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?
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.