While a monthly car payment is predictable, other costs associated with car ownership can fluctuate wildly. By understanding these potential expenses and taking proactive steps to mitigate them, you can enjoy the benefits of having a vehicle without risking your financial well-being.
Some of the most common unexpected vehicle expenses include:
Repairs and Maintenance
These costs are inevitable even if you purchase a reliable vehicle. Some common issues include tire replacements, brake pad replacements, oil changes, battery replacements, and timing belt replacements. Although today’s vehicles are more durable than ever, with the average car on the road now being over 12 years old, they also contain more delicate electronics that can be expensive to repair or replace.
Your vehicle’s most significant mechanical components, such as the engine and transmission, can cost thousands of dollars to repair or replace. Unless you’re in the market for a new or used car with an existing warranty, the potential for a significant repair bill is something to keep in mind. This situation is where research into the predicted reliability of used cars comes in handy.
Fuel Costs
Another expense that can be difficult to plan for is the price of gasoline. If your vehicle isn’t particularly fuel-efficient, incremental increases of just a few cents per gallon can add up over time.
Vehicles that require premium fuel can also add nearly a dollar per gallon to an already expensive commodity. To budget for unexpected fuel cost increases, monitor gas price trends and adjust your budget accordingly.
Consider a fuel-efficient vehicle to minimize the impact of price fluctuations, and combine errands to reduce overall fuel consumption. To save money on gas, consider getting a credit card that offers fuel rewards, which can provide up to 5 percent cash back on money spent at gas stations.
Insurance Premiums
Auto insurance costs can be challenging to control. The average price of car insurance has increased substantially in recent years, with an average annual cost of around $2,300 for full coverage (though rates can vary significantly by state, too).
Insurance premiums can vary based on your car, driving record, age, and location. However, premiums may increase unexpectedly due to traffic violations, accidents, changes in your credit score, or moving to a new area with higher insurance rates.
To minimize the impact of unexpected premium hikes, shop around for insurance quotes annually and maintain a clean driving record. Consider raising your deductible to lower your monthly premiums, but ensure you have enough savings to cover the deductible if needed. Bundling your auto insurance with other policies, such as homeowners or renters, may qualify you for multi-policy discounts.
Registration, Taxes, and Fees
Annual vehicle registration, taxes, and fees can vary by state and vehicle type. These costs may increase unexpectedly due to changes in local or state legislation, increases in vehicle value (for tax purposes), or additional fees for hybrid or electric vehicles. Research your local laws and regulations to anticipate these costs and set aside money each month to cover these annual expenses.
Planning for Vehicle Expenses
While unexpected expenses can strike even the most prepared driver, there are a few things you can do to lessen the impact these expenses have on your monthly cash flow.
Predicting and planning for unscheduled repairs can be the biggest challenge. You may want to familiarize yourself with some of the most common issues or complaints about your specific vehicle. For example, some makes and models tend to develop transmission problems at around the 150,000-mile mark. By knowing what to expect, you’ll be better prepared to weather these expenses when they come up.
If you’ve financed your vehicle, a smart financial move could be to redirect the money you spent on the monthly payment into a dedicated emergency fund after you pay it off. This fund can provide a lump sum to defray unexpected repair costs and minimize the chances of unplanned credit card debt.
When it comes to saving on gas, a fuel rewards credit card can be a game-changer. Many national credit cards, as well as those from regional or chain gas stations, offer up to 5 percent cash back on all purchases, including gas. This means you get an instant rebate on every gallon of gas you buy, potentially saving you a significant amount over time.
Finally, insurance premiums can vary significantly between insurers, so shop around for the best insurance rates. Consider setting a reminder in your calendar a month or two before your policy renews to ensure you get the best deal possible.
The Takeaway
A little planning and preparation can go a long way toward ensuring that you’re ready to handle whatever challenges come your way as a vehicle owner. By understanding and preparing for unexpected vehicle expenses, you can better manage your finances, minimize the stress of car ownership, and enjoy your vehicle without breaking the bank.
