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10 Ways to Minimize Your Transportation Costs and Save Money

Whatever your beliefs, owning and operating an automobile is expensive. For those who might be thinking about giving up their vehicles entirely, consider the pros and cons of living without a car. Cutting the strings of ownership is easier if you live in one of the ten best cities to live without a car.

For most Americans, transportation costs are a significant part of everyone’s budget. Few people are fortunate enough to live within walking distance to work, shops, schools, and churches. According to the BLS, transportation costs run between 15% to 20% of a household budget. But there are a few tricks you can use to cut down on transportation expenses.

How to Save on Your Transportation Costs

1. Walk When Possible

anonymous people walking on a city street at golden hour

Someone once said a pedestrian is a person who just parked their car. It is, unfortunately, true that Americans are more likely to drive a car than walk, even for short distances. Research from the University of Glasgow suggests most people of all ages prefer to drive any distance greater than would be covered by a 15-minute walk, especially if they own an automobile and parking is readily available. According to a National Household Travel Survey, the majority of trips under a mile are in an automobile.

Walking is available to everyone in most environments. In addition to saving money on automobile trips, walking is one of the easiest and most inexpensive methods to achieve good health. Tom Hodgkinson, a British writer and journalist, claims the biggest benefit of walking is the freedom to think: “When walking, you see things that you miss in a motor car or on the train. You give your mind space to ponder.”


2. Replace 4-Wheels With 2-Wheels

a young businessman in a suit riding a bicycle to work

Many communities encourage bicycling with sponsored bike share programs and open bike lanes for commuting. In addition to saving money, walking or pedaling a bike deliver significant health benefits. However, keep in mind that riding a bicycle to work is not for everyone, considering the costs, time and safety considerations of biking.

Forbes contributor Jason Fogelson recommends commuting by motorcycle, especially in cities where biking and public transportation are not practical alternatives. He notes that purchase prices, insurance, and fuel costs are considerably cheaper for a cycle or scooter than an automobile. Motorcycles and scooters are popular around the globe, especially in Asia and several European countries according to Pew Research.

Be aware that motorcyclists in the U.S. were 27 times more likely than automobile occupants to die in a crash per vehicle mile traveled and almost five times more likely to be injured in 2014, according to the Insurance Information Institute. If you elect to ride a motorcycle, wear a helmet and practice defensive driving when you ride among automobiles and trucks.


3. Use Public Transportation

a young woman listening to music on the bus

The costs of operating a small car –  including fuel, maintenance, and parking – can exceed the food budget of many families. If you are not ready to give up an automobile completely, replace some of your trips with public transportation. Most smaller communities offer scheduled bus services, while larger cities combine reliable bus services, rapid light rail, and commuter rail systems that are inexpensive and extensive. Many of the services provide space for passengers to load their bicycles for shorter trips when they reach their destination.

The American Public Transportation Association calculated that the average commuter could save $770 per month when self-serve, regular gasoline costs $2.75 per gallon and a monthly reserved parking space in a downtown center is $154.


4. Share Rides

a carpool lane sign on the highway

Before 2-car families became ubiquitous, sharing rides between neighbors was common. Carpooling is especially practical where people regularly travel to and from the same location. Even in situations where using a car is required, it doesn’t have to be your car. Parents who pick up children at school can arrange to share trips with other parents.

Costs are split by rotating drivers and cars or by passengers paying an agreed amount for travel. Some companies sponsor ride-sharing programs for their employees, including the use of a company-owned vehicle.

The American Automobile Association (AAA) estimates that the average commuter has about $58 in total expenses per 100 miles driven. Almost one-half of commuters live more than 10 miles from their work, traveling a minimum of 5,000 miles per year at the cost of $2,900 annually. Depending upon distance, car pooling can easily save $50-$200 monthly for each member of the pool.


5. Rent a Car Only for Special Occasions

a group of friends driving along the coast in a rental car

When your need for a car is temporary, the most inexpensive solution is often renting. Many residents in major urban communities rent cars for vacation trips or weekends away from the city. The car rental business is very competitive, so rental companies frequently offer special deals to attract customers. Unfortunately, they also are experts in adding on extra costs without their customers’ recognition. Before renting a car, recognize the tricks that auto rental companies often use to add to their profits.


6. Cut the Retail Price of an Automobile Purchase

young man holding toy car and truck choosing between vehicles

When reducing the expense of automobile ownership, keep in mind the following:

  • One car is less expensive to own and operate than two vehicles. In addition to operating costs (fuel and maintenance), there are savings from insurance, licensing, depreciation, and interest charges on any loan to acquire a car. There are pros and cons of being a single car family, including the possibility of saving hundreds or thousands of dollars a year.
  • Small models are less expensive than large models. AAA estimates the ownership cost of a Ford Focus or Honda Civic at $4,548 annually. A larger Buick LaCrosse of Ford Taurus can cost $7,620 per year.
  • Buying and operating a used car is less expensive than a new car. The cars we drive often fulfill needs beyond a safe, reliable, inexpensive ride. For some, an automobile is an ego trip, while others select a vehicle that extends a personal brand. For example, financial executives often drive Cadillacs or expensive foreign cars. For many, a car is simply a method to go from one place to another. For those people, buying a used car in good condition is always a better option than buying or leasing a new car. According to Edmunds, a new car loses 11% of its value when it leaves the sales lot; in the fifth year, its real value is 35% to 40% of the original purchase price. As a consequence, Edmunds recommends buying a car that is one or two years old, driving it for three years since factory warranties run 5 years or 100,000 miles, and selling it during its sixth year. Before making a decision to buy or lease a new or used car, consider the pros and cons for each. In addition, be sure and check the warning signs when buying a used car before purchase.
  • Finding a car at the right price. Some buyers of a new or used car use a car buying service to save money, time, and the stress of haggling with an aggressive car salesperson. Others prefer online dealers rather than confronting an aggressive salesperson at a local dealership. Some shoppers, confident that only they can get the best price, negotiate directly with the employees of a dealership. Be sure to read this car buying guide for tips on getting the best deal.
  • Substitute dealer products with after-market products. Dealers add considerable markup for accessories ranging from sound systems to roof racks, often for prices almost double the price of a comparable after-market product. According to autobytel.com, the majority of car parts are made by the same companies that produce the after-market accessories, the only difference being the manufacturer’s logo. While the quality of after-market products can vary significantly, many products have superior quality compared to the dealer accessories. Independent shops typically charge less per labor hour than dealers – another source of savings. When using an after-market part, confirm that the manufacturer’s warranty will not be voided.
  • Forego the purchase of an extended warranty.  According to Consumer Reports, extended car warranties are an expensive gamble since the majority of buyers never use the coverage. There are many instances where consumers pay thousands for extended car warranties and don’t get the value they’re looking for when issues arise.

7. Shop for the Best Financing Package

car money hand

As the prices of automobiles increase, more buyers are forced to borrow money to acquire a car. According to Experian Automotive, 85.8% of new and 55.5% of used vehicles are financed with loan balances of $28,524 and $18,671 respectively. The average monthly payment of $483 for new cars for a 67-month term and $361 for used cars for 62 months. As a consequence, many car owners become upside-down on their loans, where the market value of the car is less than the amount owed.

While leasing is a growing segment of car financing – accounting for almost 15% of total financing in 2015 – it is almost exclusively used with new cars and is available primarily to those with a prime or super prime credit rating (680+ credit score). While leasing is a method of lowering the monthly payment obligation and replacing an automobile every three years on average, it is rarely a wise financial choice. New cars frequently use 25%-30% of their value during the first three years of ownership, a financial cost that lessees bear.

Auto financing is available from a variety of different sources including the manufacturers’ captive finance companies, commercial banks, credit unions, commercial finance companies, and “Buy Here Pay Here” auto dealers. Banks, captive finance companies and credit unions specialize in borrowers with prime and super prime ratings, while finance and BHPH companies work with those customers non-prime and below.

To ensure you get the best financing deal possible, take the following steps:

  • Separate the trade of an older car from the purchase of the new car. Since the dealer is both sides of the transactions, he can manipulate the numbers to favor one or the other, like paying less for the trade-in than its market value to reduce the sales price of the newer car or vice versa. Get a realistic value of both vehicles by visiting sites such as Edmunds or Kelley Blue Book.
  • Clean up your credit score. Understand your credit score as it is the most important factor that determines whether you will be offered financing and how much you will pay for the privilege. If you need to rebuild or raise your credit score, take the necessary steps to get yourself on the right track.
  • Make the highest down payment possible. If buying a vehicle for cash is not possible, try to put down the largest down payment possible. The more equity you have in your car, the less interest you will pay and the less likely you will become upside down on your loan.
  • Shorten the term of your loan. While reducing the term of your loan may require higher monthly payments, your cost of financing will be less. In many cases, the interest rate charged is higher than you might earn on an investment.
  • Check several financing providers. Each lender establishes an interest rate to fit its business needs. For example, a captive finance company such as GMAC or Ford Motor Credit may subsidize their financing arm to sell excess inventory. Banks and credit unions experience of excess funds from time to time and reduce interest rates to attract loans. Checking with multiple lenders ensures you get the best rate possible on your loan.
  • Read the sales and finance contract to identify undisclosed charges. Many buyers focus intently on the monthly payment amount and overlook the extra charges hidden in the fine print. These charges range from extra services such as extended warranties to delivery and preparation fees. Some dealers mark up the interest rate as a “finance” or “dealer” reserve, supposedly to protect against loan defaults.

8. Save on Auto Insurance

vehicle insurance policy schedule forms on desk with keys

Automobile insurance is one of the larger expenses of car ownership. Laws in most states require that all drivers carry liability insurance to protect the public, and most lenders require comprehensive and collision insurance until their loan is repaid. Take the following steps to reduce your insurance expense without breaking the law or significantly increasing your financial exposure:

  • Choose your auto make and model wisely. Vehicle damage is the greatest exposure of an auto insurer. Insurance premiums for those models with high repair costs (sports and luxury models), high horsepower, and most likely to be stolen are higher than premiums for a family sedan or station wagon with moderate horsepower. Some insurers consider a model’s crash safety tests in their rates, so choosing a car with a high rating is wise financially and physically.
  • Understand the factors that affect your premium rate. There are various factors that affect car insurance rates. Managing those factors within your control will help you to lower your premiums and pay less.
  • Review your coverages. There are a variety of different automobile insurance coverages including comprehensive, collision, gap, and liability. You may not need all of the coverages offered, however. For example, comprehensive and collision insurance on older cars may not be needed. Gap insurance is unnecessary if you own an older car or have significant equity in the vehicle. Insurance generally pays the market value of a totally destroyed car, not its loan value. Gap insurance coverage may be justified for new cars that experience rapid market value drops in the first three years.
  • Choose higher deductibles. A higher deductible will mean a higher out-of-pocket cost if you have an accident. However, good drivers can save 15% to 30% in annual collision and comprehensive insurance premiums by selecting a $500 deductible over a $200 deductible.
  • Ask for discounts. Be sure to take advantage of car insurance discounts for good drivers. Drivers who take defensive driving courses or drivers who take a refresher driver training course often qualify for discounts as do those who are members of certain groups like AARP or other affinity groups. In addition, car owners who add theft protection equipment and safety equipment to their vehicles might qualify for a discount. Finally, combining your insurance coverages (home, automobile, general liability) will likely reduce your overall cost for insurance.
  • Maintain a good driving record. If you have had an accident in the past, be prepared to pay higher premiums than those drivers with a clean driving record. Different insurance companies put different weights on past driving records and the elapsed time since the last accident, so check around for rates.
  • Manage your credit score. Most states (with the notable exception of California) allow insurers to consider an individual’s credit score when setting a premium rate.
  • Check your rate annually. A report by Bain & Company indicates that few auto insurers excel at both attracting and retaining customers. As a consequence, some insurers regularly offer low rates initially to attract customers and raise them over time. It is easy to check auto insurance rates online or through an independent agent.

9. Rethink Car Maintenance

a mechanic inspects the suspension on a vehicle in the shop for repairs

Proper maintenance of your vehicle will ensure safe, reliable operation and slow major declines in resale value.  For example, regularly detailing – cleaning an automobile, both inside and out, to restore a like-new appearance through attention to details – can add hundreds, or even thousands of dollars to its value.

The following tips can you even more save money and keep your car in prime operation:

  • Find a trustworthy, independent mechanic. Bob and Ray of NPR’s Car Talk commissioned an independent study of 158 dealers and repair shops around the country and found that dealerships typically charge 12%-18% more than an independent mechanic. A Consumer Reports survey found that independents outscored dealerships in “overall satisfaction, price, quality, courteousness of staff, and work being completed when promised.” They also noted that it pays to negotiate prices of repair work.
  • Follow the manufacturer’s recommended maintenance schedule. Changing oil every 3,000 miles or three months became a common practice in the 1950s and 1960s. Since 2000, newer cars use synthetic oils that last 7,500 miles or more and may include an oil change indicator to prompt drivers when a change is needed. Clean battery terminals regularly to limit corrosion and tighten cable connections to delay replacement. In most environments, air filters last about 30,000 miles and need to be replaced every two to three years. Most modern cars can go to 100,000 miles before they need transmission flushing and replacement.
  • Consider AAA membership. The American Automobile Association was founded in 1904 and is one of the oldest motorists organization in America. In addition to a national roadside assistance program if you run out of gas, have a flat tire, or breakdown in the middle of nowhere, AAA provides its members with a number of other benefits and discounts.
  • Maintain the proper pressure in your tires. Under-inflated tires provide a softer ride, but increase gasoline consumption, tire wear, and the likelihood of blowouts. Check the air pressure in tires at least once a month and keep them properly inflated to manufacturer’s specifications. Front tires wear more quickly than rear tires. Rotate your tires from front to back each 6,000 miles to ensure even wear.
  • Do the easy repairs yourself. Changing the fluids and replacing your windshield wipers, lights, and fuses are simple; review online how-to videos for instructions if you need help. DIY car maintenance can save up to $200 for each occasion.

10. Minimize Fuel Costs

a man refuelling his car at a gas station fuel costs

From 1929 to 1973, the cost of a gallon of gasoline varied between $0.12 and $0.39. By 1980, the average price was $1.19 and had more than doubled by 2005 ($2.75), according to Energy.gov. Fortunately, consumers can save money on gas by:

  • Reducing the total number of miles driven. There are phone apps to determine the most efficient routes, avoid traffic jams, and find someone to share your ride and split costs.
  • Increasing the miles driven per gallon of fuel. Practice sensible driving skills. Speeding, accelerating rapidly, and braking hard wastes fuel (up to 33% on highways and 5% around town) and accelerates equipment wear according to an Oak Ridge National Laboratory report.  Use cruise control to maximize fuel economy. Save fuel costs in the winter by driving slowly for the first minute or two after starting, rather than letting the engine idle to warm up the car. In the summer, roll the windows down, rather than turning on the air conditioner.
  • Reducing the cost per gallon by smart purchases. Consider paying for fuel with cash. Posted prices at many gasoline stations include an extra six to eight cents per gallon when using a credit card. If not cash for purchases, use a gas credit card to earn valuable cash back. Additionally, many gas stations associated with grocery store chains and warehouse clubs offer discounted prices to members.
  • Buying the recommended grade of octane gasoline. The most significant savings results from buying the recommended grade of octane gasoline necessary to avoid uncontrolled combustion of fuel in the cylinders (pinging). Most stations offer three octane grades: regular (87 octane), mid-grade (89 octane), and premium (92 or 93 octane). Generally, only sports cars and some luxury models need the higher grades. However,  Kelley Blue Book notes that higher octane gas in cars between four and six years might be beneficial if pinging is present, but most new cars are designed to run on regular grade, not premium. The difference in the per gallon price between grades is typically $0.20 and $0.30.

Final Word

The automobile has always occupied a unique place in the American psyche. Our childhood stretched between family vacations driving across the country. The automobile replaced the porch swing of early generations of sweethearts and extended neighborhoods to exciting, mysterious places. The smell of a new car is never forgotten, nor the sadness when its first dent appears.

For many Americans, buying a car is the single greatest purchase in their lives. We select the cars we drive to reflect our personality, dreams, and social status. Unfortunately, increased car ownership has expanded along with packed streets and highways, rising gasoline prices, and exorbitant parking fees. As a consequence, the benefits of car ownership barely exceed its costs. Automobiles may remain a necessity of modern life, but at an expense we are no longer willing to pay.

Do you buy new or used cars? What other strategies do you use to save on your transportation costs?

Michael Lewis
Michael R. Lewis is a retired corporate executive and entrepreneur. During his 40+ year career, Lewis created and sold ten different companies ranging from oil exploration to healthcare software. He has also been a Registered Investment Adviser with the SEC, a Principal of one of the larger management consulting firms in the country, and a Senior Vice President of the largest not-for-profit health insurer in the United States. Mike's articles on personal investments, business management, and the economy are available on several online publications. He's a father and grandfather, who also writes non-fiction and biographical pieces about growing up in the plains of West Texas - including The Storm.

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