When I did some research I found that few personal finance experts consider cars to be a budget buster. In fact, looking at vehicles and their expenses even momentarily reveals a number of places for your money to disappear. I’ll categorize them:
Ownership: Did you borrow for your car? Unless you have a 0.00% APR deal, borrowing money for a car is costing you interest. This interest is compounding while you’re paying the loan. Your $20,000 car will probably cost you about $24,000-$26,000 using the average interest rate for a new car. Consider driving a car that you can afford to buy in cash or consider putting a lot of cash down for your next one.
Operation: Are you driving around with low air pressure in your tires? Low tires reduce your gas mileage by a bunch. Is your air filter dirty? Air filters help with your mileage as well. After reading an article advising women about car maintenance, I learned that older cars sometimes need fuel injectors cleaned as well. Clean fuel injectors can help gas mileage. To summarize, keeping your car in good shape helps it to run efficiently and economically.
Storage or Parking: If you live in a large city, you likely pay for parking at home, at the office, or sometimes both. Consider using public transportation if you can during the week and use your vehicle only on the weekends. You’ll save the gasoline money and the parking money.
Insurance: If you have a decent amount of money in savings and drive an older car that has no loan, consider self-insuring the physical damage coverage for your car (”Comprehensive and Collision”). This may be scary, but if you have enough cash to buy another car and your car isn’t worth much to begin with, it might be a smart idea. Another insurance mistake is not insuring your home and auto insurance with the same insurance carrier. There are almost always discounts for putting them together and insurers covet the home and auto combination.