Do you want to know how to save $500,000 on your car in a lifetime? Despite the expensive cost of car ownership, a car is a necessary part of many people’s lives. The good news is that there are plenty of ways to save money on a car, and we’re here to help you find them!
The total cost of a car goes beyond the initial purchase price or monthly lease payment. There are also ongoing expenses like fuel costs, insurance, and maintenance to consider. This is why it’s important to know the total cost of owning a car. Are you a smart car shopper?
We’ll help you become one. If you’re looking to save money on your car, the best place to start is by evaluating your current situation and needs. Knowing the actual cost can help you can make changes to help reduce the lifetime cost.
So, are you ready to buy a car in the smartest way possible? Let’s dive in!
How much does owning a car cost?
According to AAA or American Automobile Association, the average cost of owning a sedan is $9,282 per year. This includes the purchase price, fuel, insurance, maintenance, and repairs. If you’re driving an SUV or truck, the costs go up to $11,676 per year.
The cost of car ownership is one of the most important factors to consider when shopping for a car. After all, you don’t want to end up upside-down on your loan or lease payments!
Of course, these averages will vary depending on the make and model of your car as well as your driving habits. For example, if you drive a lot of miles on a late-model car or live in an area with high insurance rates, your costs will be higher.
Other costs include gas, oil changes, and tires. You should also factor in the cost of depreciation, especially for a new model. This is the amount your car’s value decreases over time.
Assuming you keep your car for five years and drive 15,000 miles per year, the total cost of ownership would be $45,410 for a sedan and $58,380 for an SUV or truck. With that said, you can save more money on a smaller car.
The total cost of ownership for a compact sedan would be $36,720 while the total cost of ownership for a full-size SUV would be $68,560.
To save money on your car in the long run, it’s important to factor in all the costs of ownership, not just the purchase price or monthly payments.
Smart car shopping tips to save money on your car
Most car owners tend to focus too much on the price of their first car without considering other important things in the transaction. Some of these are car insurance, trade-ins, financing, and other others like extended warranties.
Similarly, other costs of car ownership must be looked upon like fuel cost, depreciation, car maintenance, and repair. These are the major expense that should never be ignored. With that said, you can save a lot of money if you opt for reliable and fuel-efficient cars.
In addition, pay attention to vehicles that hold their value very well. Remember, car shopping is unlike any other shopping spree. The truth is, the majority of car owners are not used to negotiating prices. While this is an uncomfortable process, this is the only way to cost savings.
This is especially true in situations where a licensed driver is provided with different prices for a similar product.
As a result, we see a surprising pattern:
- about 5% end up getting good deals
- 15% are doing very well
- 60% of customers are struggling to get a deal
- 20% ended up getting ripped off
With this data, about only 20% of car owners can save a good amount of cash. What’s more surprising in this pattern is relatively identical to the wealth distribution in the United States and many other areas.
So, do you want to belong to the top 5% of smart car owners? The road might not be as easy as you want it to be but if you want to learn, we can guarantee it will be worth every effort in the end.
In perspective, if you save $5,000 for every car purchase you make and buy a new one after five years with the same amount as savings, after 25 years, you’ll be able to save about $25,000 on savings alone.
Let me remind you, this doesn’t include and use that car for five years, But what will you do with your $5,000 savings? My advice is to invest your savings in an index fund like S&P 500.
Let’s dig in deeper. Assuming you’re 25 years old right now, and you invest the saved $5,000 in an index fund, for every car purchase you make every five years until age 65, you’ll be able to amass $500,000!
How is this possible? An S&P 500 index fund can grow your investment by an annual average rate of 9.53%. That’s a huge difference from leaving your savings in the bank which only has an annual average growth rate of 0.09%.
If you’re not familiar with index funds, they are simply a type of mutual fund that aims to match the returns of a specific market index like the S&P 500. They are often considered one of the best investments because they offer the diversification, professional management, and low costs.
What if you’re not 25 years old? If you’re already 30 years old and still wanted to achieve the same goal of $500,000 by age 65, you need to invest about $10,000 for every car purchase.
If you want to achieve this milestone sooner than expected, you could do it by investing a larger sum of money for every car purchase. This is the rule of compounding interest at work.
On the other hand, the best way to save money on a car is to buy a used car instead of opting for a new vehicle. A used car is a great way to save money on your next vehicle purchase. Not only are used cars cheaper than new cars, but they also depreciate at a slower rate.
In addition, great deals on used cars are all over the place if you’re willing to find them. Many websites and apps can help you compare prices and find the best deals for your needs.
Choose a small car
As a car owner, instead of a large SUV, a smaller car is a great way to save on fuel. Small cars are more fuel-efficient and will cost you less money at the pump.
Small cars are easier to park and maneuver in tight spaces. This can save you time and money when looking for a parking spot.
Lastly, small cars have a smaller carbon footprint than larger vehicles. If you’re interested in being eco-friendly, a small car is a great way to reduce your carbon emissions.
Take public transit when possible
Public transportation is a great alternative to driving your car. Not only is it cheaper than owning and operating a vehicle, but it’s also better for the environment.
Taking public transit doesn’t just let you save money but lets you save time. You can use that time to catch up on work, read a book, or simply relax.
If you live in a city with good public transportation, consider leaving your car at home and taking the bus system or train instead. You don’t need to buy a brand new car if you’re not ready yet. Vehicles as mentioned earlier have the highest lifetime cost of all your purchases.
If you to travel by train or bus, by all means, do it! Not only will you be saving money, but you’ll also get to your destination without the hassle of driving and finding parking.
Walk or bike when possible
Walking or biking is a great way to get some exercise and fresh air. It’s also free! If your destination is close enough, consider walking or biking instead of driving.
You may not be able to walk or bike everywhere, but even walking or biking for part of your journey can save you money on gas. Many households spend hundreds or even thousands of dollars on gas every year.
If you live close to work, consider biking to work a few days a week. Not only will you save money on gas, but you’ll also become physically healthy in the process.
Carpool when possible
Carpooling is another great alternative to driving your car. If you have to drive to work or school, consider carpooling with a friend or co-worker.
Carpooling is a great way to save money on gas and parking. It’s also a great way to reduce traffic congestion and help the environment.
Avoid unnecessary trips
One of the best ways to save money on gas is to avoid making unnecessary trips. If you can walk or bike to your destination, do it!
If you need to run errands, try to do them all in one trip instead of making multiple trips. This will save you time and money in the long run.
So, there you have it! These are some of the best ways to save money on your car. By following these tips, you can save thousands of dollars throughout your lifetime.
Trade in your car for a newer model
If you’re looking to save money on your car, one of the best things you can do is trade in your older car for a newer, more fuel-efficient model.
A fuel-efficient car will cost you less money to operate and will emit fewer greenhouse gases. Not only will you save money, but you’ll also be doing your part to help the environment.
So, if you’re looking to save money and help the planet, trading in your car for a newer, more fuel-efficient model is a great option. If you have two cars, consider selling one of them. This will save you money on gas, insurance, and maintenance costs.
Likewise, a car that’s already ten years old or more is likely to need more repairs. These repairs can be expensive, so it might be better to sell your car and use the money to buy a newer, more reliable model.
The cost of owning an old car can add up, so if you’re looking to save money, getting rid of your old car is a great option. On the other hand, new cars can be expensive, so it’s important to do your research before making a purchase.
Take care of your car
One of the best ways to save money on your car is to take care of it. This means regularly servicing your car and fixing any problems that arise.
A well-maintained car will last longer and will be more fuel-efficient. It will also emit fewer greenhouse gases. So, if you want to save money on your car, make sure to take care of it.
Cheap doesn’t mean good
Just because a car is cheap doesn’t mean it’s a win. In fact, many cheap cars are actually quite expensive to operate and maintain.
For example, a car that gets poor gas mileage will cost you more money to operate over the long run. Likewise, a car that requires frequent repairs will also end up costing you more money in the long run.
So, when you’re looking for a new car, don’t just focus on the purchase price. Instead, look at the total cost of ownership, which includes things like fuel costs, insurance costs, and repair costs.
By taking the total cost of ownership into account, you’ll be able to find the best deal on a new car.
Think about your financial goals
Before you buy a new car, it’s important to think about your financial goals. If you’re trying to save money, buying a new car might not be the best option.
Instead, you might want to focus on other things, like investing in a retirement account or paying down debt, or choosing a used car.
Of course, there’s nothing wrong with buying a new car. But if you’re trying to save money, it’s important to consider all of your options and make the best decision for your financial situation.
If you think about it more clearly, the cost of car ownership is one of the most expensive purchases you can make. While some people argue that it’s the house, they can be greatly mistaken. That’s because houses can appreciate over time while vehicles depreciate quickly.
Instead of putting all your money into the nice car of your dreams, consider a cheaper car and invest the difference in a mutual fund where it can grow and be used for future purposes. Be wise with your car purchases, and you could be well on your way to saving a large sum of money.
If you have any additional tips on how to save money when buying a car, please share them in the comments below!