Let’s face it—cars are expensive. In many parts of the world, a car is necessary for getting from place to place. Even if you shop around to find a reasonably priced car or auto loan, you still have to keep car expenses in mind. An unexpected repair or accident could be costly.
While buying a car is one of the biggest expenses most people make, it also comes with some changes to your budget. Luckily, you can plan for car expenses within your existing financial situation to ensure you’re ready for anything. When you’ve budgeted for car expenses, you don’t have to worry about relying on debt or other lines of credit to cover any unexpected costs. Here’s our guide to how to manage car expenses in your budget.
What Car Expenses Should I Budget For?
If you’re a first-time car owner, you might not know what expenses you need to budget for. There are a few things that every car owner will need to prepare for no matter the cost of the car. Used cars are more likely to have increased costs, but even owners of new cars should take precautions against the following expenses:
- Car cost – Of course, the first cost is the price of the car. Whether you finance your car or buy it outright, you’ll need to budget for this expense in advance. If you finance your car, consider your debt payoff plan long-term.
- Maintenance – Routine car maintenance refers to oil changes, rotating the tires, and minor repairs. For this, budget around $50 per month.
- Insurance – While only third party compulsory insurance is required for all registered vehicles in Australia, it is highly recommendable to check out the comprehensive car insurance options to protect your own car, too. Budget around $70 – $120 per month depending on your policy and location.
- Registration and fees – There are also registration fees associated with owning a vehicle. Some states also have taxes for car registration. Budget around $40 per month depending on your state’s fees and taxes.
- Petrol – You’ll also need to fuel your car to get from place to place. Depending on your car’s fuel usage, this cost could be more or less. Choosing a fuel-efficient car is the best way to save on gas. Budget around $120 – $150 per month depending on your commute.
How to Create Your Car Expense Budget
Now that you know what expenses all car owners should know about, it’s time to add up your car’s total yearly cost. Create an estimate for all of the expenses above. This doesn’t have to be exact, but try to keep your car and location in mind. From here, add all of these numbers together. You’re left with your yearly car budget.
For specific data related to your home location, use the Saving’s car cost guide for Australia. According to their guide, smaller cars cost an average of $8,203 per year while sports cars cost around $11,901 to maintain.
Putting Money Aside for Car Expenses
Once you have an idea of your monthly budget, it’s time to start saving proactively. It’s easy to put off saving for car expenses by saying you have time, but you should actually start before you even own a car. An unexpected car repair could cost hundreds or even thousands.
How do you put money aside? The best way is through an emergency fund. An emergency fund is any money set aside from your regular savings to be used just in case. It’s for things like losing your job, car repairs, and other unexpected expenses. Without an emergency fund, you’re left relying on payday lending cycles and other risky means of making ends meet.
If you already have an established emergency fund, you might choose to create a separate savings account for your car expenses. This can include things like insurance premiums, gas, and regular maintenance. By setting aside money in this account on a regular basis, you can ensure that you have the funds available when you need them. Either way, set automatic payment reminders to ensure you’re staying on track with your goals. You might pay weekly, monthly, or even yearly depending on your financial situation. Even if you only save the minimum, every dollar counts.
How to Save on Car Expenses
Believe it or not, there are some easy ways to keep costs low when it comes to your car expenses. While your car might be a big purchase, it also depreciates in value immediately. In fact, as soon as you drive off the lot, your car loses value.
While it might not seem like a good investment in terms of resale value, a car is something valuable. It gets you to and from work, it helps you to visit new places, and it’s a big part of your life. As such, you want it to last as long as possible. Try these tips below to do just that:
Keep your existing car as long as possible
It’s tempting to upgrade when you get a raise or you have enough funds for a down payment. While a new car might be fun, this is an extra cost that most people simply don’t need.
Driving your existing car as long as possible not only is good for the environment, but it’s also an important way to keep costs low. You should only consider a new car when the cost of maintaining it is no longer worth it.
Maintain your car often
The absolute best thing you can do to protect your car expense fund is to keep your car in top shape. While these ongoing maintenance costs might seem high, they’re significantly less expensive than paying for a large repair.
A routine oil change might cost you around $50 at a local shop. Over the course of a year, you might pay around $150 total. However, when compared to a large repair ($300 – $800), you can see why this is a huge savings. If you only do one thing, change your oil regularly. Follow your car’s guidelines for oil changes to protect against engine wear and tear.
Pay yearly for registration and licensing
When paying for local registration and licensing, it’s a good idea to pay in advance. While not everyone has a budget for this, if you can pay a year in advance, you’ll see big savings. You can pay your registration annually, semi-annually, or quarterly. Paying cash annually gets this payment out of the way and saves you big.
Review your insurance policy and options
It’s also a good idea to review your car insurance policy on a regular basis to make sure you are getting the best rate. You may be able to lower your premiums by increasing your deductible or bundling your car insurance with other types of insurance, such as home or renters insurance.
Check your air filter
In the hot Australian climate, it pays to check your air filter. A dirty filter actually shortens the life of your engine, and it reduces your overall petrol mileage. You can clean your filter yourself or have it checked by an auto repair shop for a small fee. Check your filter at least once a month to avoid buildup.
Find a trusted mechanic
A trusted mechanic is worth their weight in gold. Having someone you can trust to help you with car maintenance and repairs is the best way to avoid overspending. Unfortunately, some auto shops charge too much or over-diagnose when it comes to repairs. A trusted mechanic won’t waste your money when it comes to car expenses.
Skip the premium fuel
Higher quality fuel might seem like it’s better for your car, but you might (literally) be funneling money away. Unless your car’s manual asks for it or you’ve been instructed otherwise by a repair specialist, premium gasoline has no benefit. Use the less expensive gas to save when you can. Your car (and your wallet) will thank you.
Avoid wasteful driving habits
Aside from maintenance, be careful with your driving habits. You can adopt petrol-saving habits like accelerating gently, coasting during traffic jams, and staying within the speed limit.
In addition, pay attention to your directions to avoid going too far out of the way and adding distance to your trip. Reducing your annual travel distance adds up to big savings. Combine your errands into a single trip and be mindful of where you’re going. Additionally, consider exploring alternative transportation options, such as walking and biking, carpooling or using public transportation, to save money on petrol and wear and tear on your vehicle.
Be a safe driver
Last but not least, the most important way to save on car expenses is by being a safe driver. This keeps your third-party car insurance down, and it also ensures your car is in top shape. When driving, pay attention to speed limits and traffic signs. A speeding ticket is expensive, and your insurance might spike as a result. Safe drivers are cheaper drivers overall.
Is Your Budget Car-Friendly?
Have you given any thought to the cost of your car in your existing budget? While most people budget for things like petrol and travel expenses, what about the other costs associated with car ownership? Taking a few moments to calculate the estimated cost of your car could save you big. While nobody wants to think about facing costly repairs, preparing for these expenses is always a good idea.
We can’t predict what will happen in the future, but we can create a safety net today. Include your car expenses in your existing budget with these tips above, and then look for new ways to save. Do you need help with your budget or debt payoff strategy? Debt Busters is here to help. Contact our team today on 1300 368 322 to get started.