Written By: Victoria Simons & Elizabeth Renter, Nerd Wallet
Americans spend a bundle on their vehicles each year. To cut costs, some people drive less when gas prices are high and buy used when it's time for a new ride, but there are more ways to save – even when your vehicle is parked.
The average annual cost of vehicle ownership is nearly $8,700, according to AAA, including the cost of gas, insurance, financing, depreciation, licensing, taxes and maintenance. With an estimated 88% of American households owning at least one automobile, according to data from the Pew Research Center, vehicles are the second-largest expense for households, following only housing.
So park it for a few minutes and consider car sharing, auto refinancing and re-examining your insurance – three options that stand to put hundreds – maybe even thousands – of dollars back in your pocket.
1. Sell your car's downtime.
If you're like most drivers, your car spends large chunks of time sitting idle. You're paying for the vehicle whether you use it or not, but you could put it to work for you by renting it out when you're not behind the wheel. Companies such as Getaround and Turo give auto owners a platform to do just that – share their car with people willing to pay.
The two car-share companies have different fee structures:
With Getaround, the vehicle owner keeps 60% of the rental price and the company takes 40%. There's a $99 installation fee and $20 monthly subscription fee for Connect, the app that will allow customers access to your vehicle. Your car must be a 2005 model or newer with less than 125,000 miles. Currently, Getaround is available in 11 cities and charges for rentals by the hour.
Through Turo, you'll keep 75% of the rental price, and the company will get 25%. There are no additional fees for vehicle owners. Turo requires your vehicle to be model year 2005 or newer with less than 100,000 miles. It is available in about 2,500 cities and charges for rentals by the day, with a one-day minimum.
Both companies set the rental price based on such factors as market value, location and time of year. Vehicle owners sign up, list their car and a schedule of availability, and wait for bookings. Getaround and Turo both include $1 million of insurance coverage while the vehicles are in service, with optional upgrades from the renter.
So, how much can you make?
According to Turo, the average vehicle rents for about $45 per day and the average rental period is five days. If you rent your car at this rate and term just three times each year, you'll net $506.25 after Turo gets its share.
This kind of cash may not get you to an early retirement, but in one year it could pay for two years of oil changes, a car battery replacement and about four tanks of gas.
2. Refinance your auto loan.
Refinancing your original auto loan can reduce your monthly payments or cut the length of time it takes to pay off your loan, both of which will save you money. We recommend checking with credit unions, such as Members First Credit Union of Florida, when looking at your refinancing options, as they consistently score better on customer service ratings and offer lower rates, on average, than banks.
Consider refinancing if you can get a lower interest rate now than you did when you initially took out the loan. If your credit was bad at the time of purchase, or if it's gone from good to excellent, qualifying for a lower interest rate could potentially save you thousands of dollars over the life of your loan. Keep in mind that you won't be able to refinance more than the current value of the vehicle and be sure to find out whether your current loan has any prepayment penalties.
Assuming you've made 12 on-time payments in the first year of your loan, here's what you'll save by refinancing in the 13th month of a 63-month loan:
|Starting APR →||3.0%||4.0%||
|New APR ↓ 2.0%||$340||$689||$1,045||$1,408||$1,780||$2,159||$2,546||$2,940||$3,342|
*Savings calculated using the average auto loan amount ($18,504) and the average length of a loan (63 months), according to Experian. Refinancing is for the remaining 51 months of the loan.
For example, refinancing a $18,504 loan from 11% APR to one with 4% APR would drop your monthly payments from $388 to $336, a savings of $52 each month. That's more than $2,600 over the course of your refinanced loan.
Although you may be able to lower your monthly payment by extending the term of your loan, we don't recommend doing this. Extending your loan term without changing your interest rate will cost you more over time in additional interest paid.
3. Shop around for auto insurance.
If you're like most drivers, you stay with one insurer for years. But your loyalty could be costing you. The simple act of comparison shopping for car insurance could save the average driver $859 a year, according to a recent NerdWallet study.
Consumers believe they're getting a decent deal on auto insurance; 45% of those surveyed said they don't think they're overpaying. And many underestimate how much they might save by shopping around; 42% guessed the average annual savings to be around $100 rather than more than $800.
Bottom line: The savings are there if you're willing to shop around. So, how do you go about getting a better deal?
- Compare rates among carriers.
- Ask about insurance discounts and consider raising your deductibles.
- Bundle your auto policy with other insurance policies.
- Drop your collision coverage if your vehicle is worth only a few thousand dollars.
- Call and update your carrier when your driving patterns change.
A car is a significant and unavoidable expense for many, but there are ways to save money. Refinancing, changing insurers and leasing out your vehicle may take some work, but the savings can be considerable.
Victoria Simons & Elizabeth Renter, NerdWallet. Victoria Simons is a data analyst at NerdWallet & Elizabeth Renter is a staff writer at NerdWallet. Email: email@example.com. Twitter: @ElizabethRenter.
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