This “checklist” series of articles looks at common areas of spending to identify a list of opportunities to reduce costs. Not every tradeoff opportunity will make sense for you, but we hope you find this a helpful compilation.
Many a naive teenager has begun their financial story with the purchase of a brand new vehicle with zero down. In an industry focused on minimizing monthly payments, it is easy to find yourself seduced by the ease of driving off the lot with that sweet Toyota Sienna XLE 1 I mean I can only assume today’s youth are enviously eyeing my sweet ride only to find a marginally wiser version of yourself regretting the purchase a decade later.
Whether you’ve fallen into the trap of buying more car than you need or not, transportation expenses represent a significant part of the average budget and a great opportunity to look at where our cash is going and whether it represents a set of tradeoffs you are happy with.
Opportunities to reduce transportation costs
Liquidate nonessential & recreational vehicles
Obviously this one is very much a trade-off, but if you find that you’ve bitten off more than you can chew or simply realized that you have higher priorities, selling extra vehicles can provide you with quick cash to pay down debts, reallocate your income, and save on ongoing operating costs. (maintenance, insurances, security and other costs).
Downsize cars
In 2023, auto loans represent the third largest category of debt (behind mortgages and school loans). Average monthly payments for this grounp are $700/month for a new vehicle. If your car is higher end, relatively new, and/or has a significant debt load, consider selling it and buying something more affordable while minimizing or eliminating debt. In assessing whether this applies to you, consider the following general advice for maximum value:
- Avoid using debt to buy a car… Overspending on cars is the most common financial misjudgment. Even if that interest rate is low, it can take many years of playing catch-up before you get out from under the payments.
- If value is your goal, buy used cars… Quality cars last 10 years. After two years a car will have 40,000 miles and cost 25% less. After four years a care will have 80,000 miles and be 50% less.
- Get the most life out of your vehicle… In most cases the cheapest car is the one you own. Resisting the temptation to upgrade every 3 years can dramatically increase the cash available for other priorities
Reduce vehicular usage
In 2023, the IRS allows you to claim 0.655/mi. In other words, the government believes that the average cost of driving a vehicle 10,000 miles a year approached $6,500 (cost of fuel and the vehicle itself). While your exact number will depend on your vehicle, there are clearly some opportunities here to free up some cash.
- Avoid unnecessary trips… that trip to a Walmart located 20miles away will cost over $25! 2 $50 if you count that amazing deal on giant squishmallows
- Travel with others… whether public transit or carpooling depending o. Your personal situation there may be opportunities to consider to decrease your cost.
Reduce car maintenance
- Do your own maintenance… if you have the skills to do your own basic maintenance (oil changes, etc) it is a whole lot cheaper than paying at the shop. If not, consider whether you have a friend who is more mechanically inclined.
- Find a competitively priced and trustworthy service provider … Nearly all auto repair shops use and industry “bluebook” pricing that provides an average time to do each type of repair. Price per blue book hour ranges from $60 — $100. Furthermore, studies show that Americans spend billions annually on unneeded repairs.
- Shop major repairs… once a problem has been diagnosed (often for free), call 2 or 3 other providers to look for cheaper pricing. Many shops will match the lower price.