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Be a Cheapskate – Often Overlooked Tips for Saving Money When Replacing Your Car

However much disposable income you have, it’s always nice to be able to save money when you’re buying a new automobile.

It can be a complicated process too, as there are so many factors to consider when choosing your car.

Do you want a brand-new car, an old one, a practical vehicle – and if so, what will you be doing with it?

Of course, you’ll be sure of many of these considerations before you start looking.

Making a choice between purchasing a new or used automobile. Note: Many drivers like to buy a new automobile since they don’t want the hassle of repairs, etc. Most today are made to last thanks to competition. Buying a used one 3 to 5 years old is one the best ways to save a ton of money. Other items to consider are, cost of coverage, financing, and replacement parts or repairs.

If you aren’t, then it’s a good idea to make a list of all the features you want your new ride to have before you start looking for vehicles to try.

One thing is for sure, nobody likes to be ripped off when purchasing a newer vehicle.

While automobiles are really cool and fun to drive, they are a horrible asset which depreciates quickly.

What does that mean?

When you buy one, you are going to lose money no matter how you “cut the pie”. 

If saving money is important to you, like me, consider these money-saving tips as well.

Top Tips to Save which are Often Overlooked

Below I have briefly outlined the top things many drivers overlook and don’t take into consideration why buying vehicle.

Overlooked ItemsReason Why
Status or keeping up with the Jones'Buying a less glamorous, more practical automobile can save a ton.
Financing Purchase*Many drivers get poor financing, typically through a dealership, and in turn get little in savings.
Insurance CostsMany forget to check the cost of coverage before buying.
Running Expenses - Replacement PartsHow expensive are parts and repairs?

*Companies like Ford are offering low interest credit loans to entice consumers to finance through them and not the bank. In this instance, you would have to look for any unnecessary fees. Even if you do get a “good deal” on financing it is wise to shop around and get a second opinion.

I will go into further detail below.

Forget Status – Don’t Pay for the Badge

Car ownership is intrinsically tied up with status and wealth, which means the make and model of the car is all important.

This kind of prestige comes at a price though, so if you want a Mercedes in your driveway, that three-pointed star won’t come cheap.

One of the best ways to save money is to ignore the status of the automobile, and select it based solely on its quality and how well it fits your criteria.

There are many wealthy people which prefer to drive cheap automobiles.

Sam Walton and Warren Buffet are two examples.

There is even an CNBC article about 5 billionaires which drive modest vehicles.

Why?

Because they know that any vehicle asset is going to go down the drain eventually.   

If you are true money-saver, you would never buy a new vehicle. Buy one 3 to 5 years old instead. Let someone else pay for the depreciation. 

Japanese and other Far Eastern imports are considerably cheaper than most European makes and have outstanding records for quality and safety.

They don’t have the same status as the likes of BMW and Mercedes (with the exception of the Lexus), but they’ll certainly be good quality, reliable cars.

If you’re not bothered about the badge and status, you can save a fair amount by looking at less prestigious makes and models.

There is an argument that expensive ones are expensive because they’re so much better.

It’s true they might have a few more functions and more leather and wood than plastic.

But in terms of primary functionality, cheaper cars can be very good value for money.

It’s certainly worth trying some comparable models and seeing how you think they compare to the more expensive cars.

If you do decide to go cheap and your friends give you crap about it?

Tell them these guys below drive cheaper automobiles too. 

BillionaireMake & ModelCostNet Worth
Warren BuffettCadillac XTS$45,00089.5 billion
Mark ZuckerbergAcura TSX$30,00052.6 billion
Alice Walton2006 Ford F-150 King Ranch$40,00045.6 billion
Ingvar Kamprad1993 Volvo 240 GL.$22,00023.0 billion
Steve BallmerFord Fusion Hybrid $28,00043.1 billion

Financing your Purchase

Investing in a car is a sizable financial undertaking unless you’re buying an old clunker for a few hundred bucks.

You’ll be looking at several thousand dollars minimum for a car that could be a decade old or more.

If you’re looking at new ones, you’ll be starting considerably higher, and for many people, a purchase of this amount isn’t something they can pay for outright.

Paying for an automobile in cash is not realistic for many people. Financing is the only option. Which is another area you need to pay attention so you don’t pay unnecessary fees or interest. 

Choosing your finance deal is as important as choosing the right car, because the repayments could well be going on for years and make a significant difference to the overall cost of the vehicle.

You need to check what the interest rates offered are very carefully before agreeing to the terms and see how much you’ll be paying for the overall loan once it’s been repaid in full.

Cost of loans for 20,000 to 40,000 for 60 months illustrated. Note: Illustrated above is the cost of financing an automobile at 4% and 9% interest over 60 months. I used 4% for those with excellent credit and 9% for those with less than good credit. As you can see a $25,000 vehicle will cost you over $31,000 at 9%.

Your best option is to get financing through a bank.

Get approved first then shop. 

Don’t ever get financing through a dealership.

Ford Motor makes most of their money by financing and not by selling to their customers.

In fact, they are considering halting all manufacturing and focusing on lending according to Investopedia. 

If you are unable to get financing through a bank, it is advisable to get some assistance from a knowledgeable credit broker like https://www.crediful.com/auto-loans/carfinance/  

The company has access to many forms of credit for you to choose from.

They can explain the differences between the options to help you make the best choice.

If you’re wondering whether it might be cheaper to buy the car on a credit card or two, and just make the repayments each month that way rather than a loan, the chances are you’ll end up paying far more in the long run.

Don’t assume you’ve found a good deal until you are sure you understand how it compares to other offers that are available.

Auto Loans for Fair & Poor Credit

Not only is Crediful.com a good source to find decent loans for those with less than good credit, there are few others too.

Below I have outlined a few companies which are willing to work with those with low income and a low credit score.

Not only will they work with you, they would be great companies to establish your credit again.

One of the fastest ways to establish your credit is to finance an automobile. Be sure to make your payments on time. And do it for at least a year. Your credit score should start to go up at that point.

I have included two companies that do not require you to have credit.

Carvana and AutoCreditExpress.

Again, Crediful.com is a good place to source loans and find deals.

I did a little research for you here.

You can give them a try yourself.

Your results may even be a little better.

LenderAPR rangeMinimum requirements
Capital One3.99% to 19.99%Credit score: 500

Loan amount: $4,000
Carvana3.99% to 24.99%Credit score: None

Income: $10,000/yr
Auto Credit Express:7.99% to 24.99%Credit score: None

Income: $10,000/yr
LightStream3.34% to 8.34% Credit score: 660

Loan amount: $5,000
CarFinance.com7.99% to 14.99%Credit score: 525

Loan amount: $7,500
MyAutoLoan1.99% to 24.9%Credit score: 500

Loan amount: $7,500

Insurance and the Cost of Coverage

Insurance is another expense you should consider carefully.

Charges for insurance can vary by hundreds and sometimes thousands of dollars across a range of providers, so there’s the potential to save a great deal of money if you shop around.

If you are in the market for a new or used vehicle you might want to get a few quotes to find out how much coverage is going to cost.

I have known a couple of people which changed their mind on a purchase when they ran the numbers for the cost of coverage for the next three years.

Below I have outlined some of the cheapest cars to insure.

I have included the previous years so you can see how much premiums can increase year over year.

You may be surprised which automobiles are cheap to insure and which aren’t.

The insurer is going to go by the safety rating of the vehicle and not necessarily the cost.

VehiclePremium Price 2018201620142012
Honda Odyssey LX$1,131$1,090$987$870
Jeep Renegade Sport$1,142$1,096$1,009$911
Jeep Wrangler Black Bear$1,155$1,098$989$894
Honda CR-V LX$1,178$1,076$970$862
Jeep Compass$1,201$1,104$1,004$912
Subaru Outback 2.5l$1,203$1,093$982$904
Jeep Cherokee Sport$1,212$1,109$1,093$1,003
Subaru Forester 2.5l$1,214$1,107$1,093$980
Ford Escape SE$1,221$1,136$1,053$967
Buick Encore$1,232$1,160$1,058$951

Running Costs & Repairs

Fuel consumption is a major contributing factor to the running costs of a vehicle, so check the official figures and if you can, compare them to what the owners in the real-world report are achieving.

Parts and servicing will also mount up on some makes, whereas for others the costs are far more economical.

For example, Toyota and Honda typically have lower repair costs than Dodge or Chrysler.

Kia offers great prices on new and used automobiles, however, their parts appear to unusually expensive.

For this reason many have opted not to buy from them.

I personally looked into buying a Kia for myself.

When I found out the price of parts and the lack of aftermarket ones, I decided not to buy.  

You’ll find some makes offer very reasonable deals on new cars, where they offer extended warranties that include the cost of servicing for a few years.

Below I picked the largest states with the average cost of repairs, insurance, and gasoline by year.

Depending on the state and vehicle, your costs will be from $2,000 to $2,500 per year.

Or about $166 to $208 per month.

You can research the make and model to find out which are usually the best overall.

Normally, Toyota and Honda come somewhere near the top in all areas. 

StateRunning Cost & RepairsYearly Coverage (Insurance)GasolineTotal
Florida $377$1,124$1,015$2,516
Georgia $385$927$1,096$2,408
Illinois$343$805$852$2,000
Michigan $317$1,064$994$2,375
Minnesota $346$782$1,033$2,161
New York $365$1,196$713$2,274
Ohio $328$698$947$1,973
Pennsylvania$364$908$781$2,053
Texas $364$1,001$860 $2,225

In Conclusion

Whether it’s a cheap run around or an expensive executive, saving money where you can without affecting your safety and comfort makes good sense.

Your car is, after all, a significant investment, and one which you should take the time to research fully before making any big decision.

However, by following the tips above, you are sure to enjoy your new vehicle for the best possible price.

With less headaches in the end and a lot more cash in your pocket!

Sources

https://www.bankrate.com/best-car-buying-tips/

https://www.autotrader.com/car-shopping/

https://www.thesimpledollar.com/best-bad-credit-loans/

Greg Fowler

Greg Fowler

Managing Member of AutoInsureSavings LLC, Greg enjoys writing articles to help drivers save on anything related to automobiles. Travel and enjoying the outdoors are some of his hobbies. The best way to reach him is at Google+ or Facebook Profile.

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