11
May

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Owning a car represents the second largest household expense in the U.S., according to the Department of Labor’s Bureau of Labor Statistics. In fact, the average household spends almost as much on their cars as they do on food and health care combined for their entire family. Find this hard to believe? When you break down the actual costs of fueling, insuring, servicing and maintaining a car (or several) year after year, you’ll see that it’s all too true. So how much is it costing you to own your own car? Or if you’re thinking of buying a new one – does the cost vs. benefit really add up?

Consequently, be realistic before you dive in. If you decide you must own a car, make sure you have an accurate estimate of your overall costs – which goes well beyond the purchase price. Doing some homework up front will save you many a headache down the road.

Action Step #1 – Do you absolutely need to own your own car, or are there alternatives like public transit, bicycle, renting or sharing a vehicle with a spouse or family member? Or even a car lease? If owning a car is a must, draw up a chart of real, predictable expenses, before you make any purchasing decisions. Most people focus on the sticker price, but there are a host of other costs to consider like depreciation, insurance, registration fees, parking, tolls, interest on loans, regular (and unexpected) servicing and repairs. Think about your vehicle needs – how often and how far you’ll be driving, whether you’ll carry passengers or other cargo, where you’ll be parking. Which features are most important to you: safety? fuel efficiency? roominess? All of this will help you determine ‘how much’ car you need, and which make and model best matches you.

Action Step #2 – Consider a smaller, fuel-efficient model – such as the Toyota Prius, Honda Civic, Ford Focus or Hyundai Elantra – versus an SUV or larger vehicle. Not only will you save significantly on gas prices, but these smaller cars are cheaper to insure and generally require less in the way of ongoing service. Many luxury cars will only take a certain, high grade of gas, and often require costly regular maintenance – or obscure, pricey parts – that can seriously drive up your ongoing costs. If you’re dead set on a luxury brand, you can save a great deal by going for a model that’s been previously owned (even a car that’s one or two years old costs far less than a brand-new one). Find out if the dealer has a test drive model they’re ready to sell – even a few hundred miles on the odometer can save you more than a grand off the sticker price.

Action Step #3 – Regardless of which model you choose, regular maintenance goes a long, long way to keeping your long-term costs down. This means getting regular oil changes, and scheduled ‘major’ service every 15,000 miles, or as recommended by your car’s manufacturer.   Get to know the way your car ‘feels’ when you’re driving, and be alert to unexpected engine noises or subtle changes in its performance. Keep an eye on things like tire pressure, which can affect your gas mileage. Simply keeping your car clean will help maintain its value over the long-term, as it affects the way you feel about and take care of the vehicle. Identifying potential problems before they grow worse will almost always save you money.

Also:

* You may have heard the adage about cars lose their value the moment they drive off the lot, but you’ll be amazed just how quickly those brand-new prices plummet. To get an idea of depreciation, look up your make and model in the Kelley Blue Book and check its price over the last three-to-four years.

* Find a reliable mechanic in your area who will get to know you and your car – they’re much less likely to rip you off or try to oversell you on needless parts or repairs if you’re a repeat customer.

Last-minute tips: More and more cities are introducing ‘car share’ programs, whereby members pay a monthly fee to have access to shared vehicles on an as-needed basis. This can be a great solution for those who don’t need a car on an everyday basis, but like the convenience of being able to use one for shopping excursions, weekend trips, etc. And you don’t have to deal with insurance and parking headaches!

The Takeaway: Most people have no idea the true costs of car ownership; more likely they make this discovery only after they’ve made a costly investment in a new vehicle. Even though owning a car can be a great convenience, it’s well worth considering whether you really need one, before you take the plunge. If there’s no workable alternative for you, there are still plenty of ways to economize – buying a quality second-hand car, choosing a fuel efficient model, and taking the best care you can so you car lasts for the long-haul.


Posted in Finance