivial and insignificant to some people, but regular cleaning is necessary to protect your vehicle from elements that may cause damage. Damage to your car would mean repairs, and repairs would mean more expenses for you.

You may easily neglect dirt, but it can accumulate quickly and cause your engine to clog. A clogged engine will not run at its optimal level and will consume more fuel as a result. Meanwhile, tiny bits of gravel and sand get into the seams and crevices of the car and may cause wear and tear to moving parts and the chassis.

If you’re going to use commercial car washes, steer clear of drive-through ones or risk getting scratches to your car’s exterior. Search for car washes that employ people who wash vehicles by hand. 

When washing the vehicle yourself, use car wash soap instead of dish soap. It may seem like a good alternative because of its ability to remove dirt, but it may affect the car paint’s chemicals, causing it to lose its shine. Use a different microfiber cloth for washing, drying, and car wax buffing.

You also need to protect your car from elements, such as rain, wind, direct sunlight, and even tree sap and bird droppings. These things can cause scratches and stains that damage the paint. Always look for covered spaces to park your vehicle. Never park under a tree because falling branches and twigs can scratch the paint, while leaves can get stuck between the windshield wipers. 

15. Correct Your Bad Driving Habits

Bad driving habits can affect not only fuel efficiency but also your car’s performance and cause parts to be damaged or deteriorate faster. Driving extremely fast and regularly stepping on the brakes hard could strain the vehicle. Remember that any form of damage or deterioration could increase your car ownership costs down the line.

Practice driving smoothly and with caution to prevent long-term damage to the car. Use sudden accelerations and hard braking only during an emergency or if you’re avoiding getting into a collision with another vehicle.

Driving smoothly is not just about how you handle the car; it also means removing any additional weight that could hinder its performance. If you’re going on a trip that does not require the use of attachments like roof racks and cargo carriers, you may want to remove them and leave them in the garage.

Don’t treat your car trunk like spare storage for your possessions. Free it up from items you don’t have to take with you. The added weight from these things could cause damage and lower fuel efficiency. 

The Bottom Line

Owning a car is not only a substantial investment but also a financial responsibility that you need to fulfill to avoid bleeding money. The tips discussed above are only some of the things you can heed to avoid making your car a money pit. Hopefully, these methods will help you save on repair, insurance, maintenance, and other costs.

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