Today, owning a car is a necessity. This is especially true if you are not living in a metropolitan area that offers public transit. However, cars can be very expensive. When you add up all the costs associated with owning a vehicle, it can be a lot. Some of these costs include the cost of the vehicle itself, maintenance, insurance, and more. Here, we will discuss several ways that you can reduce total ownership costs of a car.
Negotiate the Price
The largest vehicle related expense you will face is the price you pay for it. When you go to a dealership lot, don’t be scared to negotiate the price of the vehicle. You may feel awkward negotiating the price, but don’t. Car dealerships make money in different ways. Depending on the dealership, the driver of most of their profit comes from buying a car at a low price. They then try to sell it for more. They usually obtain cars to sell at auctions where they buy the car at wholesale price. This is the price that dealers charge other dealers for cars and is basically the bottom dollar for it.
Once a dealer gets a car for their inventory, they then mark the price of it up. In some cases, especially considering supply chain issues, this markup can be several thousand dollars and more. Some dealerships are marking up the prices of their new cars $10,000 over what the manufactured suggested retail price (MSRP) is.
Understand this going in. A dealer will mark up the price of a vehicle knowing that a potential buyer will come in and ask for a discount. Dealers factor this into the markup, and can even mark the price of the car up more.
This is why you should always negotiate. Use online tools like Kelly Blue Book to determine what the car’s value is, and use this as a baseline. If you are buying a new car, make sure you check what the MSRP is.
Some car dealerships make money in other ways. For instance, they can work with financial institutions and will get a kickback if someone who is looking to buy a car decides to finance it. These types of dealerships really prioritize the volume of cars they sell over making a profit by buying a car at a low price and selling it for a higher price. Some of these dealerships include CarMax and Carvana. You have less negotiating power at these dealers because they price their vehicles as close to the market value as possible.
Time Your Purchase
At traditional dealerships, salespeople have quotas they need to fill. For instance, maybe they need to sell 10 cars per month. Their pay may be based on meeting their sales quota. This is why you should try to purchase a car at the end of the month, quarter, or year.
If you go into a dealership at the end of the year, and the sales person has not met their sales goal, they may be more willing to make a sale. In some cases, they will be more willing to negotiate the price down so they can just sell the car.
Another tip to reduce total ownership costs of a car is to look for vehicles that have been sitting on a dealership lot for a long time. It costs dealerships money to have cars on their lot. This is why they only want to have cars that have a high turnover. This means the cars don’t sit on the lot for long periods of time. If a car has been sitting on a dealer lot for months, they may just want to get rid of it. They will probably be willing to accept a lower price for it just to get rid of it.
Timing your purchase to the end of a month, quarter, or year, or buying a car that has been sitting on a dealer lot for a longer period of time, are both great ways to reduce total ownership costs of a car.
Buy a Used Car
New cars are very expensive. When you factor in the price of depreciation, you will be surprised at how much a new car really costs. This is why it is a great idea to buy a used car. A car depreciates the most in the first 3-5 years. By buying a car 3-5 years old, you won’t have to worry about paying for its depreciation. This is not the case with a brand new car.
Over the last 5 years, car technology really hasn’t changed that much. Sure there are new features like self-park as well as automated driving aids. However, you can get the same technology on a lightly used car as a new car. So, by buying a used car, you can still get the same amount of tech and features but not have to worry about paying for the car’s depreciation.
Don’t Put Off Maintenance
One of the best ways to reduce total ownership costs of a car is to keep it in good shape. For instance, don’t put off getting the oil changed. Be sure to change your oil at the suggested intervals. Depending on the age of the car, this can vary. For instance, it may be best to get your oil changed every 3,500 miles for an older car. New cars may require the oil getting changed every 7,500 miles.
Making sure you have clean oil in your car can save you money. Not changing your oil can cause expensive engine problems. Also, getting an oil change can cost under $50.
Getting an oil change is just one type of maintenance item. There are other types of preventative maintenance that if you put off, can lead to bigger and more expensive repairs down the line. An example of this is a timing belt, which is an integral part of an engine. May timing belts have an estimated life of 100,000 miles. If you know this, and are on the same timing belt after 150,000, it is just a waiting game. If this component of your engine fails, it can lead to some serious problems that are extremly expensive to fix.
While it may be annoying to keep up the maintenance on your car, considering it can add up over time, it will be much less expensive then having to repair your car when something breaks. As a driver, it is also your duty to make sure your car is safe. This holds true not only for your personal safety, but also the safety of other drivers. If you put off a maintenance item like getting new tires, and you get into an accident because of this, your insurance company may drop coverage. This can lead to lawsuits and leave you personally liable.
Be a Responsible Driver
Being a responsible driver and reduce total ownerships costs of a car or other vehicle. Besides your car payment, car insurance can be your second highest monthly car related expense. Insurance rates are based on the type of car you drive, but also your personal driving record.
If you have a clean driving record, your insurance costs will be reasonable. However, you have a history of accidents and tickets, it can be through the roof.
For instance, if you are caught speeding and get a ticket, you will have to pay the fine if found guilty. Depending on the speed limit and state, this can be several hundred dollars. A ticket will also affect your auto insurance premiums. If you get a speeding ticket, your insurance company will think of you has a bigger liability or risk, and increase your monthly premiums. This is why you should always fight your speeding tickets.
Buy a Car Warranty
Buying a car warranty can definitely reduce total ownerships costs of a car. While this is applicable to new cars, it will mostly save you when buying a used car.
New cars come with several levels of a warranty. You usually get a 3 year bumper to bumper warranty, and a 5 year powertrain warranty. These figures can differ between auto manufacturer. When you buy a used car, this time frame will have usually passed. This may not be the case if you buy a used car in the sweet spot of 3-5 years though.
Although a used car warranty does cost money, it can help you offset the price of expensive repairs. This is especially true as newer cars have a ton of technology in them that can be very expensive to repair.
Reduce Total Ownership Costs of a Car – Summary
There are many things that you can do to reduce total ownership costs of a car. These items include negotiating the price, timing your purchase, keeping up on maintenance, being a responsible driver, and buying a car warranty.