Car Expenses

Most people are in a situation where they need to own a car. People have become so accustomed to this that they don’t even think about the expenses that come with owning a car. When you take a loan for a car you should plan on having that car longer then the loan term. With that said, you also need to plan on paying for maintenance for the car, even years in advance. I want to tell you how you can keep yourself out of debt with cars. This is really something that should start on the first day you own any car. Open a savings account for car maintenance. This is not about the car payment, but about future money you will have to spend on the car. I call it a car repair fund. You should immediately start putting money in this account every pay check. You will need tires, breaks, and oil changes in the future, and who knows what else. If you can’t afford much, just start with five dollars per pay check but this account serves another purpose as well. If you do pay your car off, then take that whole payment and start putting it into this account. This will become your down payment for your next car. If you have any repairs made to your car, withdraw money from this account to cover the repairs. Aside from your car payment, just to drive and maintain a car is extremely expensive, but even so, making repairs to a car that is paid off is usually much cheaper than making a car payment. Be very mindful when you finance a car. You should always get at least two years of paid off service from any car you buy otherwise you are flushing a lot of money away that you could use in other areas of your life. If you learn to limit your surprises by being prepared, your life will be a lot less stressful. How stressful is it when you find out you have a six hundred dollar car repair bill? One other benefit you will get by doing this is that you will keep up with your car maintenance better, and in most cases you will have a car that lasts longer and is more enjoyable to drive. When buying a car, the loan term and payment should be your determining factor for if you can afford to buy any car. Maybe you can afford that payment right now, but with a long loan term; four or five years later when you need a new car again, you will be losing from the very start and this cycle will only get worse over time. (P.S. The three thousand dollars you are getting offered for your trade in was already built into the cost of the new car you are buying. Don’t fall for that, always get a price before you let them know about your trade, also don’t negotiate the payment, negotiate the price of the car.) Bottom line is; Cars can drain an unbelievable amount of money from your monthly income, and if you’re not careful with financing you will be up to your eyeballs in debt. Also keep in mind that when you set up funds for a specific purpose, you need to keep your eyes off of that money until you need it. So put this money in a place where you will not be looking at it, and it will be there when you need it the most. A car is usually the first large expense someone has in life, so it is probably the best example to show someone how to create targeted savings funds. Some other great examples to use this method is a Christmas fund, tuition fund, or vacation/amusement fund. Stop going into credit card debt every year for these things, and just build them into your budget. Your main savings account might grow at a slower pace, but you will soon realize that you rarely will need to touch your savings and in the long run you will save more money.