Transportation – vehicle purchases – $3,244/year
The average American family spends almost $300 per month simply on car payments. What’s stunning is that this is the average, since $300 per month would be roughly the payments on a brand new car without a down payment.
This is a number that can easily be cut with some careful planning and foresight when it comes to buying vehicles.
Cutting Down Your Car Budget
Focus on the cost per mile
If you’re looking to minimize the impact of a car purchase on your family’s budget, the real factor you need to focus on when making a purchase is minimizing the cost per mile of driving that you get out of the car. This means that a $2,000 car that you think you can get 30,000 miles out of is a far better value than a $20,000 car that you think you can get 200,000 miles out of.
Buy used – or at least include them in the search
If you’re focused on minimizing cost per mile, quite often, this means purchasing a used car, and that’s where most car purchases should begin. You might not necessarily wind up with a late model used car, but such cars should absolutely be an essential part of your search.
Drive the car you have for longer
Instead of trading in regularly for something better, drive your car for longer. Ideally, keep driving it until it reaches a point that the consistent problems are causing excessive financial strain and personal stress. That’s the sweet point for getting rid of a car, not the moment where you’re in thrall with the new features of the latest models.
Make your car payments to your bank account – in advance
While you’re driving that car for longer, start making the payments on yoru next car now while you don’t have a real car payment. Set up an automatic savings plan with an online bank account to keep withdrawing the amount of your car payment when your car is paid off. Keep driving for a few years while you have no car payments. Then, when you go to buy, you’ll have a fat wad of cash with which to buy plus the interest accrued in savings. Alternatively, you could buy a car on payments and then pay finance charges straight to the dealer. One of these options puts you in a better financial place – can you guess which one?
Start shopping long before you buy
Never rush into a car purchase. Start considering what your actual needs are, researching those needs, and looking for automobiles that match those needs lnog before you buy. The person who pays the worst price for a car is the person who is up against a deadline to make a purchase.
Never buy a car during your first visit to a dealership
Sure, you can negotiate, but the number they give you is never the bottom line. Walk away. Leave your number with the salesperson. Unless the car is sold quickly, don’t be surprised to get a phone call from that salesman in a few days “reconsidering” the situation and giving you a better price.
Never be afraid to walk away from a deal
If you’re simply not getting the price you think you should pay on a particular car, don’t be afraid to walk away. If you’ve given yourself plenty of time for a purchase, you’re fine. There are plenty more fish in the sea.
Hit your social network
If you’re shopping for an automobile, mention it to your friends and family and see what they’re aware of. They might just know of someone who has a car for sale by the owner or some other arrangement that takes place far from a car dealership. These types of arrangements usually provide the best deal for both the seller and the buyer.
Avoid leases, even if the sticker price seems good
Leases do allow you to drive a shiny new car for a lower price than a full car payment, but at the end of the lease, you’re left with nothing (except for perhaps an opportunity to buy that leased car – that is, after you pay plenty of fees). Avoid that rat race and focus on actually buying a car for yourself and keeping it until well after the payments run out. It’s those payment-less months that really make buying a car into a much better deal.
Know your needs (distinct from your wants) and be open-minded
You might know the exact model you’re looking for, but be open-minded about it. Keep your eyes and ears open for strong deals on other models. Be aware of a long list of models that you would find acceptable and don’t be afraid to jump on bargains that appear from that list.
I want your help! In the comments, please let me know which of the tips you find most useful for trimming these costs. I’ll include the top choices in a comprehensive budget trimming guide at the conclusion of the series.