We often hear from customers how frustrated they are because their vehicle seems to always be costing them money. Money they don’t have or had hoped to spend on something else. Vehicles are expensive BUTnot knowing how expensive and not spending money when it is needed will make your vehicle much more expensive than it needs to be. We believe learning about your vehicle and the auto repair industry will save you money. Insert rewards and reasons for learning about your vehicle here. Your vehicle is an important part of your daily life. Knowing the costs associated and planning ahead of time can save you from a vehicle related crisis and keep you on the road.
What does it really cost to own a vehicle? What is your largest expense each month, besides housing? If you said your vehicle you would be right. Many people don’t realize how much their vehicle is costing them, they don’t really think about it until faced with a large repair. Then when the large repair can’t be avoided anymore it creates a crisis. If you haven’t planned for the repair it can throw all the plans you had for the month’s budget into chaos.
Let’s consider the costs of owning a vehicle: Depreciation: (the difference between what you pay for your vehicle and it’s trade in value) This is important to consider if you are buying a new(er) vehicle. Vehicles lose between 40 – 60% of their value in the first year of ownership. Insurance: It is tempting to only have basic coverage on your vehicle and your family. It’s important to know what you are risking by making this decision. See our insurance workshop for more information. Gas: This is the most consistent cost and the one that most people think of first in relation to their vehicle cost. It is about 24% of your vehicle expenses so definitely worth keeping an eye on! (thinkinsure.ca) Calculate cost of gas: Fuel efficiency of vehicle, how many kms you travel every month and the cost of gas. Average driver covers 20,000 kns every year. Average cost of gas can be found on gas buddy. Licensing and Registration Fees : This isn’t a large cost but if not paid can cost you a lot! The decision of our government to stop sending paper reminders may have saved them money but is costing Albertans. Go to https://www.e-registry.ca/ to sign up for an electronic reminder. The cost of missing the deadline can be as high as $310.00. Parking: This isn’t for everyone or a regular basis but it’s something to consider in the total cost of operating your vehicle. Maintenance: The most effective way to save money on your vehicle and often quite neglected. Everyone knows oil changes are important but do you know the other preventative maintenance needs for your vehicle? These are all found in your owner’s manual. Don’t have an owner’s manual? Go to Edmunds ???? To find yours. The cost of prevenative maintenance varies based on kilometres driven each year and your vehicle but a good average is $100.00/month. Tires: This cost only comes along every 3-4 years but can send your budget fishtailing out of control if not planned for. Replacing two tires or used tires vs. new tires—calculation? Repairs: As vehicles get older there will be more repairs needed. A vehicle is either being rebuilt piece by piece or replaced. By keeping track of the cost of repairs you can decide when it’s time to replace your vehicle.
Roadside assistance: This is a cost similar to insurance.. You hope you will never have to use it but if you do it’s definitely worth it! AMA offers a few different packages and has some extra benefits as well. Costs of not having a vehicle: If you went outside today and your vehicle didn’t start what would be the costs associated with that? Loss of work, late to daycare, taxi/transit or rental, repairs, towing. Do you have a plan B?
Steps to building a vehicle spending plan
Before you can begin to manage your money, you need to identify what is important to you. Then you have a foundation to decide what you want to do with your money. Write down what is important to you and use your list to help you determine goals for your money. Some ideas to help you get started are:
1. Set goals:
Step 2. Identify How much you have to spend on your vehicle and calculate your expenses. The pie below is how “the experts” suggest your expenses breakdown.
What is 15-20% of your income (after taxes)? This is your transportation spending budget. Example: If you are making $20.00/hour and working full time hours you will take home roughly $2500.00/month after tax. 15%-20% of 2500.00 is $375.00—$500.00. In order to keep the pie in balance this is your vehicle budget.
Now it’s time to track expenses to determine how much you are actually spending on your vehicle. Budget Vocabulary Basics: Fixed expenses: Expenses that hve to be paid on a monthly basis (ie. Vehicle insurance) Variable expenses: Expenses that vary month to month (ie. Tires)
There are a variety of ways to track your spending. Pen and paper, online tools like everydollar.com or this worksheet from Credit Counselling Society. (https://www.mymoneycoach.ca/_Library/docs/Expense_Tracker.pdf)
Step 3: Separate needs from wants As you begin to track expenses you may find you are spending your money on things that aren’t necessary or purchased on impulse. Before buying eyelashes or lift kits for your vehicle it’s important to make sure you have the “needs” of your vehicle covered. The money your vehicle “needs” are often the things you don’t “want” to spend on your vehicle. The upside of taking care of your vehicle’s needs is you are less likely to run into crisis vehicle spending. This ensures the other parts of your pie aren’t neglected.
Step 4: Design your budget Think back to the goals you set in Step 1. This will effect your budget for example, if you are planning to buy a dream vehicle you may be saving for your next vehicle. Were you surprised by what you found when you tracked your spending? Is there a way you can lower your expenses or plan more effectively? Take a look at Ways to Lower Your Vehicle Expenses tip sheet for ideas.
Step 5—Put your Plan into Action Now it ‘s time to put your plan into action. You may want to set up a couple of separate bank accounts to more easily reach your savings goals. You may want to get some maintenance items done in order to get caught up and avoid more costly repairs in the future. Step 6: Manage planned spending. Take your vehicle in for a full inspection at least once a year. This ensures that you know any major repairs coming up. This gives you a chance to save towards these repairs. It also ensures you are catching issues in a timely manner and not spending as much on major repairs.
Goal: ___________________________________________ ________________________________________________________________________________________________ My Costs of Owning a Vehicle—How much of the pie? Monthly Fixed Cost Car Payments __________________ Renewing License __________________ Renewing Registration __________________ Insurance __________________
Monthly Variable Costs Gas ___________________ Planned Spending New Vehicle: __________________ Tires: __________________ Repairs: __________________ Preventative Maintenance ___________________ AMA Membership ___________________ Parking ___________________ Tickets (WHAT?!?!?) ___________________ Emergency Fund ___________________
What will the effects be if I am not able to repair my vehicle? (Ex. Late or miss work, have to use funds meant for other bills to pay repairs, don’t repair car and find alternative transportation (cabs, TAPP car) not able to fix vehicle and repairs become worse, cost more money)
My Monthly Cost of Operating a Vehicle: _____________ Percentage of Take Home Pay: ____________%
A budget can be a scary word but really, all it is is giving each one of your dollars a job. This means every dollar is getting you closer to where you want to go.
Calculate your maintenance costs by going to Fix It Before it Breaks.
Did you know Good News Auto includes 6 months of roadside assistance with our oil changes?
If it is important for you to: Your goal may be to:
Have money for new to you used vehicle Save monthly towards new vehicle
Build vehicle emergency fund Create fund and save monthly
Buy your dream vehicle Save up for downpayment
Lower transportation costs: Find a way to earn money with vehicle (ie. Rideshare)
Tip: Instead of waiting for a variable expense to happen, consider turning it into a “fixed expense”. Setting aside a fixed amount towards tires every month, for example, will ensure you have money for tires when the time comes. Calculating Preventative Maintenance as a fixed expense is simple. Find out how much each service costs for your vehicle and divide it by the time interval suggested for your vehicle. For example: general guidelines suggest an oil change every 5,000 kms or 6 months. This is based on the yearly average of 20,000 kms. The calculation for figuring out how much oil changes cost monthly is: Cost of oil change / number of months between service=monthly cost. Average cost of oil change for small car= 50.00 Number of months between service = 3 Monthly cost of oil change = 16.00