Last week I wrote about how your car is making you poor. It has generated a good discussion so I wanted to expand on it a bit more and give everyone an opportunity to talk about how much they pay for their vehicles on a monthly basis relative to their income. It should be interesting to see how the answers vary and see what people are doing to help keep their vehicle costs down.
I’ll start with my own situation to kick things off. Right now our total monthly vehicle costs total about 9% of our monthly net income. This includes car payments, insurance, and gas. I added about $25/month to that to account for regular maintenance such as oil changes and annual registration fees. I feel that 9% is pretty good, but I was actually shocked it came out that high. When I started to factor in everything in addition to just the car payments it added up pretty quick.
Even so, there were a few key things we did to help keep our overall costs down. First, we had to buy two vehicles a few years ago. My clunker at the time finally died and my wife needed something a little more practical for getting around. So, the biggest thing we did was bought two used cars. Just gently used and only a year or two old, but it still saved thousands over buying new.
Next, we picked vehicles based on our needs. I have a long commute so a car that gets reasonable gas mileage. My wife on the other hand only has a 5 minute commute to work. So in her case we didn’t have to focus so much on gas mileage so we got something a little bigger that could handle the tremendous snow we can get and accomodate hauling an occasional trailer or kids. So while I might burn through $100/month in gas, my wife can go weeks at a time without filling up.
Finally, we make sure to shop around for the best insurance. In addition to just finding good overall insurance we also knew better than to get a policy with a low deductible since that adds significantly to the premium. So by finding a good policy with a reasonable deductible and coverage options we can keep our premiums down to a reasonable level.
So, what about you? How much of your income goes toward vehicle costs? Did it come as a surprise when you figured it out? And how do you keep your costs down?
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About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.
Since moving 60 miles away from work my gas costs have increased significantly. However with my job they were always pretty high. My car payment itself is about 10% of my net pay each month. And my gas total comes out to around the same amount. I hope to get a new job closer to where I live sooner than later in order to stop spending so much!! (and the car will be paid off soon too! so that'll be out of the equation!)
We bought an 2001 Camry for $9000 three years ago. I just had it at the mechanics ($256, for spark plugs and oil and air filter and checking some other stuff) and they assured me it will run another 20 years - they were working on a 1997 while I picked mine up. I'm not going to count on it, though.
I fill it with gas once a month, for $40-$50, depending. More if we take an out-of-state trip but still nothing like plane tickets.
Insurance is just under $100/mo, tags are a few bucks a month, routine maintenance about $50/mo. If you figure we'll drive it 10 years, amortized cost is $67/mo. So call it $300/mo assuming I'm under-estimating mechanics costs. That's about 7% of our net.
In contrast, my bike cost $250, new helmet, lock, fenders, lights were another $200 (I had to replace it this spring because my old bike got stolen.) I've had it 6 months so if it got stolen tomorrow it would have cost $75/mo - the kid-hauling trailer cost me $200 used 3 years ago, $5.50/mo.
I calculated all my car expenses and I also fall under 10%. It's a good thing my car is reliable and only needs the regular maintenance so it doesn't add up much.
So with everything considered my car expenses is only about 4.5% - pretty good :) (includes: maintenance, gas, insurance, & registration)
I'm right at 10% for maintenance, gas, parking, tolls, everything car related for a high powered sports car and a high powered sports truck.
Hard to say -- Do I count cash I save up for an eventual purchase of a car? I think most people with super low expenses probably are not, but just because you spend several thousand all at once and get a paid for car doesn't mean you didn't spend the $$$.
Mine are low right now - gas + insurance + maintenance. But eventually I'll need a new car.
My wife and I own our car's outright, no payments. Gas and insurance are pretty much are only car expenses. If they go into the shop that's another expense, but we usually only have one fix per year on our cars, much cheaper than a car payment.
I think you should have broken down the "less than 10%" option further. I think most people will be in this category. For me, it's about 4.6%, maybe a little less depending on how much I drive.