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Sunday, October 20, 2013

You Can Afford the Car But Can You Afford to Drive It?

Most of us typically dream about driving a nice car. It seems that Americans especially have always had an affair with their cars. We have been barraged with images of vehicles from the time we are children into adulthood in toys, cartoons, posters and every other commercial during a typical Sunday football game.

I personally dream of some day driving my own Audi S4, but there are many other models that bring a twinkle to our eyes; Corvettes, Cadillacs, a 69 Camero, Mini Coopers, Jeep Wranglers, BMWs, the new Tesla and yes even the oh so humble Toyota Camry. I need someone to explain that last one to me though.

So you know what car revs your engine and you have it picked out and have been saving or planning ahead for it. So you can afford the car, but can you afford to drive it?

Per the U.S. Bureau of Labor Statistics the average American household has 1.9 cars and spent $8,998 on transportation costs in 2012. That is almost 17.5% of all our expenditures. Yes, you read that correctly, we spend over 17% or over half of what we spend on our homes on getting to and from them. What costs so much?

The reality with almost any purchase is that there are opportunity costs associated with them. What is an opportunity cost? That would be the additional costs to ownership. For our cars this includes among other things, gas, insurance, taxes, license and maintenance.

Here are 4 ways to save on car expenses:

1.       Raise your insurance deductible- put away your deductible in an emergency account and raise your deductable from $250 or $550 to $1000. This can save you $10, 20 or even more on your monthly insurance premium. Insure yourself rather than paying the extra to an insurance company

2.       Shop around for insurance – there are many providers out there shop around and pit them against each other. There are many online tools you can use to shop for insurance

3.       Premium gas – your owner’s manual says you need the top of the line gas, but do you really? Switch between the top grade and medium grade every other time and save yourself a few dollars each fill up

4.       Refi – you do it with your home, why not try it with your car. If you are still out a few years on your loan shop around for a lower rate on your loan. Switching banks can save you a few dollars a month on your loan

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