How to save on car expenses
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Kathryn Pomroy is a personal finance writer with over seven years of experience. Her work has been featured by GOBankingRates, MSN, Kiplinger, and Fox Business.
Updated October 16, 2024, 2:45 AM EDT
Car ownership isn't easy. Upkeep and repairs to your car can be expensive, especially when you consider that the average cost of four tires in the United States is $123. Add in the fact that the average cost per mile for maintenance to your vehicle — oil change, replacing a battery, wheel alignments, yearly tune-up costs, and more — is 8.9 cents, according to the Bureau of Transportation Statistics.
Read on to learn about how car insurance impacts your personal finance and get tips to save.
How can I reduce my car expenses?
Check out these three steps you can take to save on your auto insurance:
- Shop and compare car insurance companies
- Claim all available discounts
- Consider usage-based car insurance
1. Shop and compare car insurance companies
When shopping for car insurance, saving money is usually a priority. Another concern is the reputation and financial strength of a company and whether they can save you money (preferably, hundreds of dollars).
“A company that's been around for a while with a strong brand and reputation for customer service should be one of the first things you consider when shopping," said Duncan France, owner of Duncan France Insurance Agency and a State Farm agent in Pennsylvania. "You want a company to be there when you need it most, and you don't truly find out what your car insurance is 'worth' until you make a claim. Find out what the claims process is like when shopping around.”
Brandon Tritten, an agent with JBLB Insurance Group, offers another aspect to consider that can save you money. “When you’re shopping for auto insurance, insurance companies will review if you have consistently carried auto insurance in the past, If so, you will likely receive better pricing than someone who hasn’t carried insurance in the last few months.”
What’s more, the higher limits you have on your current prior policy, the better pricing you will receive from the new insurance company.
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2. Claim all available discounts
Insurance companies typically offer discounts for a variety of reasons.
“Many insurance companies will give you a discount if your child has a 3.0 [GPA] or better in school, or if your child attends a driver’s education program,” according to Tritten, who says discounts are worth checking out. “Sometimes, auto insurance companies will also provide a discount to adults and/or seniors who take a defensive driving course.”
Insurance companies also offer discounts for safe driving records, no tickets or accidents within a specific timeframe. You may get a discount for being a loyal customer or bundling your car insurance policy with homeowners, for instance.
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3. Consider usage-based car insurance
In some states, insurance companies offer usage-based insurance, also called PHYD (Pay-How-You-Drive) and PAYD (Pay-As-You-Drive). This means that your rates are based on how much and how well you drive. No accidents or tickets and your rates will be lower.
Telematics also helps save money on car insurance. “A lot of carriers offer devices you can plug into your diagnostic port under your steering wheel. These devices track things like; what time of day do you drive, how fast you accelerate, how hard you brake, etc,” Tritten says.
Each insurance company handles cuts in your rates a bit differently. You might get a discount upfront, “Then in six months they review the data, after which you could receive a 40% discount. Or, if you don’t qualify, they remove the 10% discount at your next renewal,” says Tritten. However, he also warns that if you have a lead foot, your rates could go up as easily eat up any discount.
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More ways to save
It’s not cost-effective to pay for insurance you may not need. For instance, if you drive an old vehicle, you may not need comprehensive coverage—any major repairs to your vehicle will likely exceed your car’s value.
You may also want to think about raising your deductible if you can afford the out-of-pocket costs before your insurance kicks in. For example, if your deductible is $1,000 and you can afford to raise it to $2,000, you may be able to save a few hundred dollars per year.