Car Smarts: Steer Clear of Vehicle Money-Wasters
Among the myriad consequences of the coronavirus, two of them are reprioritizing what is necessary and dealing with financial challenges.
If you’ve decided you need to get a car, but you also need to know the most affordable ways to deal with that priority, we want to help.
Learn money-saving tips relating to the cost of buying a new car, as well as maintaining it, repairing it, and insuring it.
Save on Car Buying
As with any large purchase, you hopefully have some basics down: The basic tips for buying a car are researching car prices as well as trade-in values if you’re going that route (Edmunds and Kelley Blue Book are good sites), staying alert so the sales staff doesn’t slip in any extras, and double-checking every document before you sign it.
Let’s delve a little deeper into a few more car buying tips to save you more money.
The Right Time for Car Buying
Year-end savings aren’t a myth.
A study by the car search engine iSeeCars found that the best time to make a new car purchase from a dealership is the end of the calendar year.
October through December coincides with when the new model year vehicles debut in showrooms, so dealerships offer generous incentives on the new vehicles remaining from the outgoing model year.
If you can’t wait, don’t despair that you’re fully missing out on savings.
The first day of the month is 8.5% better than average, and the last day of the month is 5.6% better than average on car deals.
This is due to a dealership’s sales month usually ending a few days into the beginning of the next calendar month, so sales made on the first day of the month get tallied into the previous month’s sales. And dealers are trying to make last-minute sales to meet their monthly goals.
If you’re in the market for a used car, you have more leeway. The study found that while November and December were the best buying months, too — with 26.9% more deals and 23.5% more deals, respectively — the biggest used-car savings can be had on specific holidays:
- Black Friday (33.1% more deals)
- Veterans Day (32.5%)
- Columbus Day (30.5%)
- Martin Luther King Day (29.4%)
- Christmas Eve (28.7%)
Set the Right Budget and Financing
Before you head out for those holiday sales — and even before you research — get your budget squared away on paying for the car. Don’t waste your time car shopping online or in person until you know your price range.
Determine how much car you can afford. A good rule of thumb is that your car payment should total no more than 15% of your monthly net income.
If you can pay in cash, perfect. Forgoing financing will save you not only on the cost of paying interest but also on the lender requirement of having full coverage car insurance (the addition of comprehensive and collision insurance) for the life of the loan.
But if you have to finance, there are several ways to save money. The higher of a down payment you can make, the better your credit score, and the more you compare lenders and rates, the lower the cost of your car loan.
You’ll also save if you have pre-approval on a car loan from a bank, credit union, or online lender when you go shopping for a car. This will put you in the driver’s seat not to automatically succumb to the convenience of the dealership financing your car loan. You will pay for that “convenience”: A loan from a dealer usually involves interest rate markups.
Consider a Pre-Owned Car
A pre-owned or used car usually costs less. According to Experian data, the average new-car loan is over $36,000, while the average used-car loan is close to $21,000.
But don’t just go for the lowest price. If the price sounds too good to be true, you could end up wasting your money.
Inspect the car’s exterior and interior, test drive it to ensure everything is working smoothly and without any odd sounds, check for leaks, determine a fair purchase price, look up the vehicle identification number (VIN), review the vehicle history report, and consider a certified pre-owned (CPO) vehicle.
Also check the mileage for being either too high or too low. If a car has been driven too infrequently, the plastic and rubber parts may dry out and get brittle. It’s also better for the drivetrain when the vehicle is used consistently. You don’t want to end up with a vehicle that needs a lot of repairs and reconditioning.
Save on Car Maintenance and Repairs
Speaking of repairs, you can avoid unnecessary costs when you hit the road with your new car by staying on top of maintenance.
Read Your Owner’s Manual
Avoid most of the major, expensive car problems by checking the vehicle’s maintenance schedule in your owner’s manual.
Not only will you avoid missing important services, which can lead to costly repairs, but you’ll also keep from wasting money from being upsold unnecessary repairs. For example, if you don’t get your tires rotated ($35-$45 cost), you could cause your tires to wear out too fast, and the average cost of one tire ranges from $50 to $200.
Maintenance and Repair Money-Wasters
It also helps to know what your car needs and when so you’re not upsold unnecessary maintenance. For example, it used to be normal to change the oil every 3,000 miles.
But thanks to modern lubricants, most engines today have recommended oil change intervals of 5,000- 7,500 miles. If your engine requires full-synthetic motor oil, it might go as far as 15,000 miles between services.
Additional Benefits of Car Maintenance
The better you take care of your car, the longer it will last. The longer you have your car, the longer amount of time before you have to buy another one. Good maintenance will keep you from wasting money on dealing with the car-buying process more frequently, including paying sales taxes each time.
Save on Car Insurance
Beyond buying a used car in preference to a new car, there are many ways you can keep from spending more than you should on car insurance. Finding cheaper car insurance is actually easier than you may think.
Compare Insurance Carriers
While car insurance companies use the same factors to determine your rate — from the car make and model and age of the vehicle to your age and your ZIP code — each company does their calculations differently.
That’s why you should compare quotes from at least three companies as well as research their business and customer ratings. You can save hundreds of dollars on your rate annually by doing a bit of homework.
Consider a Higher Deductible
Most people don’t file a car insurance claim for a repair costing less than $1,000, mainly due to not wanting to receive a possible rise in their premium.
If that sounds like you, and you have the out-of-pocket money to afford a repair cost of up to $1,000, then look at the deductible on your car’s collision and comprehensive coverage. The lower your deductible, the higher your insurance rate. Increasing your deductible from $200 to $1,000 could potentially save you 40% on your premium.
Be Proactive About Discounts
Insurance companies also have common discounts — including bundled, multi-car, pay-in-full, and low mileage — but it also pays to check on these by company, as the discount percentage differs depending on the carrier.
Some companies also have more discounts than others as well as different types. For example, some insurers offer a senior-citizen discount or a discount for certain occupations.
Car insurance companies will advertise only a few discounts, so you have to be the one to ask about all that is available. Take advantage of all discounts for which you’re qualified by periodically asking your agent if there are any new discounts.
A series of 5% and 10% discounts can add up to a nice way to keep from wasting money.
Keep Your Driving Record Clean
Driving recklessly and aggressively — heavy speeding, heavy braking — won’t only waste your money through additional car repairs from straining your engine, wearing down your belts, burning your clutch, and wearing out your brake pads.
It could also cause you to get a speeding ticket, which could raise your rate by 25%. Even worse, you could get in an accident, which, depending upon the severity, could raise your rate more than that, even doubling it.
Maintaining a good driving record will keep you a low-risk to your insurer, and they will reward you with lower premiums as well as good-driver and accident-free discounts.
We hope we’ve given you new ideas as well as a few reminders to help keep you from having car buying and car ownership be much more expensive and time-consuming than it needs to be.
Karen Condor is a car insurance expert who writes and researches for the insurance comparison site, USInsuranceAgents.com.