One big money sucker can be your car. From the insurance, to the upkeep and gas, it’s quite easy to have a large sum of your budget dedicated to that little metal box that gets you to and from work. While many people work REALLY hard to cheap out on expenses and insurance to save a buck, as someone who has spent all of her adult life working in the insurance field, and someone who has suffered from cheaping out on my car, I’m here to tell you that you’ve gotta rethink about how much that $20 a month savings may actually be costing you.
When it comes to financing your vehicle, shop around before heading to the dealership (because once you’re there it is SO hard to get away without them trying to snag you into a “deal”). We’ve personally had better luck with rates at credit unions around town, and since I support small banks and credit unions over the big Wall Street banks, I felt a lot happier and more comfortable sending my money that way.
While getting multiple inquiries on your credit at once when shopping around may seem like a bad thing, in the long run, it will be good for you since you will get a better deal. Also, banks and credit institutions understand that a handful of inquiries at one short period of time for a specific loan is normal, so you really shouldn’t have too much to worry about when it comes to getting several quotes on your loan.
When it comes to purchasing a car do not, I repeat DO NOT, forget about GAP insurance.
What exactly is GAP insurance?
GAP insurance covers the amount on a loan that is the difference between the asset value and the amount covered by another insurance company (the company that hands you a check minus your Collision deductible when your car is totaled in a wreck).
This saved us financially when I was about $3,000-$5,000 underwater on a car I purchased (we rolled the balance from an old vehicle that I was super underwater on over to my new car) and then later was totaled in a wreck caused by someone else (more on that below). If it hadn’t been for the GAP insurance I would have had a loan on an old car we no longer owned AND a loan on the car I had to buy after it was totaled.
When discussing your financing at the dealership or bank, tell them you want GAP insurance and they’ll calculate that into the loan for you.
Before heading into the dealership get on Kelly Blue Book and assess the value of the cars you are interested in. Go online to the dealerships and check out what they have. This way when you go in you have the paperwork showing what the real value of your ideal vehicle is, and can haggle better with this information.
Also, don’t be afraid to walk away and wait for another day or go to a competitor. Put the fear of losing money into the salesman, don’t let them have the power over your vehicle choice. Walk away if they won’t haggle or treat you badly and go somewhere else. You may have to drive a bit to go to a better dealership, but that extra 30-minute drive can be worth it.
Lastly, do not, for the love of all things holy, buy brand spanking new. Just don’t. Especially if you’re 19 and have no credit (totally just an example, not speaking from experience…). The second that brand-new vehicle with 12 miles on it leaves the lot it depreciates SO fast. You’ll be underwater in no time if you buy brand new (unless you get some fantastic amazing deal on it where your loan is way below value). Once you’re out of debt and can afford more luxurious purchases, consider buying new but for now, you just need something that runs and gets you to work so you can keep paying your bills.
One common thing I have seen people do to save a buck is drastically change their car insurance or homeowners insurance policies around so they save on their monthly premium.
While up front this may seem like a great idea to save some change every month, when (not if) something happens, you’re probably going to be out a lot more money than what you saved each month by getting the highest deductible available for your policies or cutting coverages drastically.
Let me give you an example that I personally lived through.
I had just bought a new car, I was smart and bought used and at a good price (but I was still underwater on the loan because of the rolling balance from my old car that stupid 19 year old me bought brand spanking new with no credit to my name) and hadn’t even made a payment on it.
I called my insurance agent and got coverage for it, taking lower liability limits to save me money and rejecting coverages like Road Side Service (for if I break down or need a tire replaced) and Rental Reimbursement (for if my car is totaled and I need to, ya know, go to work or something).
Before my first payment was even due we got slammed into by a guy with no license (it had been revoked due to multiple DUIs and arrests) and was driving someone elses car that had no insurance.
Everything in that wreck landed at my insurance carriers feet. They had to pay for everything that my coverages allowed, even though I didn’t do anything wrong.
Everything that my insurance didn’t cover due to me asking for lower coverages landed at our feet.
A few thousand in medical bills for ER visits for us (Cyle didn’t have medical insurance at that time so we paid 100% out of pocket for him) and a few hundred for me to rent a small car for a few days while I waited for the check to come in to pay off my old car that was totaled so I could get a new one.
All of this financial stress, which equated to around $3,000, made our lives strenuous for almost a year.
All because I wanted to save about $30 a month on coverages.
Ya’ll don’t know how stupid I felt after all of this. In an effort to try to save us money we lost so much more.
Now, I’m not dishing out advice here on what coverages to get, legally I can’t, but I just want ya’ll to think about what you may be costing your family in the future for trying to cheap out and get the bare bones coverages.
You may be the world’s greatest driver and know you will never cause a wreck, but that doesn’t mean some moron with no license won’t try to run the stoplight by trying to run through you (and then trying to run and flee the scene).
My only advice to you is this, talk to your insurance agent and ask questions. While they can’t answer “what if” kind of questions, they’ll be able to help you find good coverage for your family and your car that will financially make sense for you.