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More than five years ago, my family of four downsized from two cars to just one. I initially expected us to have a single vehicle for about a year, but it turned into a much longer experiment that has saved us thousands of dollars in car payments, insurance, and maintenance.
Here's how much we've saved compared to the average cost of buying a new car or keeping my old one -- and how you can save on vehicle expenses without getting rid of your car.
My family owns one car right now, which we paid off a couple of years ago, so our vehicle costs are pretty minimal, mostly involving paying for gas and car insurance.
However, had we decided to buy a new car five years ago instead of eliminating one from our budget, I wanted to see how much it would have cost us. To calculate all of this, let's look at the average cost of a new car in 2020, which was $38,960, and the average annual percentage rate (APR) for a car loan at that time (about 5%).
| New Car Price | Interest Rate | Loan Term | Monthly Payment | Total Amount Paid |
|---|---|---|---|---|
| $38,960 | 5% | 60 months | $747 | $44,838 |
Buying an average-priced new car over the past five years would have cost me nearly $45,000! While I wasn't in the market for a car at the time, this shows just how much money I would have had to work into my budget over a five-period, which would have likely caused me some financial stress.
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Even if I had kept my old car, which was paid off, I still saved tons of money by getting rid of it. It was older, so I would have been way more likely to pay for maintenance, which costs about $400 annually ($2,000 over five years) for a Honda Civic, according to RepairPal.
Additionally, I would have had to pay for car insurance over the past five years, which averages about $3,133 annually in my state, or $15,665 over five years. That means if I kept my old car and just paid for insurance and average annual maintenance, I'm still ahead by $17,665!
Want to pay less for car insurance? Go here to see our list of cheap car insurance companies.
Car insurance costs have risen 22% this year, causing a strain on many people's budgets. Luckily, you can do a few things to help lower that cost (that don't involve getting rid of your car). Here are a few options.
Increasing your deductible means you'll pay more money out of pocket if you're in an accident, but it will also lower your monthly premium costs. Increasing your deductible to $1,000 could save you up to 40% on your collision and comprehensive coverage premiums.
As the commercials suggest, you can save money by bundling home or renters insurance with your car insurance. While it varies by provider, you could save up to 25% by bundling with some companies.
Not all insurance providers will charge you the same premiums. That's why it pays to compare insurance quotes to find the best car insurance for your needs. A recent Consumer Reports survey found that people who switch car insurance companies saved an average of $461 per year.
While I've enjoyed not having the added expense of a second car, I'll probably need to get another one at some point. And when I do, you can bet I'll be shopping around for an inexpensive used car -- and for cheap car insurance, too.
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