When Your Car is a Gold Digger: Budgeting for Auto Maintenance

Your car. You love it when it takes you to work or through winding mountains on a weekend escape. When it comes time for oil changes and tune-ups, however, your car stereo plays a different tune.

Your car. You love it when it takes you to work or through winding mountains on a weekend escape. When it comes time for oil changes and tune-ups, however, your car stereo plays a different tune.

For many even minor car repairs can put a dent in your wallet, let alone the inevitable but unpredictable major system failures. When you bust a radiator, fuel pump, alternator, clutch or AC compressor, it will be the mechanic – not your car – taking you for a ride.

While you might not be able to avoid repair shop sticker shock, you can prepare for the expense. Budget properly and even astronomical repair tabs can seem like any other bill.

The first step to budgeting for auto maintenance is to change how you think about car maintenance. A few years ago it seemed like I was scraping the bottom of my bank accounts every time my vehicle needed work done. Finding the money for even small repairs was stressful because I hadn’t planned for the expense.

But guess what? I knew my car would need maintenance, and since it was an older car, I also should’ve known it would break down sooner or later! So I should have had money on hand to cover the car repairs. But how?

Insure Yourself

Insurance companies know people are going to crash their cars, get sick, and even die. Well, especially die. We all do. Yet the industry is still wildly profitable. That’s because insurance companies collect money before it is needed to cover an emergency expense and invest it. That’s why the longer you live, stay healthy, or drive without an accident, the more the insurance company can make off your invested premiums.

Why not insure yourself against breaking down? The idea is simple. Pay yourself a monthly auto maintenance premium based upon what you anticipate you might spend on car repairs in the next five years and invest it in a high yield savings account like ING.

Then, if you have a car repair, you’ll have money on hand to pay the bill without using credit cards. You’ll also have money to rent a car so you’re not stuck without a ride to work. If you haven’t had time to save enough to cover the entire repair bill, you’ll have to pay a bit out of your pocket, but that’s no different than an insurance deductible.

The best part is, your money will have earned interest all along! To find more money to squirrel away for car repair, regularly compare insurance quotes from multiple companies— chances are, you could be getting a better deal elsewhere and that extra $100 per year could come in handy for your next oil change.

No matter how old or new your car is, I strongly recommend creating a separate account just for auto maintenance. You can save a monthly amount in this account based upon your anticipated car expenses.

Keep On Fixin’ or Buy New?

When repairs keep on coming, why not just buy a new car? It’s certainly an option, but not always the most economical. The longer you can keep your vehicle on the road, the less money you’ll waste on depreciation, dealer and registration fees, and financing.

If you’re looking at an annual repair budget of over $2,000, however, the odds are you won’t be saving money by driving your old beater much longer.

If you do decide to get a new ride, know how to beat car dealers at their own game and get a few recommendations for safe and affordable cars.

Published or updated on February 27, 2007

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.

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