4 Ways to Save on Auto
4 Ways to Save on Auto
This guide is for general information purposes only. We are providing what we hope will be a helpful resource, not a guaranty of success. We are not providing legal or financial advice. Please consult with an attorney or accountant if you need such advice.
When it comes to owning a vehicle, whether it’s a car or any other type of automobile, there will always be expenses. And oftentimes, those expenses can begin to add up.
What’s more, you may have heard the phrase “saving on auto.” So, what does this mean? “Auto” refers to anything that relates to your vehicle or automobile.
While it can be hard to avoid spending hundreds, even thousands, of dollars in auto related expenses every year, there may be ways you could save money.
In this guide, learn about the different ways you may be able to save on auto expenses.
Different Ways to Save on Auto Expenses
In this guide, explore four ways you may be able to save money on auto expenses while:
- Buying a new car.
- Leasing a car.
- Purchasing an auto warranty.
- Purchasing auto insurance.
How to Save Money While Buying a Car
If you want to save on car-related expenses in the future, buying the right vehicle is one way that you can save in the long run.
Some tips to look out for when buying a vehicle with the hopes of saving are:
- Looking for a car with better gas mileage
- Negotiating for a lower sale price than your current vehicle was purchased for
- Negotiating for lower monthly payments than you are currently paying
- Searching for a newer model vehicle that will not likely need regular and expensive repairs
The process of buying a new car can be made easier if a driver conducts thorough research prior to finalizing the sale. The more prepared you are, the more confident you will feel about selecting the vehicle that is right for you and your financial needs.
Review the sections below to learn three of the best ways you can save money when buying a car:
- By doing thorough research on the vehicle(s) you are considering,
- By trading in your current vehicle, and
- By purchasing your new vehicle at the optimal time.
How Reading Online Reviews Can Help You Save
Prior to purchasing a vehicle, research the vehicle itself and whoever you plan on buying it from. If you are purchasing a new car from a dealership, one of the best places to start your research is with online reviews of the dealership itself.
Though most cars in a dealership lot will appear shiny and new, what is under the hood may not match the exterior. Aside from getting the vehicle inspected by a professional prior to purchase, you can also gauge the sales quality of the dealership by reading reviews other car buyers have left.
You can also find out more about the reliability of the vehicle in question by checking reviews of the car written by others who bought the car before you. For example, does the vehicle deliver on the gas mileage and savings promises? An internet search can yield many results for vehicle reviews. Other companies that allow drivers to review cars and dealers include:
- J.D. Power – https://www.jdpower.com/cars
- Cars.com – https://www.cars.com/reviews/
- Carfax – https://www.carfax.com/car-research
How Trading in a Vehicle Can Result in Savings
While some new-car buyers are purchasing a vehicle for the first time, others are coming to the negotiation while still owning their previous vehicle. If you do not have any need for two cars, consider trading in your old vehicle as part of your down payment. When trading in, car dealerships will assess the value of your old vehicle and subtract that amount from what you owe. Trading-in can result in an immediate cut to your auto expenses, whether it decreases or covers your full down payment (if required) or decreases your monthly payment by a fixed amount throughout the payment term.
Best Times to Buy a Car for Savings
Most drivers purchasing a new vehicle visit car dealerships and expect to haggle the price down for a certain amount of savings. However, visiting a dealer at a particular time of year can go a long way towards adding savings to your purchase price before you even step foot inside the dealership. Pay attention to pricing during the following time periods to ensure you get the best deal on your purchase:
End of the Month
One of the best ways to get a good deal on a car is to work around car dealers’ monthly quota marks. Most dealers have a set number of cars they are supposed to sell by the end of the month. As the end of the month approaches, dealers who have not met their quotas may sell the remaining vehicles in their inventory for bargain prices.
End of the Year
Just as with end-of-month quotas, dealers also have yearly quotas that typically include selling all of a particular car model for that year before receiving the next year’s model. If you happen upon a current model near the end of the year, dealers may give you a great deal to make way for their upcoming shipments.
Almost all of the major holiday weekends (i.e. Labor Day, Independence Day, Thanksgiving, Memorial Day, New Year’s, etc.) coincide with a number of retail sales in all markets, cars being no exception. Car dealerships will typically advertise their holiday sales extensively prior to the weekend so you can see exactly which types of deals work best for your budget and desired vehicle.
How to Save Money by Leasing a Car
Vehicle leasing is a form of financing that allows you to rent a vehicle instead of buying it. Lessees rent a car for a predetermined amount of time, typically between two and four years, before returning the car to the dealership.
This form of financing can be beneficial to drivers who:
- Only need a car for a short time.
- Like to drive a new car every few years.
- Wish to drive a vehicle that is more expensive than they could generally afford to purchase outright.
- Do not wish to own a vehicle.
At the end of the leasing period, drivers will usually have the option of buying the vehicle. If you choose not to buy the car, you can return it.
To learn more about how the leasing process works, continue reading the section below.
How the Leasing Process Works
The leasing process is in some ways similar to purchasing a car with an auto loan. In many cases, the lessee is required to pay a down payment. Like an auto loan, the lessee must make monthly payments to keep the vehicle. However, those payments are often lower since they do not build equity in the vehicle.
Unlike auto loans, most leases are arranged through a special vehicle-finance company or directly through a dealership. While arranging for the lease, you will need to sign a contract. The contract you sign with the lender will include:
- The length of the lease.
- Your monthly payment amount.
- Any required down payment amount.
- Maintenance and repair terms.
- Warranty details, if applicable.
- The early termination fee if you choose to return the car before the lease ends.
- Your annual mileage limit.
Leased vehicles typically have an annual mileage limit between 12,000 and 15,000 miles. This is something you can negotiate with the dealership. Should you exceed this mileage amount, your contract will state the amount you will be charged for every mile that exceeds the annual mileage limit.
Once you are ready to lease a vehicle, you can do so by following these general steps:
- Visit a dealership that offers leased vehicles or contact a vehicle-finance company.
- Select the vehicle you wish to lease, following research and/or a test drive.
- Allow for a credit check to be done on your application. This will influence your lease terms like your monthly payment amount and will determine if the dealership/company is willing to let you lease the vehicle.
- Allow for the lease contract to be drafted by the dealership/company.
- Review and negotiate your lease contract, if desired.
- Get approved for the lease based on your credit check and finalize the terms.
Should you lease a vehicle but then return it before the end of your contract or default on your payments, you may be required to pay an early termination fee. That fee, and any exceptions to the early termination fee, will be disclosed in your contract before you sign.
How Leasing Can Save You Money
Compared to purchasing a car, leasing a vehicle can help save money. When you buy a car, its value immediately depreciates once it is driven off of the lot. Depending on your contract terms, it is possible to owe more on an auto loan than what the car is valued for.
With leasing, you typically pay a lower monthly payment, and you can choose to apply for a new lease at the end of your contract if you decide to. Therefore, you will not need to worry about the vehicle’s depreciation versus the amount you owe on a loan.
You may also be able to save money on repair and maintenance costs, depending on the terms of your contract. It is not uncommon for contracts to include coverage towards mechanical repairs. Some contracts may extend this coverage to maintenance costs. Reviewing your contract before signing and negotiating for these allowances can result in further savings.
Furthermore, when your current lease ends, selecting a car that has better gas mileage can also help save you money throughout the lease term.
How an Auto Warranty Can Help You Save Money
Buying a car can often be one of the biggest purchases a person makes. However, what many car buyers fail to account for is the equal importance of an appropriate warranty for their vehicle.
In addition to the time spent on researching the performance, style and cost of the vehicle itself, it is important to research and understand the conditions of the warranty if the vehicle is new, or your options for warranty coverage if the vehicle is used.
Car warranties offer owners the chance to save money on the total cost of ownership over the life of the vehicle. Furthermore, if you are diligent, you can make the most out of the warranty and experience maximum savings compared to other vehicle owners.
Warranty information does not have to be confusing or intimidating, but it helps to be prepared and to have a solid understanding. With a warranty, you have the chance to save hundreds or even thousands of dollars on auto after your purchase.
Basic Concepts of Car Warranties
Car warranties vary in length and breadth of coverage, but they all come back to the same basic principle: They are meant to protect you from having to cover unexpected or exorbitant amounts if and when your vehicle malfunctions.
New cars often come with a basic manufacturer’s warranty, which can be upgraded or extended at the time of the purchase or any time thereafter. Owners of older cars are most likely to benefit from an extended warranty, as older vehicles typically require more repairs.
Whether you purchase a new or used vehicle, the Magnuson Moss Act, passed in 1975, requires certain information to be included with every warranty, such as:
- What is covered in the warranty
- What is not covered in the warranty
- Length of coverage
- How to obtain coverage
So, when you purchase a car warranty, the dealer should be ready to provide this information.
Warranties differ greatly in terms of which parts of the vehicle are covered and for how long. Generally, cars with better performance ratings offer longer warranties because the manufacturer stands behind the quality of the parts and assembly.
Questions You Can Ask to Make Sure Your Warranty Leads to Maximum Savings
- What is the length of the warranty?
Warranties are typically offered with time and vehicle mileage limits, and coverage for the part(s) in question will expire when either limit is met. For example, on a three-year, 36,000-mile warranty, you will no longer be covered once the three years have passed or once the vehicle has more than 36,000 miles – whichever one happens first.
So, a defective part will not be replaced if the vehicle in question has 40,000 miles on it, even if it has only been driven for two years. Car warranty length options vary greatly from one manufacturer to another, from three-year, 36,000-mile coverage to 10-year, 100,000-mile plans. The length of your warranty is the foundation for saving money in the long run.
- What is covered under the warranty?
Coverage is dependent on the type of plan chosen. Warranty plans fall under different names including but not limited to: “Basic,” “Powertrain,” “Corrosion Perforation,” “Roadside Assistance,” and “Emissions.” These will be explored in more detail in the “Types of Manufacturer Warranties” section below.
- What is not covered in the warranty?
Typically, manufacturers do not cover parts that have been damaged due to abuse or neglect of the vehicle. Also, they will usually not cover faulty repairs or illegitimate replacement parts. For example, a warranty may not replace parts due to any of the following:
- Misuse (such as racing or overloading)
- Improper repairs
- Replacing genuine vehicle make parts with replacements from a different make
In other words, once you start tampering with repairs away from the certified dealer or service center, the warranty provider has the right to void the remainder of the warranty for that part.
Also note that car manufacturers typically do not cover usual maintenance items such as oil changes or tire rotations, although some dealers do offer a limited number of months or miles on a new vehicle. Check with your dealer for those specific items.
- Who do you contact when something breaks down?
If the car was purchased new, it likely needs to be brought back to the dealership where the purchase was made for repairs. If it is an extended warranty, the provider may send you to different authorized service repair shops for different parts. Ask the dealer before the purchase for this information.
Types of Manufacturer Warranties
Basic – Sometimes referred to as bumper-to-bumper, this is the standard warranty from any car dealer. Available in different lengths of time or mileage, this is the most broad-based warranty, covering faulty manufacturer-installed parts. These warranties are the shortest in length because they are the most comprehensive.
Powertrain – A powertrain warranty typically covers only the parts that power a vehicle, including the engine, transmission, axle shafts, drive shafts, bearings and gaskets. These tend to be longer warranties (often 60,000 to 100,000 miles) as manufacturers expect the engine to last longer than other parts of the vehicle.
Corrosion – This warranty covers the body of the vehicle against rust or corrosion. These warranties differ greatly from dealer to dealer, and sometimes do not have a mileage limit (i.e. 60 months, unlimited miles).
Roadside assistance – Usually an added feature to an existing warranty, roadside assistance provides coverage specifically for towing in case a part covered by the basic warranty breaks down.
Emissions – Federal law mandates that a car warranty cover the first two years of the life of a vehicle to meet Environmental Protection Agency standards. Many manufacturers extend this warranty beyond the minimum to cover parts that need to be replaced.
Wear and tear – This plan extends the basic warranty to include car features that are easily worn through regular daily use. Coverage may include seat upholstery, interior and exterior paint, and tires.
New Car Warranties vs. Used Car Warranties
New car warranties are created by the manufacturer, have the most comprehensive coverage and offer the most options because the car has no wear and tear. Meanwhile, used car warranties come in several different forms:
- As an extension of the original warranty
- As part of a certified pre-owned vehicle from a dealership
- As a plan from a third-party after-market warranty company
How Extended Warranties Can Help You Save
Typically, the dealership is factoring the likelihood of you using the extended warranty into the cost of that warranty. The best value on an extended warranty, then, includes the worst-case scenario that a major part malfunctions after the initial warranty expires. If this occurs, suddenly, that extra cost for the extended warranty becomes worth it to the vehicle owner.
Also, note that you do have the option of negotiating for a better price on your warranty, which could tilt the deal in your favor.
With the above scenario in mind, there are several different ways to purchase an extended warranty, such as from a dealership as part of an initial purchase, for a certified pre-owned vehicle (CPO) and for a non-CPO vehicle.
Warranties From a Dealership as Part of Initial Purchase
This is an area where savvy negotiation skills can help maximize the value of a warranty. Since the extended warranty is an optional item, it affords room for negotiation with the dealer.
It can help to negotiate different aspects of the extended warranty differently, but the biggest money-saver will usually be on the powertrain parts, as they are usually the most costly to repair or replace.
Check with the dealer to see which aspects of the warranty are transferable if you decide to sell your vehicle: purchasing an extended warranty that does not transfer will hurt your bottom line if you sell the vehicle before it expires.
Certified Pre-Owned Vehicle Warranties
Certified pre-owned vehicles, or CPOs, are cars that have been bought back by the dealer and thus offer manufacturer warranties. The terms and conditions of these may or may not be the same as the original warranty, but the biggest benefit is that they have the backing of the manufacturer.
When it comes to CPO warranties, these are typically less flexible than extended warranties in terms of negotiating specific items, so make sure to inspect what is covered and what is not before deciding on this option.
After-Market Third Party Warranties
Another option for a car owner is to purchase a warranty from an after-market third party. Be sure to read the customer reviews for the third party providers you are considering, so that you invest in a reputable company.
Ask a lot of questions about the coverage offered, as seen in the sections above, and take the same steps to make sure the warranty you find will help you in the long run as it relates to savings and vehicle security.
Saving by Staying on Schedule With Services
Dealerships build the cost of the warranty into the cost of the car. Therefore, dismissing the manufacturer-suggested service schedule may cost you more money in the long run. To take the most advantage of your vehicle warranty, pay close attention to the recommended service schedule in the manual that comes with your vehicle. Taking your vehicle into the service center at the suggested mileage or time milestones will help keep your car in the best shape and also help prevent voiding the warranty. Recall that the manufacturer has the right to void a warranty due to abuse or misuse of the vehicle. By staying consistent with the recommended maintenance schedule, you can avoid claims of misuse.
It is important to check the maintenance schedule in the vehicle’s manual beforehand and compare that to the warranty you are purchasing. Since the dealer has already factored in the scheduled maintenance costs to the sale of the vehicle, this step will help you save throughout the length of your warranty, but also after the warranty expires.
How Technical Service Bulletins Can Help You Save
Technical service bulletins are created by either the manufacturer or a third party to supplement the service manual. These are available online and can be found by typing the name of your vehicle followed by “technical service bulletin” into any search engine. You can also visit any dealership that sells your make and model for an updated technical service bulletin.
Bulletins are useful because they provide additional maintenance information that may not be provided in the vehicle’s manual, which allows you to stay up to date with the current needs of your vehicle.
In other words, your 2018 Honda Pilot service manual may not anticipate the need for maintenance on a part until 2022, but a review of your vehicle’s most recent technical service bulletin may indicate that service is indeed recommended.
Bulletins are not just for emergency issues. Anything deemed imperative will be covered in a factory recall. Regular tracking of your vehicle’s technical service bulletin could help you maximize your warranty.
Recall that different parts of your vehicle may be covered for different lengths of time. While a gasket in your engine might be covered for 100,000 miles, a broken door handle might only be covered for 36,000 miles. Therefore, it is important to understand the deadlines when considering repairs.
If the part in question works some of the time but not all of the time, it is better to take the time to have it fixed under the warranty than to find yourself responsible for the full cost after the warranty expires. For major parts, like the engine or transmission, it is helpful to set reminders for deadlines to avoid unnecessary costs. Likewise, servicing your vehicle as close to the warranty expiration date as possible enables you to go the longest length of time before having to pay for maintenance on your own. This results in extra savings.
How to Save Money on Car Insurance
Most states in the U.S. (except for New Hampshire and Virginia) require drivers to have a minimum amount of insurance coverage in the event of any car accidents or other car-related incidents. For many, this means paying hundreds of dollars (or more) each year.
Money spent on car insurance premiums (and deductibles) can add up quickly, which is why you may consider taking a look at your current policy and those provided by other insurers to see if you can save money on your coverage.
Types of Auto Insurance
Car insurance companies provide a variety of types of coverage to drivers. The main types of insurance are as follows:
- Liability coverage – The minimum required insurance coverage in most states throughout the country, liability insurance covers drivers who are involved in an accident which they caused. This insurance coverage will cover financial liability resulting from property damage including damage to another person’s vehicle. Additionally, liability coverage also covers medical costs incurred by the injured party resulting from the incident.
- Personal injury protection (PIP) – PIP enhances liability insurance coverage by insuring drivers’ and any other involved parties’ medical bills. PIP insurance will cover all parties’ medical bills regardless of who was at fault.
- Collision coverage – Collision coverage protects you from having to pay for your own repairs. In the event that you are involved in an accident where your vehicle is damaged or totaled, collision insurance will cover the cost of repairing your car.
- Uninsured/underinsured motorists – Though most states require drivers to have insurance coverage to operate a vehicle on public roads, not all drivers comply with these requirements. If your property is damaged by a person who does not have car insurance, uninsured and/or underinsured driver insurance protects you against paying the extra costs (beyond what standard insurance covers) out-of-pocket.
- Comprehensive coverage – In the event that your car is damaged in an incident that does not involve another vehicle (i.e. hitting an animal, theft, vandalism, etc.), comprehensive insurance coverage will cover the cost of repairs.
Factors That Determine Your Insurance Rate
In addition to the type(s) of coverage you select, auto insurance rates are based on several factors that insurers review to determine the risk of providing you with coverage. The higher the risk a driver poses, the higher the amount they will pay toward insurance premiums.
Factors that determine insurance rates include:
- The vehicle you drive. The vehicle you wish to insure plays a large role in the insurance rates you will be offered. The vehicle’s value, theft rate, accident rate, repair costs, safety tests and safety features are all considered.
- Where you live. Highly populated areas and areas that statistically have more accidents or thefts are associated with higher insurance premiums.
- Your age and gender. Statistically, young adults are more likely to be involved in an accident, resulting in typically higher premiums for this population. Similarly, men are more likely to be involved in an accident compared to women, which may result in higher rates for such applicants.
- Your marital status. Most states allow insurers to charge higher insurance premiums to single drivers as opposed to married couples. Statistically, drivers who are single are involved in more auto accidents. States that do not permit insurers to charge higher rates based on marital status are Montana, Michigan, Massachusetts and Hawaii.
- Your driving experience (or lack thereof). Inexperienced drivers, especially teens, pose a higher risk to insurers compared to experienced drivers.
- Your driving record. Your driving record heavily impacts the insurance rates that you receive. Drivers that have accidents, speeding tickets, DUIs and so on can expect to pay higher insurance rates compared to drivers with a clean record.
- Your annual mileage. How often you use your vehicle is factored into your insurance premiums. The more often you drive influences your likelihood of being involved in an accident, thus affecting your rates.
- The car insurance limits you choose. The more insurance you have, the more coverage you will receive in the event of an accident. However, higher insurance amounts (limits) and additional coverage options come with a higher insurance premium.
Tips for Saving Money on Auto Insurance
Now that you know what factors go into determining your insurance premium, the next step is to make sure you are getting the best price on the market, and saving as much as possible. To learn more about how you can save money on auto insurance, continue reading the sections below.
Shopping Around for the Best Rates
Once you know the type of auto insurance you need and the coverage amounts you want, consider shopping around with different insurers. Not all insurers measure your risk of getting into an accident in the same way. You may be considered a high-risk driver with one insurance agency and a low or medium-risk driver with another. Some insurance agencies also offer discounts that others do not or additional features that can save you money in other ways, such as free roadside assistance.
When comparing rates between insurance companies, it is important that you compare the same types and limits of coverage to get the most accurate results (not adding on different features or options).
Many auto insurers provide online pricing tools that will generate auto insurance quotes based on the information you provide. Be prepared to fill in information such as:
- Your location and/or zip code
- Your date of birth and other personal information such as name and Social Security Number
- The type of insurance coverage you seek (whether auto only or a bundle)
- The Vehicle Identification Number (VIN) and other auto information such as make, model and year
- Whether you own or are leasing/financing the vehicle, how you plan to use it and how often
- What your gender is
- What your marital status is
Increasing Your Deductible
Your deductible is the amount of money you will need to pay before the insurance agency will begin to pay for coverage during an at-fault collision or theft. Deductibles are commonly available at $250, $500 and $1,000 but vary by insurer. However, some insurance agencies offer a larger variety of deductible amounts.
To compensate for plans with higher deductibles, insurance providers decrease the premium prices, so this is one way to save on auto insurance as it relates to costs you will always need to pay. Premiums must be paid regularly to maintain coverage whereas a deductible is not paid unless one experiences an accident and files a claim. Note, however, that in the event of an accident, you may end up paying more by increasing your deductible.
Learning About Discount Options
Taking advantage of discounts that you qualify for is another way you can save on insurance costs. The available discounts and the amount of the discount vary by insurance provider, but commonly available discounts include:
- Student discount – For drivers who are still in school
- Military discount – For members of the U.S. Armed Forces
- Good driver discount – For drivers who have a clean driving record and no accidents
- Defensive driving course discount – For drivers who successfully complete a defensive driving course
- Bundle discount – For drivers who bundle multiple types of insurance, such as home and auto, with the same provider
- Multi-vehicle discount – For drivers who insure multiple vehicles with the same insurance provider
Checking with each auto insurance provider you are considering purchasing coverage from is a good way of learning about all the discount options available.