Hi guys! One of the things that I hear people talk about all the time are vehicle expenses. Your emergency fund can certainly take care of those unexpected expenses like repairs that result from an accident or blown tire, but it’s a good idea to plan for regular maintenance costs too. Insurance, oil changes, tire rotations, tire replacements, etc. are all things that you’re going to have to pay for over time just by nature of having a vehicle. So, you might as well set yourself up for success and save for regular maintenance in advance. Here’s how I do it.
Let’s start with insurance first.
Believe it or not, keeping your insurance active is part of vehicle maintenance. I assure you, the cost to pay your policy is much less expensive than the cost of being caught driving without insurance, so make sure you keep your policy paid! I prefer to pay my car insurance policy in full every six months. A lot of providers will give you a paid-in-full discount, so I recommend you pay your policy this way if you can. After I get my renewal notice, I start shopping around. I like to check and see what other company’s rates are for the same level of coverage that I have at the time and compare it to what my current company wants to charge for my renewal. Now, I will admit, for a long time (a few years), even though my rate climbed a little with every renewal, it was still cheaper to renew rather than start a policy with a new company. If that’s been your experience too, don’t let that stop you. Keep checking anyway when it’s about time for you to renew. Also, don’t be afraid to ask your current company for a policy review or if there are any other discounts available that you may qualify for. At my most recent renewal, I found a reputable company offering the same coverage for $191 less than my current company was going to renew my policy for if I paid in full. Not bad!
As you can imagine then, I’m reviewing my budget for car insurance twice a year and adjusting as needed. I take my six month paid-in-full total, divide by six to see what it costs per month, and save that amount to an account that I call “Reserves”. This account is what I use to save or ‘reserve’ money in advance to pay for recurring bills that are due on some schedule other than monthly – i.e., quarterly, semiannually, annually, triennially, etc. So, I set aside money every month for my car insurance and save it in this account. When the bill comes due, I pay it in full with my credit card to get the cash back rewards and send a payment to my card the same day to pay it off. A credit card is beneficial when you use it the right way.
OK, let’s talk about maintenance. I figure out my maintenance costs based on 4 categories.
1) Oil Changes & Tire Rotations
I drive a Honda, so I get my oil changed and tires rotated about every 3,000 to 5,000 miles. Prior to working from home, I would get this service done about 3 times a year. It includes several other inspections, so it’s a good service overall that also catches some watch items before they’re bigger problems. I take the average cost per service, multiply by three to get the total cost per year, then divide by twelve to get the amount I need to save for per month.
2) Major Maintenance
I also like to plan for major maintenance. I have over 100,000 miles on my car, and I’ve always gotten it serviced by the dealer. So, I do follow their schedule for recommended major maintenance points. They usually let me know the details for what the next maintenance point is for me after every appointment, but if I need to, I’ll call and ask them what the estimated cost is for whatever major milestone is next, then budget accordingly. I plan for one major maintenance event per year: total cost divided by twelve and set money aside for it every month.
3) Full Detailing
My car is 9 years old, but it’s also paid in full, so I’m not in a hurry to get a new one. I clean it myself for the most part, but what I can do still doesn’t compare to a full detail. I also have an 8 year old that loves crackers and smoothies. So, to keep my car looking fresh and as close to that new car clean as possible, I do like to get a good, professional deep clean once a year.
4) New Battery and Tires
As a general rule of thumb, I assume that I’ll need to replace my tires about every 50,000 miles or about every four years. To budget for this, I looked up the average cost for 4 new tires in the size and type that I need and divided that number by 48 to get the amount that I need to save for every month. I took a similar approach to the battery, assumed that needs to be replaced every three years, and divided by 36 to get the monthly amount to save up for.
Make sure that you refer to your vehicle’s manual for how often your servicing needs to be done and how often your tires and battery should be replaced. Again, I’ve listed the rules of thumb that have worked well for me, but it may vary a little depending on what you drive and what your driving habits are. I’ve been budgeting for vehicle maintenance in this way for about the past five years, and it’s served me well. I’ve needed major maintenance only once and have gotten my vehicle detailed only twice in this time, but I’ve also had to get new tires, a new battery, and a new key fob in this time as well. And none of these expenses were a big deal since I already had the money to take care of it right away without impacting anything else. No robbing Peter to pay Paul or carrying a balance on my credit card.
Since regular maintenance items are things that I know will keep coming around, I don’t want to pull from my emergency fund to pay for them. They aren’t emergencies; they’re just part of regular maintenance. I am constantly putting money aside every month for these expenses – it’s not like a car loan where eventually that expense goes away – but I’m also never concerned about how I’m going to pay for a new battery or if I have enough money to get a nice detail done. And, I never have to touch my emergency fund to do it. Another example of how a budget actually gives you freedom, not take it away. In my book, that’s a win.