Saving for Maintenance and Repairs
Most of us don’t save for our car maintenance and repairs. Then, when something happens, money becomes tighter for a while or we have to carry a balance on our credit cards.
Putting away money for automotive expenses is one of those things that everyone knows they should do, but always gets put on the back burner. If you can start planning for those expenses, though, you will experience less stress and scrambling when your car needs work.
You can get an idea of how much you need to save for maintenance by looking at the common major maintenance items, their cost and how often they need to be performed. For example, if you know that your oil needs to be changed every 3,000 miles and it costs $30 for an oil change, you need to save $30 every 2-3 months (assuming you drive 15,000 miles per year) or 1 cent per mile you drive. The same goes for tires, brakes, tune-ups, car washes, and anything else you do to take care of your car. These items might seem small when you look at them one at a time, but they start to add up quickly – particularly if you forget that a major service is coming up.
Repairs are another expense, but the problem is that they are a bit harder to plan for, since they tend to happen unexpectedly. So, how can you figure out how much you’ll need for repairs? If you’ve had your car for a while or know someone else who has had the same car and keeps meticulous maintenance records, you can use those to estimate. Even then, you may be underestimating since as cars get older, repair costs increase. You can use the Edmunds True Cost to Own tool to estimate how much the repair will be (only good for 2005+ model years at the time of this writing). Keeping your car in good shape through proper maintenance will reduce the need for unexpected repairs, and probably save you money in the long term.
Once you have figured out how much money you will need for your car repairs and maintenance each month, you can set up an automatic savings plan with your bank (I like ING Direct, personally). The good thing about an automatic savings plan is that once you set it up, you don’t have to get over the mental hurdle of saving again. It is important to make sure that you have enough of a buffer that your other accounts are not overdrawn, but if you get paid on a regular basis, it is easy enough to set up the withdrawals to take place soon after payday. For a more detailed description of how to set up an automated savings system, see this guest post by Ramit Sethi on Tim Ferriss’ blog.
The reason I recommend setting up an automatic savings plan is that many people buy warranties or service contracts that usually cost more than they’re worth (otherwise the people selling them wouldn’t make any money). It’s true that some catastrophic repairs can run into tens of thousands of dollars, but on average, you will come out ahead by simply saving money on your own and keeping a growing fund for expected and unexpected automotive expenses. Skip the warranties and service contracts (unless it was included with your car purchase) and start saving!
