The $1,000 Challenge, Part 3: Shrinking Your Car-Related Costs

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Man driving a small car
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We focused on easy savings categories for the first two installments of "The $1,000 Challenge" (based on my book of the same name): utility bills, and those forms of miscellaneous spending that are automatically charged each month to bank accounts or credit cards.

Savings may be tougher to find in this week's category: transportation. When I wrote the original 10-article series on cost-cutting for my Funny Money column at The Detroit News, car-related spending was one of my toughest challenges. But even if you, too, hit a pothole on the road to savings on this section, don't fret. I saved a lot in some parts of my family budget, not so much in others, and in the end, I was able to cut $1,000 of spending from our monthly budget.

(If you missed any of the previous installments of The $1,000 Challenge on DailyFinance.com, feel free to check out the whole series so far.)

I was sure I could dig out $100 of savings a month out of transportation, since, according to the Bureau of Labor Statistics, it's the second-largest expense for Americans. But the entire category boils down to four elements: vehicle cost, insurance, maintenance and gas.

You've got two approaches here: Either cut your current fixed costs or, more radically, find a way to reduce your overall driving. Let's start with cost-cutting.

On your car, there's not a lot you can do once you've made the purchase, and if it's paid off -- like my (t)rusty 1995 Buick Roadmaster Estate Wagon -- your best bet is to take good care of it and keep it going as long as you can. If you're carrying a car loan, a good (and often overlooked) option is to refinance it, especially if you're paying a high interest rate from some sort of buy-here-pay-here easy dealer financing. Check with your local credit unions. You may be able to cut your loan payment by quite a bit.

Other options for trimming a car payment you can't afford are finding a trusted friend or relative to take over your payments while you find something cheaper to drive, carpool, take the bus or learn to live without a car. For some folks, that's impossible, but some two-car families can get by with one car, even if it's much less convenient. Whether to make that trade-off is up to you, but parking one car and finding alternative transportation saves on the payment, maintenance, insurance and gas in a big way.

If you're stuck in a lease that you can't afford, check out one of the online services that matches people who need a car with lease customers who want to get out of their agreement. Two of the bigger ones are LeaseTrader.com and Swapalease.com. First check that your finance company will allow a lease transfer, and that you won't have any liability for the car or the balance if the lease is transferred. Another way out of a lease is to exercise your option to buy the car, then sell it. This only works if the car is worth more than you'll pay to buy it, but the recent increase in used-car prices can make this a real option. I know one savvy guy who did this with a leased BMW and made a couple thousand bucks – and really ticked-off the dealer.

In all cases, you want to avoid rolling over the unpaid balance of a lease or car loan into a new lease or loan, which just leaves you with more debt, and owing much, much more on a car than it's worth.

They've Got You Covered

Insurance is one place where you can often find big savings. Shop around, ask for any kind of discount you can find (good driver, over-50, good student, and others) and remember that the best deal often comes from bundling your auto coverage with your homeowners and other insurance policies. Consider raising your deductible (especially if you have some savings on hand) or dropping policy for add-ons that you can live without. Coverage that replaces a broken windshield may be something you can cut, for example.

If it's been awhile since you first bought the car and took out the policy, it might be time to drop your collision and comprehensive coverage. The standard rule of thumb is that if you car is worth less than 10 times what you're paying for annual comp and collision, it's time to cancel the coverage, which can account for up to 40 percent of your insurance bill. If you do, set aside at least some of the savings each month to build a fund to help replace the car if you have a serious accident, or to eventually replace it.

One big factor in your insurance rate can be your credit score, the magical number that rules our lives as much as our IQs and dress-size. If you've paid bills late or had other financial trouble, your credit score has taken a hit, and you'll pay higher insurance rates. How well you pay your bills on time time accounts for 35 percent of your score, so scrupulously pay every bill on time for the next several months, then go insurance shopping again. (Credit scores are complex and sometimes murky. For a complete guide to demystifying and raising your score, see the excellent book, "Your Credit Score: How to Improve the 3-Digit Number That Shapes Your Financial Future" by Liz Weston.)

When it comes to keeping your car or truck on the road, your best bet is to pay for affordable maintenance regularly so you can avoid more expensive repairs down the road. Regular oil changes and keeping your tires inflated are a lot cheaper than a new head gasket or two pairs of radials.

On gasoline, do some comparison shopping with an online service such as GasBuddy.com to find the lowest prices near your home or workplace, and stick with the stations that consistently charge the least. This way, you save every time you fill up without continually having to drive around hunting for a better deal. Also check with your grocery stores and see whether any of them offer discount fuel gas cards or fuel points. For example, Kroger fuel points save me 10 cents a gallon, and paying cash saves another dime a gallon, too. It's not huge, but at 15 gallons a week, that's $12 a month to spend on something else. Combine that with things that improve your overall fuel mileage, like properly inflated tires and taking those 10 bags of newspapers out of the trunk that you've been meaning to recycle for months, and it can add up.

Put It in Park

But for significant savings, try to eliminate driving when you can. I'll talk about it more when we look at the costs of working -- for me, commuting is a major job-related expense --
but carpooling or working from home even one or two days a week will save you a lot more on gas than a discount of a few pennies per gallon. For instance, Mrs. Funny Money recently switched from working nights to days, so we now can drive to work together up to three times a week, which saves us more than $70 a month on gas.

In my original cost-cutting experiment, the only transportation savings I could find came from swapping my 18 mpg Buick wagon with Mrs. Funny Money's 25 mpg compact car on the days she wasn't commuting downtown. I also saved a bit by paying my auto insurance six months in advance instead of monthly, which got me a discount of more than $50 on a six-month renewal. It wasn't huge savings, but with the combined savings from the previous two categories, it still kept my average cost-cutting above my goal of $100 per category.

Here's the running total for the whole series so far:
  • Week 1 - Miscellaneous Spending: $132.89
  • Week 2 - Utilities and Phones: $139.39
  • Week 3 - Transportation Costs: $41.61
  • Total Monthly Savings: $313.89
You can click on the links above to go back and check out any sections you've missed. Mix and match them in any order you want – just get in there and start saving! Check out the series introduction to get the big picture on finding big savings in your family budget.

Come back next Tuesday when I'll tackle the bouncing baby bills of child-related costs. (Also, check back on Friday, when I'll offer a bonus installment: the little-known strategy for cutting your car payment to the bone.)

You can find more detailed suggestions in my book, "The $1,000 Challenge." Make sure to post your ideas, tips, strategies and how much you find to save here in the comments or share them on the Facebook page. Just grab a bill and start today.




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4 Comments

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Big John

Having a car in this country is just a way everyone gets a piece of the pie. Insurance controlled by the state, tags, inspection, local property tax from your city and county. High cost maintenance including tire prices that have skyrocketed, high price gas and toll roads on top of everything. It seems today everyone wants your last dime.

January 21 2014 at 6:39 PM Report abuse +1 rate up rate down Reply
Fose Lamaz

For those looking to save on insurance, 4autoinsurancequote is quoting me at $30/month for liability coverage. I don't know if it's legit, but at least it's worth a shot!

January 21 2014 at 4:47 PM Report abuse -1 rate up rate down Reply
RMS

I haven't purchased a brand new car since 1990. And I mean purchased as I have never leased a car. My current car is 12 years old, I bought it and paid cash for it three and a half years ago. Even counting repairs, amortized over three and a half years it is far less money than having a car payment. Many of the cars I have had in the last 20 years were purchased for cash when they were two or three years old and still had some of the factory warranty in effect. You don't have to spend or waste a lot of money to drive a nice clean dependable car. Just one more thought, every time you turn that key you are using gas. Stop and think, do I really have to go out and make this trip, or is it unnecessary? Can I combine this errand with another one?

January 21 2014 at 11:54 AM Report abuse +3 rate up rate down Reply
alfredschrader

The kind of car or truck you buy can affect your costs too. In general, most imports cost more to repair especially for the parts which have shipping (half way around the world) and import fees factored in. Rust and corrosion are major enemies to your auto investment. Most metals wont corrode if they are protected by a petroleum product of any kind. I take a can of spray oil and coat everything made of metal on the vehicle even inside the doors and the underside of the vehicle.
Most parts will last forever if they are lubricated, especially steering parts like ball joints, upper and lower control arm bushings, and tie-rod ends. Have your garage lubricate everything under the car including the parking brake cable giudes, and the door, hood, key locks, and trunk hinges. This usually costs about 5 bucks which is nothing compared to a ball-joint job which starts at $600.00
Coat all of the plastic and rubber parts with baby oil, a protectant, or white petroleum. Wipe off any excess.
Seat covers on all the seats are a must. They average about $79.00 for a set verses buying another car and losing your shirt because most people wont buy a car with worn-out upholstery, so you get next to nothing for your trade.
Always buy the best wax for the finish so the paint doesn't fade. Make your own floor mats from
carpet bought from JC Whitney (online). When they get funky, throw them out and cut a couple of new ones from the roll of carpet.
Tune-ups will pay for themselves in better gas mileage. Always replace the air filter. Driving smoothness will go a long way to makes tires, brakes, and transmission parts last a lot longer.
On nice days consider bike riding instead and save all of it.

January 21 2014 at 9:17 AM Report abuse +1 rate up rate down Reply