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!

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.

Use our free annual auto maintenance budget calculator now to see how much you should put aside each month for car repairs.

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 affordably fun cars.

Car insurance. You hate paying for it until you need it. And a few months later you hate paying for it again. Wouldn’t it be nice if you could actually get a cheaper car insurance policy? The ads claim you can save on car insurance just by switching companies, but getting the lowest car insurance rates takes more than choosing the right insurer.

Progressive Insurance boasts that you compare their rates to competitors on their own website. But don’t forget that you may not be seeing the whole picture. Local insurance companies may not be included, and the information Progressive uses for the quotes may differ from other insurers. To really save on car insurance rates, you’ll need to do your own research.

Look for Discounts

Yes, you can buy car insurance on line, but picking up the yellow pages and calling some local agents may be worthwhile. Local agents may offer “group rates” to employees of local businesses, local students, or even members of community groups. If you qualify for a group rate, find out what the discount is and how it compares to one of the rates from a large national insurer. You may qualify for other discounts on certain kinds of coverage—like a break on theft if you install a car alarm or immobilization device.

Negotiate

While negotiating your car insurance policy may not be as black and white as haggling for your new car, you may have some leverage, especially with smaller, more personal insurance agencies. Combining multiple policies (whether auto, home, or other property) is the easiest way to justify a better rate.

Pick and Choose

Just because your car insurance company offers certain coverage options doesn’t mean you need them. If you have an older car that isn’t worth very much, skip the carry comprehensive damage coverage, for example.

Drive Safely, and Pay Your Bills

Clearly, the more accidents and speeding tickets you rack up, the more your insurance will cost you. But insurers are increasingly also relying upon consumer credit reports to set rates. Just one more good reason you should pay those bills on time.

Related Posts

How to Negotiate with Car Salesmen

Tips for Shopping for Your First Car

Best New Cars for College Graduates

In February 2004 I worked one educational month as a car salesman. I learned you don’t need a full set of teeth to be a winning car salesman and the nicer a salesman is to a customer, the more that customer overpays. I also learned the car salesman’s playbook. And of course, I’m willing to share. If you want to protect your wallet when you’re buying a new car, here’s how to beat auto dealerships at their own game.

Be Prepared

Even if you deflect the sleaziest sales schemes dealers dish out, you can’t get a good deal without some homework. Don’t step into a showroom without reliability, safety, and pricing information (try Edmunds.com). You should know the mark-up of the car’s sticker price and how much the dealer expects to profit. It makes it almost impossible for the dealers to bluff when you already see their cards.

Call First

Auto makers and dealers do everything in their power to make car buying an emotional experience. They have you sit in plush new leather, soak up new car smell, and punch the gas and hug the turns on the test drive. The salesmen hope, by the time you talk price, you want the car so badly you’ll okay the first number thrown at you. But, ask for the dealer’s best price over the phone, you axe their edge. Lucky enough to snag a telephone quote? It will almost always beat a quote from the showroom. But be warned: Good dealers will smooth talk you into making an “appointment” at the dealership without giving a price.

Hide Your Trade

If you plan to trade in your existing vehicle, don’t let the dealership know it until you have agreed on the price of the new car. Tell them you definitely don’t have a trade-in and then act like you changed your mind. The reason? Dealers use their profit margin on the new car price to make it seem like they are paying thousands of dollars more for your trade-in. Only when you handle the new car and the trade-in separately can you get good deals on both.

Talk Price, Not Payment

“Payment” is a car salesman’s favorite word—and not just when it refers to his commission check. Dealerships love to quote cars in terms of the monthly payment, leaving the purchase price out of the equation until the papers are signed. In the negotiation process dealers try to lower the monthly payment by extending the loan term rather than cutting the purchase price.

Be Patient

Negotiations are tests of will-power. Who will cave first? Dealerships make you wait to get you dreaming about your new wheels. Why not bite back? Car salesmen’s commissions are based on volume. They want to sell lots of cars fast. And unless you’re shopping for a rare model, there will plenty of cars left tomorrow, but with every day that goes by the dealer will grow anxious wondering whether you changed your mind or found a better deal. Use time in your favor to get dealers to provide even more price concessions.

Go Rate Shopping

You wouldn’t negotiate with car salesmen without the car’s average price; you shouldn’t negotiate an auto loan without information, either. If you can, get your credit report before buying a car. Apply for an auto loan online or from your local bank or credit union and take the approval with you to the dealership. You may get an even better rate from the dealer. Worried about too many credit applications? True, multiple credit inquiries can negatively affect your credit score. The good news? Credit bureaus now count multiple inquiries within a month as one.

After graduation you’ll need some new wheels to get to that all-important first job. But which new car is for you? Money Under 30 picks the top new cars for college graduates and young professionals under 30 based on affordability, reliability, and appeal.

2007 Scion tC
Avg. MSRP: $15,000 (Man.)

If you crave an affordable sports car, look no further than the 2007 Scion tC. Featuring mouth-watering standard equipment like 17-inch alloy wheels, a moonroof, and a super sound system, this coupe is one hot ride for just $15k. The tC also boasts the engineering quality of Scion parent company Toyota, so you know you can count on your tC. Got friends? Owners praise the tC’s spacious rear leg-room. For a small car, the Scion tC carries disappointing 21 mpg city and 31 mpg highway EPA ratings. Fuel economy aside, the tC is a loveable marriage of fun and practicality.

2007 Hyundai Sonata
Avg. MSRP: $18,295 (Auto.)

Need to impress your coworkers? Drivers looking for a larger car won’t beat the 2007 Hyundai Sonata. Redesigned in 2006 and made even better in 2007, the new Sonata is proof that Hyundai is a worthy competitor in the American auto market. The Sonata provides a smooth, quiet, yet peppy ride and boasts a surprisingly spacious cabin. Need more proof? The Sonata raked in initial-quality awards from J. D. Power and boasts Hyundai’s impressive five-year/60,000-mile bumper-to-bumper and ten-year/100,000-mile limited warranties.

2006 Toyota Tacoma
Avg. MSRP: $18,230 (2WD, Auto., Access Cab)

Haul more gear than bodies? For those looking for a pick-up truck there’s no better choice than the Toyota Tacoma. The redesigned 2005 Tacoma won Motor Trend’s 2005 truck of the year award, and the Tacoma continues to be strong. With rock-solid reliability and interior styling far eclipsing American compact pick-up trucks, the Tacoma does well as a daily driver and a work horse. The Tacoma is highly affordable on the lower end, with four-cylinder, rear-wheel drive models all coming in under $20k. Choose these models for the best affordability, fuel economy, and reliability. Six-cylinder and four-wheel drive models will cost substantially more to buy, fuel, and repair.

Money Under 30’s Best New Car

2006 Honda Civic LX Sedan
Avg. MSRP: $17,510 (Auto.)

To current Honda drivers, the Money Under 30 pick for best new car for college graduates comes as no surprise. The 2006 Honda Civic features Honda’s legendary value and reliability and, finally, competitive styling. The Civic may not be the flashiest car you can buy, but its appearance has come a long way from its blander past.

Civics carry higher sticker prices than competing compact cars but cost less to own thanks to fewer repair bills. And with an EPA highway rating of 40 mpg, the Civic’s gas tank is easy on your wallet, too. The LX model offers options that are “just right”, including air conditioning and power windows and locks. Choose a barebones DX model to save cash or splurge on the EX for “luxuries” like alloy wheels and a sunroof.

Now that you have some cars to choose from, read up on some smart car shopping tips or learn how to negotiate with car salesmen like a pro.

Read More

Looking for a used car? Check out these useful resources:

The ultimate used car value reference, the Kelley Blue Book Used Car Guide 2006 contains average private market, trade-in, and dealer prices for fifteen model years.

From the most trusted source of car satisfaction and reliability, the Consumer Reports 2006 Used Car Buying Guide is a comprehensive reference for anybody purchasing a pre-owned car.

Buying your first car on your own is both exciting and harrowing. After all, a new car is more than a shiny toy; your first car needs to be a reliable, safe, and affordable.

The Golden Rule of Car Shopping

Before your buy your first car you must learn the golden rule of car shopping: The more you want it, the more it will cost you. Why, exactly? Because the auto industry uses emotion, more than anything else, to sell cars. Think about it. Many recent model Volkswagens have among the worst Consumer Reports reliability ratings, yet continue to be popular cars, especially among young buyers. Why? Because they look cool. But emotion doesn’t just dictate the car models people buy; emotion directly affects how much you pay for your new car.

Car salesmen are trained to do one thing: get you to want a car so badly you will sign for the car’s sticker price before you go home. Think about that. Car salesmen’s jobs are to get your emotions going. They let you drive the car, they tell you how great you look in it, and they make fun of your trade-in. They are trained to keep you waiting for long periods of time so your desire for the new car can grow. And auto showrooms aren’t made of glass to let people see inside. That glass is so you can see all the new cars (and your old one) while you wait! What’s more, the car salesman, typically, does not negotiate the price of the car or handle the details of the financing or registration (managers do). Those in auto sales are compensated by two things: how many cars they can sell (how quickly they can sell you a car), and how much profit they can “hold” on the car (how much above sticker you pay). Therefore, logically, the more time you take and the more research you put into buying a car, the better your deal will get.

How Much Car Can You Afford?

The first step to buying your first car is to determine what car you can afford. You must do this before you set your sights on any particular vehicle. Why? Remember the golden rule. If you start taking test drives or paging through car ads before you have a budget, it will be far to easy to convince yourself you can afford a car later. Most financial planners agree you should not spend more than 20% of your monthly take-home income on transportation. So once you divide your monthly after-tax income by five, you will need to figure out how much you will spend each month on gas, insurance, maintenance, tolls, and parking (all transportation costs). If you sometimes take taxis or public transportation instead of driving, factor those in as well. Once you have subtracted your ancillary transportation expenses from 20% of your monthly income, you have your maximum monthly car payment. Here’s an example for somebody that makes $29,000 a year:

Monthly Income: $1,975
20%: $395
Insurance: ($70)
Gas: ($100)
Maintenance: ($40)
Max Payment: $185

Your monthly payment figure is probably less than you had thought. But that’s good! Believe it or not, somebody with average or better credit can own a reliable car for just $100 a month. Don’t think of your maximum payment as inhibiting what car you can buy, rather freeing up your money to spend on other things.

The Right Car for You

With all of free online automotive research available, it doesn’t make sense to start shopping for your car on the lot. To start try Edmunds.com where you can sort and compare cars by a number of different criteria, get full car descriptions and lists of features, and, if you choose, connect with dealers in your area via e-mail.

Look at both new and used cars in your price range and remember that buying a new car is more costly than buying a used car because of how quickly a new car depreciates. That said, used cars inevitably will cost more in maintenance in the first two to three years. New or used, look for a car that you can see yourself driving for a number of years and can provide safe and reliable transportation. If you are leaning toward a new car, investigate the factory warranty (not extended warranties) and reports on initial problems on the year, make, and model you’re considering. While you’re at it, check out Money Under 30’s best new cars for college graduates. If you decide on two or three different cars but can’t narrow it down from your living room, it’s time for a test drive. But don’t get up so fast. You will need to approach the dealerships carefully.

Buying New

Before you go on a test drive you want to get car dealer quotes from multiple dealers for each car you’re considering. Most car research sites make this easy, giving you the option to select dealerships and click submit just once to get multiple quotes on each car model. Prepare to receive a barrage of phone calls and e-mails relatively quickly. Most dealerships have dedicated Internet salespeople standing by to respond to your quote request. The great thing about shopping for a car online is that research sites show you the exact invoice price (what the dealer pays for the car), and how much above that price people in your area are actually paying this. When you approach a dealership from the Internet rather than the street, the sales staff knows you have extra information and will treat you accordingly. (This means they will only lie to you about 90% of the time). Some dealers will come back simply asking to set up a test drive, others will send you a hard quote. Don’t agree to go for a test drive without a hard quote, and always take printed copies of every quote you received with you to the dealership. Shadier dealers may claim to have made a mistake on a quote that you can’t prove you received. Once you have all your quotes in hand take some time to have fun taking test-drives. If you have done your homework and selected a few reliable, safe, and affordable new cars to choose from you can let your tastes make the final selection. Once you have, go home and sleep on it. Never buy a car on your first trip to the dealership. Statistically you will pay more for your car if you do.

Buying Used

The process is slightly different if you choose to buy a used car. You will need to be slightly more flexible about the car you ultimately buy, but you will also have greater pricing flexibility. Not only can you choose from similar cars with different mileage (and prices), dealers have a much higher profit margin on used cars, meaning there is more room for negotiation. To begin the final selection process for a used car, find between five and ten cars that interest you and meet your price, safety, and reliability requirements. Request quotes online from the dealers and choose three to five to test drive. As with a new car, never buy a car on your first visit to the dealership. Have just one night to think over your potential purchase could save you from getting stuck with a lemon for five years. A final step in buying a used car is running a title history report and/or getting an independent mechanic to inspect the car for you. Any reputable seller will allow you to take the car to a mechanic for a quick check, and you should. If you have a good relationship with your mechanic he will probably do this for free. Otherwise expect to pay between $20 and $50.

Have you chosen the car you want to buy? Congratulations! Before you return to the dealership to make a deal, learn secrets of an ex-car salesman and how to negotiate with car salesmen like a pro!

Read More

The ultimate used car value reference, the Kelley Blue Book Used Car Guide 2006 contains average private market, trade-in, and dealer prices for fifteen model years.

From the most trusted source of car satisfaction and reliability, the Consumer Reports 2006 Used Car Buying Guide is a comprehensive reference for anybody purchasing a pre-owned car.