For some people, there is an appeal to leasing a car vs. purchasing it outright. Leasing a car is one way for many would-be car owners to be able to finance a more expensive car with a lower monthly payment than they would have otherwise been able to afford.

This low monthly payment is not all it is cracked up to be, though. In fact, there are several hidden dangers when you lease a car that you do not typically find when making a purchase.

With the popularity of leasing on the rise and new commercials hitting the airwaves every week, it’s important to understand how these hidden expenses can wind up costing you more money in the long run than if you had simply purchased the car.

Here are four of the biggest hidden dangers that people face when leasing a car instead of buying a new car.

Lack of equity

While most financial experts are quick to point out that your new car loses value as soon as you drive it off the lot, they also often fail to mention that you will eventually have some sort of equity in the car.

When you finish making payments on your car loan — if you are a buyer — there is still a residual value to your paid off car. This is the value that you can sell the car for in the end. Granted, your car’s value may just be a fraction of what you paid for it initially, but it still has some value.

If you had leased the car instead, that wouldn’t be the case. When you lease a car, you agree to return the car at a predetermined point in time, typically three years after signing the lease. At the end of your agreement, you simply return your car and are left with nothing but memories.

Also can be the risk that if you wreck the car or have it stolen, your auto insurance will only cover the market value – which may be less than you owe on your lease.

Mileage limits

When you lease a car, you are typically limited to driving between 10,000 and 12,000 miles/year. If you want the best deal on a new car lease, you may find yourself stuck at the low end, with a 10,000 mile annual limit.

Many lease agreements charge 18 cents per mile or more when you go over your limit. So, for example, if you drove 15,000 miles each year during a three year lease that only provided you with 10,000 miles annually, you could be looking at an extra $2,700 in charges when you your leased vehicle to the car dealership at the end of your agreement.

Damage fees

A car lease requires that you return your car in good shape, and dealerships can vary in terms of what they consider to be satisfactory condition. What you may view as simple dings and chips from normal wear and tear may be unacceptable to the dealership when you return your car.

One friend of mine found himself penalized thousands of dollars for damage thanks to stains on the carpets of his car from coffee spills. ProTip: You may be able to take your car to the dealership for a pre-inspection before returning it, thereby allowing you to fix/clean it up before being charged.

Lots of legalese

Both leasing and buying a car can both be tricky, and car dealerships don’t make things easier on their customers with all their legalese.

You’re bound to hear terms such as money factor, residual value, capitalized cost reduction, and capitalized cost when you look at leasing a car. One of the most important figures to focus on is the money factor, which is essentially the interest rate on your lease.

You have to multiply the money factor by 2,400 in order to find the annual interest rate that the dealership is charging you. For example, with a 0.002 money factor, the interest rate is 4.8%.

Closing thoughts

Leasing a car is starting to make a big comeback in mainstream America as more consumers are looking for new cars while trying to minimize their monthly payments. According to the Automotive Lease Guide (ALG), which tracks industry leasing trends and residual values of cars, the popularity of leasing is expected to continue to increase over the next four years.

ALG estimates that leasing will grow to over 17% of the mainstream car purchasing market by the end of the year, with 43% of all luxury cars being leased. Leasing a car may be a viable option for many consumers, but you need to go into the transaction with an understanding of all the requirements, potential fees, and hidden dangers that lie ahead.

Have you ever leased a car? If so, did you run into any unwelcome surprises?

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With summer in full swing and the price of oil hovering near $90-100 per barrel, everyone is feeling the pinch at the gas pump. High fuel costs affects us every summer, and this one is turning out to be no different.

Except this year, the high cost of filling up our gas tanks has been compounded by the economy’s continued slump, high unemployment, meager savings account rates, and other trouble spots in families’ finances.

Here are five ways to save some money this summer on your gas bill.

1. Keep your car moving. I know that it may seem like a counterproductive idea to keep driving to save money on fuel costs, but stop and go traffic can play havoc on your fuel gauge. Depending on the amount of congestion that you encounter, you could be adding a lot to your fuel bill. Studies have shown that stop and go traffic can reduce mileage at least 5% to 10%. While living in the traffic-riddled city of Atlanta, my brother-in-law used to have a theory that you could save a lot of time on your daily commute by only making right-hand turns. Who would have thought that something so simple could save you money, as well.
2. Tune up your car. Studies have shown that tuning up your car can save you money on gas by improving your fuel economy. In fact, simple tune ups can save you approximately 4% on your gas costs. If you can avoid major mechanical problems with your car, you could also save on car repairs.
3. Clean out your trunk. Studies conducted by the U.S. Department of Energy found that your fuel consumption will be up to 2% higher if you drive around with an extra 100 pounds in your car’s trunk. So, for example, if you have a 15 gallon gas tank in your car that you fill up once a week, that extra 2% in fuel costs can add $50 onto the roughly $2,500 that you spend on fuel per year (assuming $3.50 per gallon gasoline). Instead, you could save money this money if you’d just stop carrying around needless gear and added weight in your car’s trunk.
4. Use gas reward credit card. You can earn up to a 5% rebate at certain national gas station chains by using a credit card like the Chase Freedom Visa when you fill up. While many of these credit cards have high interest rates, the savings or rebates may be well worth your time and effort in gas savings if you pay your credit card bills off every month instead of letting your balances carry over and accrue interest. The best credit cards can help you earn a rebate on your gas costs.
5. Carefully pick the day you fill up. I used to work at a gas station, and one of the tips that I learned was to not fill up your car while the fuel truck is there replenishing the gas station’s fuel tanks. Pumping in the new gas stirs up any sediment in the station’s large tanks and can be transferred to your car while you are filling up. Timing can also save you money on changing gas prices. Many gas station owners change their prices on Thursday mornings by 10AM. Beat the deadline if you think prices are rising, as they often do heading into the weekend when more people are on the road.

While many of these fuel (or cost) saving measures may not seem like much when you look at them individually, they can add up to some serious savings when you combine them. Saving 10% or 20% on your fuel costs can put hundreds of dollars back in your savings account every year. This can make a huge difference in your family’s budget when times are tough.

What about your fuel savings? Do you fill up your tank every week? What are some things you do to save money on gas? Did I miss any good tips?

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A few weeks ago, gas prices at our local gas station were flirting with the $4 mark. Today, they’re about $0.30 lower, but still high. I thus thought it would be worth sharing this list of the ten ways to save money on gas from the Consumer Federation of America.

Note that I’ve sorted these ideas from the most to least effective, and that the estimated savings (on a per gallon basis) are based on gas priced at $3.85/gallon. This is sort of a strange way of calculating things, but I’ll run with it since that’s how it was presented.

1. Don’t ride your brakes. Driving with your foot on the brake not only wears out your brakes, but can also reduce fuel efficiency by 35%. Take your foot off the brake, and you can save the equivalent of $1.35/gallon.
2. Drive more smoothly. By accelerating and decelerating smoothly, you can improve your mileage by 33% on the highway and 5% around town. This works out to an equivalent of $0.68/gallon. See “Hack Your MPG” for my experience with driving smarter to save gas.
3. (tie) Check your air filter. Having a clean air filter can improve mileage by as much as 10%, or an equivalent of $0.39/gallon.
4. (tie) Check your alignment. A poor alignment not only wears out your tires ahead of schedule, it also reduces mileage by as much as 10%. Straighten things out and you can save the equivalent of $0.39/gallon.
5. Don’t speed. Did you know that for every 5 mph you reduce your highway speed, you can reduce fuel consumption by as much as 7%? Slow down from 70 to 65, and you can save the equivalent of $0.27/gallon.
6. Tune up your engine. A properly tuned engine can be as much as 4% more efficient, resulting in an effective savings of $0.15/gallon.
7. Check your tire pressure. Improper tire inflation isn’t just dangerous – it can also be expensive. On average, car tires are 7.5% underinflated, resulting in a 2.8% loss in fuel efficiency. Inflate your tires and save the equivalent of $0.11/gallon.
8. Lose (or remove) weight. For every 100 extra pounds that you carry around you can lose as much as 1-2% in fuel efficiency. Get rid of that junk in your trunk (or in your car’s trunk) and save the equivalent of $0.03/gallon.
9. Check your fuel cap. A broken or missing gas cap can reduce mileage by as much as 1% and also harm the environment. Fix or replace it and save the equivalent of $0.03/mile.
10. Don’t idle. For every two minutes of idling that you avoid, you can save the equivalent $0.01/gallon. It’s not a lot, but if you idle a lot (or spend a lot of time warming up your car) it can add up. After all, you’re burning gas and going nowhere for a grand total of 0 mpg.

To these, I would add: Drive less. Walking, biking, combining trips, telecommuting, and just plain old staying home are by far the most effective ways to reduce your fuel costs. After all, if you’re not driving, you’re not using gas. Period.

You can further reduce your fuel costs by using a gas credit card that pays rewards each time you fill up. Compare credit card offers to find the one that’s the best fit for your lifestyle.

Source: Consumer Federation of America

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This is a guest post from Hank Coleman.

When you write out the check for your 6-month car insurance premium, do you ever get the sinking feeling that once again you’re paying out a chunk of change you’ll never get back?

If you’re a safe driver with a clean record, you may be thinking about raising your auto policy’s liability insurance deductible. Everyone knows the way to save money on car insurance premiums is to set the deductibles as high as humanly possible, right? But is the lower premium really worth the increased risk? Let’s take a look.

Why a higher deductible lowers your premium

The deductible is the amount you’ll pay on an insurance claim before the insurance company starts paying. You might think that a high deductible lowers your insurance premium because the insurance company’s costs are reduced by the amount of the deductible. Actually, having a high deductible on your insurance means that you’ll tend to file fewer claims, which means you’re a lower risk to the insurance company, and can therefore be charged lower rates.

Not having an insurance claim in the first place is far more profitable for insurance companies. Insurance companies survive based on how well they predict consumer behavior, and higher deductibles directly affect that behavior.

When a lower premium costs you more

How can you tell if the money you save by reducing your premium is worth the risk of the higher deductible? For example, let’s say that you reduced your six-month car insurance premium from $600 to $500 by increasing your deductible from $250 to $500. So in this example, you’d save $200 per year in premiums, but you risk paying an additional $250 out of pocket if you file a claim.

If you felt you could go claim-free for the better part of a year, you could partially “self insure” by stashing that $200 in your savings account. If you had to file a claim, you’d lose that $200 plus an extra $50, but you might come out $200 ahead. In the end, this boils down to a cost-benefit analysis.

If you’re risk-averse, you may have your deductible set as low as $250 to limit your out-of-pocket costs in an at-fault accident. I’ve had my deductible at $500 for a while now, but figured it wouldn’t hurt to call my car insurance company to find out just how much I could save if I raised my car insurance deductible even higher.

When I called my insurance company asking about raising my deductible from $500 to $1,000, I was told that the savings I would earn on my premiums would only be $27 every six months. At that rate, I would have to be claim-free for about ten years in order to recoup the increase in risk I took by raising my deductible.

Is that a risk I want to take? Personally I’d rather pay the extra $27 for the piece of mind of not having to fork over another $500 out of my emergency fund in the next 10 years. In this case, the conventional wisdom of raising your car insurance deductible may not be the best course of action for your wallet.

Get lower premiums by reading the fine print

When was the last time you sat down and read your insurance policy? Not many people fully understand what their car insurance policy covers other than the basic limits they agreed to when they bought the policy. If you’re like many busy automobile owners, you may not have looked at the details of your policies for years.

When I was looking in-depth at my car insurance policy, I realized that I was not receiving credit for the GPS tracking system that was installed in my new car. If my car was ever stolen, the tracking system could help the police locate my car. Noticing this missing discount and asking for it ended up saving me $40 per year in premiums without accepting any new risks.

No matter where you set your car insurance deductible, you need to make sure that you have an adequate emergency fund in place. If you decide to raise your deductible, you need to be able to pay that extra money out of your emergency fund should you have an auto accident. Understanding how to conduct a simple cost-benefit analysis can help you to understand how to save on car insurance without dramatically increasing the risks that you take.

How’s your deductible?

What level of car insurance deductible do you favor – higher or lower? What’s your favorite way to save on car insurance?

About the Author: Hank Coleman is a personal finance writer and entrepreneur who has been writing about investing, retirement, and insurance for years. Hank holds a Bachelor’s Degree in Business Administration, a Master’s Degree in Finance, and is currently studying for his Certified Financial Planner (CFP) credentials.

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Briefly, here’s the situation. I “inherited” a vehicle from my ex-wife through divorce. She declared bankruptcy and, rather than have the vehicle included in that (it had my name on the lien as well as hers), I took over the payments. The payments are very high [and] are a strain on my budget. I have some options, and that’s where you come in. Which of the three following choices make most sense?

• One, just pay it off and tighten my belt. I have 11 payments left.
• Two, use home equity credit to pay it off, and then pay that off over 20 months.
• Three, use my savings to pay the balance of the car loan off, then try to pay myself back.

I have another vehicle and don’t need this van, though it’s nicer than my car.

Nickel and I both had the same response – that he should try to sell the car and use the proceeds to pay off the loan, dipping into savings if necessary. This is certainly a tough situation, so I wanted to put together some thoughts on making it happen.

Assessing the car’s value

The first step in getting out of your car loan is figuring out what it’s actually worth on the open market. If you price it too low, it’ll sell fast but you won’t get enough for it. If you price it too high, you might not be able to sell it at all.

• Consider the demand for your car. If you’re trying to unload a convertible, you’ll probably be able to sell it for more when the weather is warmer. A family sedan isn’ seasonal, so you may be able to get a fair offer whatever season you sell it.
• Check out Kelley Blue Book as a starting point. But don’t just rely on the numbers from their site. You should also check out local prices on Craigslist, eBay Motors, etc.

Now that you have an idea of what you can get for your car, it’s time to see if you can get a bank to finance the difference.

Handling or financing the difference

While it would be great if everyone could just pay off their loan after selling their car, that’s not always an option. If you have a bit of money saved up, you might be able to use that to cover the difference between the sale price and what you owe on the loan. Just make sure you still have some money left in your your savings account for emergencies.

If you’re looking for possible lenders to cover the gap, here’s a list of some possible avenues to investigate:

• Local Credit Union/Bank: If you’re a member of a credit union or local bank, check with them first to see if they are willing to work with you on an unsecured loan. Many of them offer competitive rates and the fact that you’re an existing customer may increase your chances of getting approved.
• Lending Tree: If you’re looking to connect with several lenders, Lending Tree can be a helpful resource. You submit a single loan request and they provide the information to multiple lenders.
• Lending Club: Peer to peer lending has grown more popular over the last few years and for some people, it’s a great solution to their problems.

Before going down any of these roads, make sure you have all of your financial documents in order and prepare a logical pitch for why your loan should be approved. Build confidence by creating a realistic budget where you can pay back the amount in a timely manner.

Maximizing your selling price

You can’t just put a for sale sign on the car and hope someone gives you the money you need for it. Instead, you’ll need to think of ways to increase your sales price without spending a ton of money.

Prepping your car for sale

If you want to get top dollar for your car, you should take some time to make it look good.

• Vacuum the inside of the car thoroughly. If you have stains that aren’t coming off, consider buying a seat cover.
• Dust the panels and dashboard.
• Empty all junk from the trunk.
• Wash and wax the car to keep it pristine.
• Avoid heavy scents on the inside. Use a light air freshener to appeal to more buyers.
• Clean both sides of the windows. Dirt can accumulate on the inside as well.
• Replace windshield wipers if they are in bad shape.
• Check and replace your car’s fluids.

All of these steps are relatively cheap and in many cases just involves some good elbow grease. By making the car look as fresh and new as you can, you’re giving buyers the impression that you were a careful owner.

Think like a buyer

Just like selling a home, you have to get into the mind of the buyers. If they are buying from a private seller like yourself, they’ll be wondering how well you’ve maintained your vehicle. Gather and organize all the paperwork you have on every car repair and check up done. Be ready to answer questions about how recently certain work was done. A knowledgeable seller makes it easier for a buyer to trust and hopefully buy from.

Thoughts on car loans

One other point I’d like to add for those in a similar predicament is to avoid the temptation of rolling your old car over into a new car from a dealership. I knew someone who did this and it made their finances even tighter. If you absolutely need another car, find a reliable used car as cheap as you can and stick with that until your finances improve.

I hope this guide proves helpful for some people. I’m definitely open to hearing any practical tips or ideas that you might have. Have you ever had an upside down car loan? If so, how did you get out of it?

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Some people turn to “title loans” to give them a quick infusion of cash to tide them over until next paycheck. Are title loans a good option when you’re tight on money or are they a rip-off? And how exactly do they work?

How car title loans work

As the name suggests, a person can borrow money with their car title as collateral. Typically with these loans, there’s no credit check and your application is processed quickly. They’re mainly used as cash advances, and their term is usually 30 days.

The maximum amount someone can borrow varies, but it’s usually no more than 50% of the car’s value. To qualify for the loan, the borrower needs to own the car outright. After assessing the value with an inspection, there is usually a small amount of paperwork and then the money is loaned.

As with payday loans, there are term extensions that some borrowers can take out, but many times this will lead to a cycle of debt with the constant threat of repossession.

Big fees and interest rates

Title loans are not cheap. They tend to have higher interest rates than banks, credit cards, and in some cases, payday loans. As always, there’s a high price for quick cash, and it’s usually to the borrower’s detriment.

When people take out such loans they may see the amount due on the loan, but if they calculated the APR it can be over 100%! Some states, like Florida and Illinois, have placed restrictions on the interest rates and fees charged by these companies. The end result is rates that are still quite high – often around 30% – but more reasonable than in other places.

Too much risk

Putting your car on the line is leaving yourself open to a financially devastating situation. What if an emergency happens and you lose your car? Not only will you be stuck without transportation, but you’ll have given up your car in return for only a fraction of its value.

I think that if someone is having a difficult time paying bills to the point that they need to get a title loan, there is a strong possibility that they can’t afford to replace their car if they lose it.

Don’t think they’ll go after you or they’ll cut you a break? Some title lenders require GPS tracking, and may ask you for a copy of your car’s keys. Lenders do not give out money unless they expect to get it back

How to avoid taking a car title loan

In general terms, you can avoid financial disasters, or at least minimize their impact, by planning ahead and building up an emergency fund. Eliminate excess expenses temporarily or permanently from your budget. Pack your lunch, stay home instead of going to the movies, and cut the cable bill if you have to – any of these are far better than jeopardizing your financial future.

If you can’t cut your budget any further, then consider taking on a second job as an added source of income. Be a waiter or deliver pizzas – do whatever necessary to get more money into your budget. You don’t have to stay at your second job forever.

Save up a comfortable cushion of at least 3-6 months worth of your expenses and you should be able to ride out most emergencies that crop up. If you’re not comfortable at that level, work your way up to 12 months worth of expenses. Stash you funds in a dedicated savings account where you’ll be able to keep it accessible but resist the temptation of dipping into it.

What if you need the money now? Many of the above tips apply. Cut expenses, increase income, etc. If that’s not enough, check with your bank for a short term loan, sell some of your stuff, compare rates against credit card cash advances, or apply for a peer-to-peer (P2P) loan from an outfit like Lending Club. Whatever you do, please think twice before getting a car title loan.

Your thoughts on car title loans

What do you think about title loans? Do they serve a useful need, or are they predatory loans? Have you ever used one? If so, what was your experience like?

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Did you know that the EPA has approved E15 (gas with 15% ethanol) for use in 2007 model year and newer cars? In fact, they’re considering extending approval all the way back to the 2001 model year, depending on how their current round of testing turns out.

Apparently they took this action in response to a 2009 request by “ethanol backer” Growth Energy and 54 ethanol manufacturers. Keep in mind that this ruling simply allows E15, and does not require it. Still, this is something that you’ll probably run across at some point in the not-too-distant future.

In a subsequent article, USA Today tackled the question of exactly what this change means for you. In short, higher levels of ethanol could cause corrosion in engines not designed for it.

While proponents argue that ethanol is a great way to reduce our dependence on foreign oil, detractors have raised a number of concerns ranging from negative environmental effects to concerns over the impact of corn-based ethanol on food prices.

What do you think? Are you a fan of ethanol? Or would you prefer your gas straight?

Source: USA Today

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Understand the process

While there are honest car dealers out there, dealing with a bad dealership can leave a very bad taste in your mouth. If you know the tricks of the trade, though, you can go in prepared to get a fair deal for your next car.

Today I wanted to cover some of the most common tricks you’ll encounter when buying a car and/or when you do a trade-in.

Trade-in tricks

Trading in your old car help to offset a portion of the purchase price on your new car, but it’s rarely the best deal. In most cases, you’d be better off selling your old vehicle yourself and then putting the proceeds toward the new car. It’s more legwork, but if you’re patient, you can get a much better deal.

Inflated trade-in values

If you do decide to trade in your car, the salesperson might come back with a fantastic offer – perhaps much more than any other dealer would offer. Seeing as this deal is much better than what you can get elsewhere, you may go ahead and start making a deal for your next car.

The problem with this situation?

All too often, the sales guy will eventually claim that the trade-in price was rejected by his manager. He’d like to keep the deal with the new car since you’re almost done, but will offer a smaller amount for the trade-in. At that point you may be so emotionally invested with the process that you’re likely to accept his offer.

Don’t fall for this trick. Stand up, start moving toward the door, and ask the salesperson to lower the new car’s price correspondingly. If they won’t budge, you may just want to walk away.

Holding your keys

Another possible gotcha occurs after you hand the dealer the key for your trade-in. There have been stories where dealers kept potential customers in the showroom by “misplacing” their keys. In fact, our friends had it happen to them. Upset with that old trick, they wound up leaving without purchasing anything.

Scams when buying a car

The biggest advantage you can have when buying a car is knowledge. Don’t go into a dealership without knowing what kind of car you’re looking and how much it should cost. If you’re prepared, you’ll be able to spot outrageous offers and comfortably walk away.

Foursquare – bad math

If a salesperson asks how much you’re willing to pay per month for your car, watch out! Some dealerships coach their salespeople pull out a foursquare chart to maximize their profit by only focusing on your monthly payments.

Payments can be reduced by extending the length of your loan, or by including a balloon payment. Know what you’re looking for and tell them what – and how – you want to buy. Use sites like Kelley Blue Book and Cars.com to see what your dream car is worth and how much people are paying for in your area.

Instead of getting into the tricky math at the dealership, focus on the bottom line – the total price you’re willing to pay for the car. If you need financing, you should consider lining it up on your own rather than including that in your negotiations.

Lowball first offer

Similar to the overly-generous trade-in offer discussed above, it’s not uncommon for a salesperson to give you a too-good-to-be-true price on the car you want to buy. As you rush to close the deal, however, the manager inevitably comes in and says that the price is too low. They can’t sell it to you at that price because they would “lose money.” Don’t fall for it.

If a salesperson has been at the dealership for any reasonable amount of time, they’ll know what sort of deal will pass muster and what will get rejected. Simply tell them that you understand, but that you’ll need to find a deal that is better suited to your situation. Then get up and head for the door. If they capitulate, great. If not, keep walking.

Push you to pay more

Finally, be on the lookout for attempts to add extras to your purchase. Maybe they’ll claim that the bank requires you buy a warranty before they’ll approve the loan. Another tactic is to use your credit score as an excuse to get you into a ridiculously high rate car loan. They may be right that your score won’t get you the lowest interest rate, but it doesn’t mean you have to take the worst.

The best way to prepare is to know your credit score. You should also check with your local bank or credit union to see what sort of interest rate you can qualify for. Knowing these things in advance can help you evaluate any deal you come across.

Your car dealer experiences

Not all dealerships are shady, but you still need to be very cautious.
What sorts of car buying experiences have you had? Good? Bad? Any tips or tricks for getting a great deal?

Note from Nickel: My preference is to avoid the showroom entirely, and to negotiate the deal via e-mail and/or fax. That way you can play dealerships against each other and find the bottom of the market without racing all over town. It also keeps you out of the sales office, so you avoid any shenanigans.

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After the accident, he said that he was messing with his cell phone when he saw a car “pop out of nowhere.” He then swerved into our lane where he rear-ended us.

We’re grateful that it wasn’t worse, but we’re definitely upset by all the work we’ve had to do to get the car fixed (possibly replaced) just because some guy was messing with his cell phone.

What to do when filing a claim

Even if you’re in the right and have been a victim in a car accident, you have to make sure you follow your insurance company’s procedure for filing a claim. If you don’t, you can expect headaches and problems with getting the claim sorted out, and you might not get the money you deserve.

Exchange information

After you’ve established that everyone is okay, go ahead and exchange information with the other driver(s). Besides getting their name, contact information, and license plate number, you should get their VIN and car insurance information (including the policy number).

While this is generally easy, sometimes the other driver will be belligerent, especially if they know they’re at fault. Don’t say anything to provoke them. Instead, just wait for the police to arrive – you did call them, right?

Another point to consider is whether or not you should talk about the accident with the other person. In general, it’s a good idea to avoid speaking about the details of the accident with the other driver. This helps to protect you from a misunderstanding, and from them blaming you when it’s really their fault.

Contact your car insurance company

Another important step is to contact your car insurance company as soon as possible. Some insurance companies have very specific time frames for reporting claims. As soon as the police officer finished up, I called our car insurance company.

If you have serious injuries, of course, you should get them taken care of immediately – the insurance company can wait. Even if you think you’re okay, you might want to stop by an urgent care center to double check for any injuries related to the accident.

While I felt fine for a few minutes after the accident (aside from a killer headache), I noticed that my knee was bleeding. It didn’t look too bad, so we didn’t need an ambulance. Since our car was still functional, we drove ourselves to urgent care. I ended up getting a tetanus shot and a prescription for a pain killer.

While waiting for the nurse, my husband and I called and gave the insurance company all the information they needed. This included:

• Names and contact information of all involved
• Names and contact information of any witnesses
• Vehicle information and VIN of the other car
• Detailed description of the accident
• Information on any injuries and/or medical treatment sought

If you have the presence of mind, you should try to give them this information as soon as you can after the accident, or at least write down the details so you don’t forget anything important.

Take pictures and organize your documents

My husband took numerous pictures of our car, but forgot to get pictures of the other guy’s car. Along with the photos, we’ve been accumulating related documents, receipts, and paperwork in a central spot.

When you’re getting phone calls and scheduling repairs, it’s very helpful to keep all of your information organized. If you don’t, you might lose documents that you don’t even know you’ll need.

Be careful before signing anything

While your car insurance company is processing your claim, take some time to review your policy to make sure you’re getting everything you’ve paid for. If you don’t understand any part of your policy or claim, call your insurance company for a thorough explanation.

Insurance companies often try to give you estimates of losses that are lower than your actual losses. Don’t accept their estimates without getting some estimates of your own. Also be sure to read any paperwork that you’re given to make sure you’re not signing off on anything that you don’t agree with.

Your thoughts

Have you ever been in a car accident? If so, what happened? And how did the claims process go? Did the other driver or their insurance company give you a hard time? What about your own insurance company? Please share your thoughts and experiences in the comments section.

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At some point we’re going to have to replace them, so we opened a savings account specifically for a new car. Even though we hope to put off the purchase as long as possible, we want to prepare now for the inevitable purchase.

What’s your budget and time frame?

The biggest factor for most people when deciding whether or not to buy a new car, as well as which one to get, is their budget. You have to first determine how much you can afford, and then whether or not you’ll be able to buy it with cash, or if you’ll have to take out a loan.

Having no car payments is great for your monthly budget, so don’t just assume that you should go for a new car loan like many people do. If you are looking at making car payments, you should plan on making a nice sized down payment to minimize your monthly obligation.

If you already own a car, you have two options, and each has its own pros and cons.

• You can drive your current car until it completely dies. This option can give you some more time to build up your car fund. The downside is that you won’t get much (if anything) in return for your current car.
• You can buy another car sooner and sell your old car. This option may give you some more money than the first (depending on the condition of your car), but it also means you’ll have to buy a new vehicle much sooner.

In our case, we’re planning on driving our cars for at least a few more years. We’d like to build up our car replacement fund up to an adequate level instead of having to borrow a bunch right now.

What to look for in your next car?

Before getting into the new vs. used debate, you should have a list of desirable features in mind for your next car. This list should include both deal-breakers and preferences. Some factors to consider include:

• Manual vs. automatic transmission
• Coupe vs. sedan vs. SUV
• Passenger and cargo capacity
• Engine size
• 2WD vs. 4WD
• Standard vs. hybrid drivetrain
• Historical reliability
• GPS, Onstar, entertainment system, etc.

Using resources like Consumer Reports and Edmunds can help you determine which cars fit your needs. Regardless of where you stand on the above list, you should always consider the total cost of ownership on the various makes and models.

Now that you have an idea of the type of car you want, you can decide whether you should get a new or used model.

Buying new vs. used

Many personal finance bloggers, including myself, have written about the financial virtues of buying used vs. getting a new car. I’ve come to learn, however, that it’s not always as clear cut as you might think.

You should really weigh all your factors when looking at buying either new or used. How long do you plan on keeping your next car? If you’ll only be keeping it for 3-4 years, then why lose all that money on depreciation with a new car? If, on the other hand, you plan on owning it for the life of the car, then this becomes less of an issue.

Another factor to consider is the historical rate of depreciation for your desired make/model. Some cars depreciate rapidly whereas others depreciate very slowly. In the former case, you’ll likely do better with a late model used car. In the latter case, you can get the peace of mind that comes with a new car purchase without paying a ton of extra money.

After you’ve gone ahead and decided on the car that you want, you should check out the series that Nickel wrote about getting the best deal. You can save a lot of money by following his tips.

• Part I of “Buying a New Car”
• Part II of “Buying a New Car”
• Part III of “Buying a New Car”
• Part IV of “Buying a New Car”

Your thoughts and tips on buying a car

I’d love to hear your take on buying a car. Have you purchased a new (or new to you) car recently? If so, what factors did you consider when shopping? Did you buy new or used? Why? And do you have any tips for getting a great deal?

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He seems determined to get us to use him for all our insurance needs. I told him that would be fine; we’re always trying to get a good deal. I doubted he could offer something comparable to what we have now since it’s already such a good deal.

He called again Friday and told me his quote, and suggested that we review the copy he’d be sending in the mail. That’s good, because I don’t make big decisions like that over the phone; my husband and I like to research the numbers and ask around for opinions on customer service. I also look at companies like NetQuote, Geico, Esurance, and Progressive to make sure I’m getting a fair deal (compare rates and get tips on how to save at our post on how to save money on car insurance).

Examining car insurance coverage

The first we did when comparing rates was to pull out our existing car insurance policy so we could compare apples to apples. Here’s what we’re looking for in car insurance coverage:

Bodily Injury ($100,000/$300,000): We need to coverage to protect us from medical bills and lawsuits from any injuries or death that are our responsibility. North Carolina has a lower requirement for bodily injury ($30,000/$60,000), but we believe medical bills can easily top those amounts so extra coverage is important for us.

Property Damage ($100,000): This coverage will pay for any property we damage (such as to someone else’s car) due to an accident. This amount reflects the maximum paid per accident; we think $100,000 should be enough to cover these expenses. North Carolina only requires $25,000, but we think that is too low. We could save money on our premiums if we went lower, but we’d then be responsible for anything over our coverage limit.

Uninsured Motorist Coverage ($100,000/$300,000/$100,000): If we get into an accident due to the other driver’s fault and they don’t have insurance, then this protects us and our property.

Collision: Collision coverage can help when your car is damaged and is in need of repairs. It also includes repairs if your car is broken into. We currently only have collision for my car (2000 VW Jetta). If you have a car loan, most lien holders will require collision, but it’s optional once you pay the loan off. Since collision typically pays up to the value of the car, having coverage for my husband’s car (a 1994 Acura Integra) didn’t make financial sense.

Coverage-wise the new offer looks about the same, but I noticed that our current policy is has slightly lower premiums.

Discounts for car insurance

While reviewing the new policy, I noticed it was lower than what he had been quoted by the same agent months before, and I wanted to know why. I noticed that we now qualified for more discounts. Besides having a multi-car policy, we were now having a multi-policy discount with this insurance company. After getting some more information on our cars, he included discounts for having car alarm systems installed, and we also qualify for something called NC Tiering Program.

Beyond the above, you can also get a better rate though big things like not having any accidents as well as little things like having a clean credit report. With everything included, our 12 month car insurance premium would be around $775/year or about $65/month. It’s definitely in the ballpark with our current policy so we’re considering it. One thing in favor of the new policy is that it would simplify things a bit, as we’d only have one insurance agent.

Consider your Circumstances

Besides price, we’re also looking at any extra benefits of the policy. The car insurance policy the new agent quoted has lower deductibles ($500 instead of $1,000), but our current policy has towing and roadside assistance included with no additional charge.

The new policy quote doesn’t include towing on it, so I’m going to ask the agent if that’s an additional charge. We’ve already used the roadside assistance with our current policy a few times, so we’re definitely interested in keeping it. While celebrating our anniversary, for example, our car got stuck in the mud. All it took was a quick phone call to get a tow truck dispatched, and there was not out-of-pocket expense.

How do you save on car insurance?

Now that you’ve heard about our situation, I want to hear about your tricks for shopping around for car insurance and getting a better deal. What tips do you have for saving money on car insurance? Please let us know by leaving a comment.

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Aside from carpooling, there are a number to reduce our automotive expenses. Today I’m going to highlight some suggestions that will hopefully save you some money.

Saving money on gasoline

Saving money on gas is a big concern for us. My husband is in the habit of saving gas receipts and dumping the information into a spreadsheet. He’s therefore able to track and see his gas mileage and spot trouble. For example, we noticed that I needed a tuneup when my car’s mileage dipped lower than normal.

Your behavior behind the wheel can also help improve your mileage and thus save money. “Hypermiling” was a popular term when gas was $4/gallon and everyone was trying to cut down on fill ups. The term basically refers to driving in a more fuel efficient way, though some practitioners take it to the extreme. For most drivers it boiled down to a few simple changes when they’re on the road.

• Track your mileage. Take a page from my husband’s book and record your miles driven and gallons burned after every fill up in a mileage spreadsheet.
• Drive the speed limit. Life in the fast lane isn’t always better, as your mileage drops dramatically at high speeds.
• Reduce fast acceleration and braking. By maintaining a relatively steady speed, you can waste less gas. Anticipate the traffic and lights ahead and coast if possible. If you’re driving a distance on a relatively flat highway, consider using cruise control to help you maintain a fuel efficient pace.
• Turn off your car to reduce idling. I was surprised to learn that if you’re going to be idle for more than 10 seconds, it pays to turn off the car and restart it later. While I’m not comfortable doing this at a red light, it might be useful for those waiting to pick up their kids from school.

Saving on car insurance

Another big expense with owning a car is having enough insurance to cover it. Over the years, we have found ways to save money on car insurance.

Shop around for the best deal. It’s amazing to me how effective shopping around can be. There can be a huge difference between insurance companies for the same coverage on the same car. When I shopped around for car insurance, I discovered that by switching companies I could save $40/month — a huge savings for a college student.

See if your memberships can get your a good deal. We really saved money with this tip. After doing our regular, semi-annual price shop, we checked our Costco membership and found a policy for about half of what we were paying. We’ve also taken advantage of the free towing and roadside assistance that they offer.

Maintaining your car

My husband and I are thrilled that we don’t have any car payments. We’d like to make this situation last as long as possible, so we’re doing our best to keep our cars in good condition. The good news is that it’s possible to do some minor checkups and car maintenance yourself. Not only will you save some money, you’ll also learn quite a bit about your vehicle.

• Air filters: A clogged air filter can decrease your fuel efficiency, so check it out whenever you get a tune up.
• Clean the car inside and out: Not only does this improve the appearance of the vehicle, but you can use it as a chance to see if there is any rust or other maintenance problems developing. Having a clean car may also help reduce your urge for a new car that you can’t afford.
• Fluids: Checking and filling your fluids yourself is a great way to keep your car running smooth while saving money.
• Tire pressure: This is a common tip for saving gasoline, but it’s not a big win according to Edmunds’ tests. Regardless, underinflation can wear out tires quicker and become a serious safety issue.

If you’re not a handy person, then by all means spend some money on a trustworthy mechanic. Either way, having regular check ups on your car can improve the life of your vehicle and save you money at the pump.

Replacing your car

Eventually, even a well maintained car will break down and you’ll have to find a replacement. Having a car replacement fund allows you to get a car without having expensive financing.

Open a high interest savings account specifically for your car replacement fund. We’ve used ING Direct for our savings for the last couple of years. If you already have an account with them, setting up a sub-account takes less than 5 minutes. Having a separate account reduces the chances of you dipping into it before your next car purchase.

It’s also a good idea to automate a deposit into your car savings account every time you get paid. Have the transfer go from your checking account into your savings account immediately after getting paid. If you don’t, you might spend the money instead of saving it. If you can, aim for saving a car payment ($250-$350) into your fund each month.

Any other suggestions?

I’ve shared some of my favorite tips, and I hope that they help you reduce your car expenses. If you have any tips, please share them as I’m hoping to stretch our transportation dollars even further.

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This an interesting problem…

On the one hand, it doesn’t seem fair to hit someone with a higher fine just because they have more money in the bank. On the other hand, while a “typical” speeding fine might really strain a poor person’s budget, it wouldn’t even register for a wealthy person. Thus, as long as you have enough money, you can essentially ignore things like speed limits, at least from a financial perspective.

Of course, there are other types of punishment available, such as suspending a driver’s license. But this still begs the question… Is it fair to index punitive measures such as speeding fines to an offender’s ability to pay? Is it fair not to do this? What do you think? Please share your thoughts in the comments.

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The cost of owning a car

Here’s a look at all the budget categories you may want consider when attempting to nail down your auto expenses:

1. Purchase price – payment (cash and/or financing and interest) to acquire the vehicle
2. Taxes – paid when you buy or sell the vehicle
3. Fuel – the gasoline/fuel you need to make the vehicle run
4. Insurance – all levels auto insurance including personal liability, collision, comprehensive, roadside assistance, etc
5. Tags and registration – state vehicle registration, license plates, and renewal tags
6. Repair and maintenance – tires, oil changes, and all other repairs and maintenance necessary to keep your vehicle operational

Today we’ll set aside the first five categories and focus solely on budgeting for repairs and maintenance.

Benefits of controlling these costs

Many of the benefits of controlling your auto maintenance costs are similar to those you experience when gaining control over any area of your money, so let’s focus on those that are specific to the topic. Proper budgeting for auto repair and maintenance will allow you to:

• Have a better relationship and better communication with your auto mechanic
• Prepare/plan better so you don’t have to race to get oil changes before your next trip
• Reduce your maintenance expenses going forward
• Relax in the knowledge that you’re prepared

You can achieve all of these things simply by setting aside enough money to cover your expenses. That way you won’t have to stress or worry about where the money is coming from — if it can be found at all.

A simple, average amount

Before we try to determine specific dollar amounts for your individual situation, let’s talk about a simple, average amount that people can start with. If you want a detailed break down of costs for your exact vehicle and situation… Scroll down to the next section.

Earlier this week, I spoke with my trusted auto mechanic — Sam — about how much the average person should budget for auto repair and maintenance. These are the numbers he gave me:

On average $1,200 per year per vehicle, is a great place to start. This means $100 per month for each vehicle.

Remember that these numbers are averages, so… While there will always be exceptions to the rule, this amount should cover “typical” maintenance expenses. Of course, it’s important to actually have this money set aside so you can spend it in a lump sum if necessary.

Robert Espe, a frequent DebtFreeAdventure, says the he budgets $2,000/car per year, and also reminds us that although there is no exact answer that will work for everyone.

Figure out your total cost of ownership

For all you fellow geeks out there who want to nail down costs to the exact penny… This section is for you! Rather than guessing at or estimating monthly amounts, use this information to figure out exactly how much it will cost you to purchase, own, operate, and maintain your vehicle over the entire life of ownership.

Here are a few tools to help you figure out exactly how much you are spending to help you get an idea of how much you need to budget:

• The Total Cost of Ownership Calculator from Edmunds
• The Car Operating Cost Calculator

The Edmunds tool is only for current car models, whereas the other one works regardless of your situation. Also note that these tools are very comprehensive, even taking into account depreciation. I recommend setting aside some time and playing around with these calculators so you can nail down the real cost of owning and maintaining each of your vehicles.

What about you?

Do you budget for automotive expenses? If so, how much do you set aside for these expenses each month?Do you check your free credit report to budget your automotive expenses?

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Looking at overall brand reliability, Japanese imports clearly rule the roost, whereas domestic brands are generally well down the list. Here’s the rundown:

• Scion
• Honda
• Toyota
• Infiniti
• Acura
• Mitsubishi
• Lexus
• Hyundai
• Porsche
• Mercury
• Saab
• Subaru
• Suzuki
• Kia
• Mazda
• Ford
• Nissan
• Volvo
• Buick
• Lincoln
• Volkswagen
• Pontiac
• Mercedes-Benz
• Audi
• Chevrolet
• BMW
• Mini
• GMC
• Saturn
• Jeep
• Dodge
• Cadillac
• Chrysler

Of course, these rankings are based on the average predicted reliability ratings of all models for each brand. It’s thus important to keep a couple of things in mind here…

First, the reliability ratings might not be entirely accurate, as there isn’t a whole lot to go on when making predictions for new models. In some cases, these predictions are based on data from just a single year.

Second, companies at the high end aren’t immune from producing a dud, whereas some at the low end actually have a decent model or two. For example, the Toyota Tundra is (slightly) below average despite coming from the 3rd best maker, whereas the Dodge Caliber is (again, slightly) above average despite coming from the 3rd worst maker.

CR points out that, “as a group, inexpensive small cars and midsized family sedans are the most reliable.” They also made clear that the difference between the best and worst models is dramatic. In fact, the Volkswagen Touareg (worst) is 27 times more likely to have problems than the top-ranked Honda Insight.

Interestingly, five of the top eight most reliable family cars were hybrids. The NY Times “Wheels” blog inquired about this surprising (at least to some) result, but CR held their ground.

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This program has been a mixed blessing for the auto industry. The cash incentives have resulted in increased sales, but reimbursement delays have simultaneously created a financial burden on cash-strapped dealers. Some dealers have already dropped out of the program due to cash flow problems created by the delays.

It’ll be interesting to see what happens to new car sales after the program ends. I’m guessing that these rebates did little more than cannibalize future sales, such that car lots will be a very lonely place by next week. Then again, because the clunkers must be destroyed, a used car shortage could help prop up new car sales.

As an aside, charities that depend on used car donations are none too happy about the clunker-destruction requirement.

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According to AP reports, nearly 23k vehicles had been sold under the program by late Wednesday, using up nearly $96M of the budget. However, many dealers have reported that large numbers of claims had yet to be processed by the government, thereby prompting the suspension.

According to Bailey Wood, spokesman for the National Automobile Dealers Association, “There’s a significant backlog of ‘cash for clunkers’ deals that make us question how much funding is still available in the program.”

For those that have taken advantage of this program, White House spokesman Robert Gibbs has gone on record that “all valid CARS transactions that have taken place to-date will be honored.”

Assuming that the money truly is exhausted, Congress is looking for ways to extend the program. Thus, it’s quite possible that it will be revived in the coming days. What do you think? Should it be brought back to life? Or should it stay dead?

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A bit of background

From the time we met in 2003 up until seven months ago, my wife and I had always viewed two cars as a necessity. Then on Thursday, December 19th, 2008 I rear-ended a pickup truck at a busy intersection and wrecked my 2001 Jeep Cherokee.

At the time, my Jeep was worth about $5,000 and the initial quote to repair the damage was upwards of $9,000! In other words, it was totaled. I called a mechanic friend up and asked if he could come by and give it a once over to see if anyone he knew could do the body work for a reasonable amount of money. He obliged.

As it turns out, he did have a business associate who, despite being a wee bit unreliable, would be able to do the work for around $3,000 parts and labor. I jumped at the chance.

As the weeks rolled by and my Jeep was still “being fixed,” I grew increasingly impatient and my wife was far from happy. After all, she was the one responsible for carting me around until my Jeep was back in working condition.

The weeks turned into months, and now here we are in the middle of the summer and I still don’t have my Jeep back! We’ve certainly learned an important lesson about “getting a good deal,” but that’s a topic for another post.

Today I want to focus on how we successfully adapted to becoming a one car family. without killing each other, or hating the end result.

Changes we’ve made

My wife and I work in different towns, so she started dropping me off at a bus stop on her way to work. From there, I was able to catch a bus straight to my workplace. The stop was right off an expressway exit for her, so it took little more than five extra minutes each morning.

To save money, I purchased bus passes in 10 ride increments and wound up paying $1/ride. After work, I would catch a bus back to the dropoff/pickup spot and wait for my wife to arrive on her way home. We coordinated the pick up times via phone, and it worked out quite well.

Once summer came, and my wife began her three month vacation, things changed a little. Some days (fewer than I would like) I ride my bike about 10 miles to and from work. On days that I don’t ride, my wife gets up with me and drives me in.

I don’t want to spend too much more time talking about how we get around with just one car, so I’ll just say this: We do our best to coordinate our schedules, and we go out of our way to accommodate each other. A side benefit is that we get to spend more time together.

Tips for making it work

• Increase organization. Creating (and using!) a “Family Calendar” has gone from being a bit of an inside joke in our marriage to being a necessity. Before we commit to anything, we check the family calendar for availability and vehicle options.
• Embrace the bike. Unless you own a pair of shorts with a pad in the crotch, you probably don’t ride your bike as much as could/should. We didn’t either. If you want to increase your bike usage, get in better shape, ditch your gym membership, or all of the above… Simply get rid of one of your vehicles.
• Ride the bus/train. Using public transportation in small town USA might make you feel like a bit of a pariah, but… I got past that, embraced my options, and used them to improve my situation. I found that counting myself among all other people, regardless of income or status, was healthy on many different levels.
• Carpool whenever possible. Share rides with friends or neighbors when you can. Just be careful not to take advantage of them. It’s always a good idea to offer some sort of payment if you can’t fully reciprocate, and always work to fit your life around their schedule.
• Stay home more. Enjoy time with your family, complete projects around the house, read more, make/eat homemade meals, grow a garden, talk to your spouse more, and/or spend time with your kids. All of these things will have a positive impact on your life.
• Simplify your life. Getting rid of a vehicle may seem like it complicates things, but we found that it actually made our lives far simpler. The whole process forced us to “trim the fat,” so to speak. We’ve learned better communication and organization and, now that we’re seven months into it, we’ve come to enjoy the increased levels of simplicity and contentment.

Making it permanent?

What really surprised me was that my wife asked me the other night if we should just sell my Jeep when we get it back. That’s actually what inspired me to write this post. If you knew my wife, you’d be surprised, too. She’s taken this all in stride, but was pretty annoyed with the whole situation at first.

Over time, however, the idea of having just one care has grown on her. When you add up all the associated costs, getting rid of the Jeep altogether would save us around $350/month. That’s money that we could be using for getting out of debt instead of tooling around town.

So no… We still don’t have the Jeep back, and we’re now seven months into the repair process. I’ve begun calling the bodyshop guy every day to ask for status updates, and things have started moving faster. We’re still not sure if we’ll sell the Jeep when we get it back, but we sure are leaning that way.

We just don’t seem to need it anymore!

What do you think?

If your hand was forced, as in our situation, could you and your wife/family get get by with one less vehicle? How much trouble would it cause? How much money would it save?

What if you weren’t forced? Would you ever consider getting rid of an extra vehicle voluntarily?

Or perhaps you’ve already done it… If so, please weigh in.

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Officially known as the Car Allowance Rebate System (CARS) Act, the “Cash for Clunkers” program is intended to: (1) get gas guzzlers off the road, and (2) stimulate new car sales. We’ll just have to wait and see how well it works on both accounts.

Details of the Cash for Clunkers program

According to the official CARS website:

• Your vehicle must be less than 25 years old on the trade-in date
• Your vehicle must be in drivable condition at the time of trade-in
• Only purchase or lease of new vehicles qualify
• Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements)
• Trade-in vehicles must be registered and insured continuously for the full year preceding the trade-in
• You don’t need a voucher, dealers will apply a credit at purchase
• Program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first
• You can combine the CARS rebate with other State and Federal incentives, such as the hybrid vehicle credit
• Not all dealers will be participating in the program, so check before buying
• The vehicle that you are trading in is required to be destroyed

Note that, because your trade-in will be destroyed, the dealer is unlikely to offer you more than its scrap value. Still, for a crappy old car, the scrap value plus the $3500-$4500 credit might be worth taking advantage of.

Another point to keep in mind is that, while transactions taking place on or after July 1st will qualify, full details of the program won’t emerge until later in the month. Thus, you might want to wait a bit before jumping on this.

More info is available from the official site. If you’re curious about what sort of (official) mileage your old car gets, you can check it out at FuelEconomy.gov.

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Keep your driving record clean

In other words, don’t get nailed for speeding like I did a few months back. I was fortunate in that it was a first offense, and I was able to keep my record clean by pleading nolo contendre (no contest) and paying the fine, but… Next time I won’t be so lucky, as I’ll wind up with points on my license and higher insurance premiums.

Increase your deductible

If you’re willing to bear a greater portion of the risk, you can save a significant amount of money. Simply call your agent and ask them to increase your deductible. Just be sure that you have enough cash on hand to cover your out-of-pocket expenses in the event of an accident.

Drop unnecessary coverage

If you’re driving an older car, you might want to consider dropping your comprehensive and/or collision coverage entirely. After all, what’s the sense in paying a ton of money to insure against damage to a car that might not be worth repairing? Note that I’m not suggesting that you drop your insurance coverage entirely, just the portion that pays for repairs on your own car.

Bundle multiple policy types together

I can’t speak for all insurance companies, but we get a nice “multi-line” discount for carrying multiple policies with a single company. We actually have two car policies, our homeowner’s policy, a personal articles policy (for my wife’s engagement and wedding rings) and an umbrella policy all with the same company.

Ask about other discounts

You might qualify for discounts for being accident-free, renewing your policy, driving relatively few miles each year, taking a defensive driving course, etc. Be sure to talk to your agent and get what you have coming to you.

Shop around

Assuming that you’re doing everything else right, another great way to save money on car insurance is to comparison shop. You can either call around to local agents, or use the auto insurance comparison tool at FiveCentNickel. Whatever you do, be sure to buy from a reputable company so you won’t run into any problems if/when you file a claim.

So there you have it… Six simple tips for saving money on car insurance. If you have any further suggestions, please be sure share them in the comments.

.

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“The Internal Revenue Service announced today that taxpayers who buy a new passenger vehicle this year may be entitled to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns next year.”

While you’ve been able to deduct sales taxes for quite some time now, this deduction was previously limited to those that itemize their deductions, and you also had to make a choice between deducting your state income tax and your sales tax.

Details of the New Car Sales Tax Deduction

The deduction is limited to state local sales and excise taxes on up to $49,500 of the purchase price of a qualified new car, light truck, motor home, or motorcycle. In order to qualify, the vehicle must have been purchased between February 16, 2009 and January 1, 2010.

The deduction phases out for individual filers with modified adjusted gross income of $125k-$135k and joint filers in the $250k-$260k range. As noted above, you can claim this deduction even if you don’t itemize your deductions.

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“The best vehicles are built by Honda, Subaru, and Toyota. They make well-rounded cars that excel across the board…”

That’s not to say that every model made by these companies is highly recommended. In fact, the Honda Element, Toyota Yaris, and Toyota FJ Cruiser scored low enough that they weren’t recommended.

Amongst domestic automakers, Ford came out on top. However, they were only the 12th best carmaker out of the 15 under consideration. Suzuki, General Motors, and Chrysler brought up the rear (in that order).

This is what CR has to say about Chrysler:

“Overall reliability of Chrysler vehicles, which was average last year, dropped to below average this year. No Chrysler, Dodge, or Jeep vehicles are recommended.”

Yes, you read that right… Consumer Reports doesn’t recommend a single Chrysler, Dodge, or Jeep model. Ouch.

What about GM’s claim that they build 19 cars that get at least 30 mpg on the highway? That’s technically true, but those cars are “a relatively low percentage of [their] fleet.” Moreover, CR has found that “even non-SUVs from Detroit tend to have among the worst fuel economy in their class.”

The good news for GM is that their newest models actually performed reasonably well in CR’s testing, though their reliability still lags behind the competition. Similarly, Ford has some models that do quite well, but most fall somewhere in the middle of the pack. And Chrysler? Well…

“Most models… have noisy, inefficient, unrefined powertrains; subpar interiors; and poor visibility.”

It’s hard to believe, but they’ve actually gotten worse since last year, when they tied for last place with Suzuki.

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We learned the hard way

Shortly thereafter, we got a phone call from the shop. My brother needed to pay around $1,200 to replace his clutch. The amount surprised us, and we asked if it would be possible to get it running so he could get home. Unfortunately, it wasn’t.

We had the car towed back to my brother’s home thinking that it’d be awhile before he had enough saved up for the repairs. Shortly thereafter, I received a call from my mom to let me know that the car was running again. She had an acquaintance who does car repairs, and she asked them for help. The total cost? Less than $20!

Do you know what they found? The car had no oil in it! They also replaced a missing hose. My brother is very fortunate that he didn’t lose the car. He’s also fortunate that he didn’t spend $1,200 on an unnecessary repair. He has now learned how to check and change his own oil, and we all learned a valuable lesson: Learning some of the basics of car repair can save you a lot of money.

Do-it-yourself isn’t hard

Maintaining a vehicle costs money, but just blindly trusting a mechanic can cost you even more money. In fact, typical labor rates range from $50-$120/hour. Being able to handle some basic car repairs can increase the life of your vehicle and keeping money in your pocket (some of which should be set aside for huge repairs).

If you’ve never done this before, start small. Don’t risk ruining your engine or transmission just to save a few bucks. Here are some relatively easy things you can do to keep your car in good condition:

• Check all fluids in your car (motor oil, washer fluid, and transmission fluid) and adjust their levels as needed
• Check, clean, and perhaps replace the air filter your car. When air filters are clogged, your gas mileage deteriorates.
• Check your tires to make sure the pressure is correct as determined by your owner’s manual. Keeping your tires at the proper inflation improves gas mileage and can extend the life of your tires.
• Check and maintain your car battery. Keep it clean by removing any deposits on the posts. They usually last around 5 years before needing to be replaced.
• Replace your windshield wiper blades if they are worn. Tell your local auto parts shop which car you need them for and they’ll find the match. You might also want to apply some Rain-X at the same time.

Look at your car’s manual and follow that maintenance schedule given, some repair shops recommend more frequent maintenance schedules to increase their revenue.

DIY doesn’t mean you can’t have help

If it makes you feel more comfortable, help someone else with their do-it-yourself maintenance. This will give you a chance to ask questions and take notes. And once you’re ready to do your own maintenance, be sure to keep records of what you did and when.

If you need some sites to learn how to perform some of these maintenance checks, here are some helpful links that I found and used for the article:

• Change Your Own Oil
• Keep Your Battery Connections Clean
• Replace Your Fuel Filter
• Change Your Wiper Blades

If you doubt your abilities or want a professional to handle it, then by all means, find a good mechanic that you can trust.

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If you don’t laugh, you’ll cry. Enjoy!

Source: Buffalo Beast

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The ever-increasing number of winners makes me wonder if cars actually getting safer, or if carmakers are just getting better at beating the tests. Hopefully the test results are reflective of real-world safety improvements.

While the list of winners is rather lengthy, there are some notable features. For example, Ford and their subsidiary Volvo had 16 winners, whereas Honda/Acura has 13 winners. Also, Honda, Acura, and Subaru have at least one Top Safety Pick in every vehicle class in which they compete.

Here’s the full list of winners…

Large cars

• Acura RL
• Audi A6
• Cadillac CTS
• Ford Taurus
• Lincoln MKS
• Mercury Sable
• Toyota Avalon
• Volvo S80

Midsize cars

• Acura TL, TSX
• Audi A3, A4
• BMW 3 series, 4-door
• Ford Fusion w/optional ESC
• Honda Accord, 4-door
• Mercedes C class
• Mercury Milan w/optional ESC
• Saab 9-3
• Subaru Legacy
• Volkswagen Jetta, Passat

Small cars

• Honda Civic, 4-door (except Si) w/optional ESC
• Mitsubishi Lancer w/optional ESC
• Scion xB
• Subaru Impreza w/optional ESC
• Toyota Corolla w/optional ESC
• Volkswagen Rabbit

Minicar

• Honda Fit w/optional ESC

Midsize convertibles

• Saab 9-3
• Volkswagen Eos
• Volvo C70

Minivans

• Honda Odyssey
• Hyundai Entourage
• Kia Sedona

Large SUVs

• Audi Q7v
• Buick Enclave
• Chevrolet Traverse
• GMC Acadia
• Saturn Outlook

Midsize SUVs

• Acura MDX, RDX
• BMW X3, X5
• Ford Edge, Flex, Taurus X
• Honda Pilot
• Hyundai Santa Fe, Veracruz
• Infiniti EX35
• Lincoln MKX
• Mercedes M class
• Nissan Murano
• Saturn VUE
• Subaru Tribeca
• Toyota FJ Cruiser, Highlander
• Volvo XC90

Small SUVs

• Ford Escape
• Honda CR-V
• Element
• Mazda Tribute
• Mercury Mariner
• Mitsubishi Outlander
• Nissan Rogue
• Subaru Forester
• Toyota RAV4
• Volkswagen Tiguan

Large pickups

• Ford F-150
• Honda Ridgeline
• Toyota Tundra

Small pickup

• Toyota Tacoma

Source: IIHS.org

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This time, I had to make a 350 mile roundtrip on the interstate. As such, I decided to drive “normally” on the way out, and to go out of my way to keep my speed in check on the way back. I filled my tank at the beginning, at the turnaround point, and at the end. Thus, I was able to calculate my mileage for each leg. For background, I have a 2005 Honda CR-V that’s supposed to get 23 city mpg and 29 highway mpg.

The impact of slowing down

As noted above, I drove “normally” on the way out of town. For me, this meant running at roughly 75 mph. In order to keep things as accurate as possible, I decided to use the cruise control to hold my speed steady. While I realize that I could’ve done a good bit better mileage-wise if I had controlled my speed manually (especially on hills), I wanted this to be an apples-to-apples comparison. Upon arriving at my destination, I learned that my outbound mileage was 25 mpg.

On the way back, I decided to ratchetthe cruise control down to 65 mph and hang out in the slow lane with the trucks. At the end of the trip, I was surprised to learn that I had achieved 32 mpg – that’s a 28% improvement! To be fair, I was driving into a bit of a headwind on the way out, and had the wind at my back on my return. Then again, it was considerably warmer on my return trip, so I had to turn on the A/C to stay cool.

While I fully expected to see an improvement, I was a bit surprised by how much of an impact slowing down had on my mileage. Of course, that 28% improvement was based on a relatively small amount of data (i.e., one roundtrip of 175 miles each way), so it might not be entirely accurate. Nonetheless, speed obviously has a pretty major impact on highway mileage.

Is slowing down worth the trouble?

Sure, slowing down saves gas. But in an economic sense, was it worth it? Let’s take a look at the numbers… For simplicity, I’ll base my calculations on a 100 mile trip and $4/gallon gas — you can easily extrapolate from there.

At 75 mph… 100 miles would take 1:20, and would consume 4 gallons of gas.

At 65 mph… 100 miles would take 1:32, and would consume 3.125 gallons of gas.

So… I’d spend an extra 12 minutes on the road, but would save 0.875 gallons of gas at an estimated cost of $3.50. Extrapolating this out to an hourly rate, I could “earn” $17.50 per hour (tax free!) of extra driving, not to mention the environmental benefits of burning less fuel. Not bad considering I was relaxing and listening to podcasts the entire time.

While your mileage may (quite literally!) vary depending on your vehicle of choice, driving style, etc., the bottom line here is that you can definitely save a few bucks (and be a bit greener) by slowing down.

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The price/mpg ratio is an interesting approach in that it’s more or less equivalent to the quick-and-dirty method of valuing stocks based on their price-to-earnings (P/E) ratio. They also filtered their list to remove cars that have high ownership costs after purchase to protect against the whole penny-wise, pound-foolish thing. Here’s what they came up with:

1. Honda Fit Sport ($464/mpg)
2. Honda Fit ($476/mpg)
3. Toyota Prius ($540/mpg)
4. Mazda3 i ($576/mpg)
5. Toyota Prius Touring ($591/mpg)
6. Nissan Versa 1.8 SL ($596/mpg)
7. Honda Civic Hybrid ($605/mpg)
8. Honda Civic EX ($607/mpg)
9. Hyundai Elantra GLS ($650/mpg)
10. Toyota Scion tC ($658/mpg)

Despite their high overall mileage, it’s interesting to note that hybrids stumbled a bit on this list to their higher price. Nonetheless, the Prius did quite well, especially considering that it’s a good bit larger than the Fit. It’s also worth noting that the Toyota Yaris ($370/mpg) and the Hyundai Accent ($425/mpg) beat out the Honda Fit, but they scored too low in other tests to be included.

Source: ConsumerReports.org

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If you’re at all competitive or motivated by numbers, then I can virtually guarantee you that your mileage will improve, and thus you’ll save money, if you simply keep track your mileage at every fill up. Not only does this make you more cognizant of your driving habits, but it helps make a game out of improving your gas mileage.

The old school way of doing this is to simply keep a small notepad or ledger in the glove compartment and then record your miles driven and amount of gas purchased at each fill up. But guess what? If you have a web-enabled smartphone, it’s even easier. You can now track your mileage online using a web-based service.

The two such services that I’ve heard the most about are FuelFrog and Fuelly. Both of these sites allow you to update your information on the go. FuelFrog relies on Twitter, whereas Fuelly has a mobile version of their website.

After looking at the two, I’ve decided to create an account with Fuelly. To me, the mobile web interface is a more elegant solution than Twitter, and I also like that fact that I can easily compare my performance against that of other users.

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When it comes to finding a good mechanic, I’ve always relied on the recommendations of others. We’ve moved around a good bit over the years, so finding a new mechanic has been a fairly regular occurrence for us. While our friends and colleagues have never steered us wrong, there are a number of things that you can do to increase your odds of having a good experience.

Ask the right person

Beyond simply asking for personal recommendations, I’ve found that it helps to ask the right person. Look for someone that’s lived in the area for awhile. Someone that’s been around the block a few times can not only steer you to a good mechanic, but can also warn you away from the bad ones. Another tip here is to ask someone with a similar car to your own — not every mechanic knows how to work on every brand of car. Another reasonable source of information is the Car Talk Mechanics File.

Choose the right kind of shop

It’s important to understand the difference between the different types of repair shops. While dealerships will be full of mechanics that specialize in your particular make/model, they also tend to have the highest prices. When it comes to warranty work, the dealership is a no-brainer. But if you’re paying out of pocket, you’ll wind up paying more by going to the dealership. If you can’t find a good alternative, this is likely worth it. But if you can, you’ll save yourself a decent chunk of money.

Next up, we have the chain store auto shops. While these places typically offers lower prices than a dealership, the workmanship may suffer. Often times, such places are staffed by entry-level employees and the quality of work will be highly variable. If we need anything more than a new battery, we usually go elsewhere.

Finally, we have independent repair shops. This is by far my favorite option, but it’s not always easy to find a good one. In most cases, the prices will be a good bit below what dealerships charge, and they’ll have mechanics on-site that specialize in a wide vareity of makes/models. You’ll also get a bit more personal attention at an independent repair shop, and you’ll probably also get better continuity, with the same people servicing your car year after year.

Check for trade association affiliations

So you’ve decided that you want to go to an independent repair shop, and you’ve gotten a few recommendations. What next? One thing to look for is whether or not the shops you’re considering are affiliated with trade associations such as the Automotive Service Association (ASA), National Institute of Automotive Service Excellence (ASE), American Automobile Association (AAA), etc. This isn’t foolproof, but these sorts of associations require members to adhere to certain ethical standards and, in some cases, certification means that mechanics meet minimum training standards.

Miscellaneous warning signs

When choosing a mechanic, it helps to do a bit of extra homework. Here are some things to be on the lookout for:

• Double check to make sure they handle cars like yours — a quick tour of the parking lot should suffice.
• Check for complaints with the Better Business Bureau.
• Check the terms of the warranty — six months is great, 30 days…. Not so much.
• If the shop operates on a cash-only basis, you might consider taking your business elsewhere.
• While you want to be able to get in to see your mechanic on relatively short order, an empty shop is a bad sign.

Other considerations

A good mechanic is really only useful if you can make use of their services. Here are some other things to consider:

• Is the shop open convenient hours?
• Are they located in a convenient (and safe) area?
• Are they near public transit?
• Can you get a ride to where you need to be while your car is being worked on?

Photo credit: sgrace

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1. Lexus
2. Mercury
3. Cadillac
4. Toyota
5. Acura
6. Buick
7. BMW
8. Lincoln
9. Honda
10. Jaguar

Interestingly, Ford Motor Company nailed down three of the top ten spots with Mercury (#2), Lincoln (#8), and Jaguar (#10) all placing in the top ten. My personal favorite, Honda, slipped from 5th in 2007 to 9th in 2008.

Here’s a look at the top models by segment:

‘Regular’ Cars

• Subcompact: Hyundai Accent
• Compact: Toyota Prius
• Midsize: Buick Century
• Large: Ford Crown Victoria

Sporty Cars

• Compact: Mazda Miata
• Midsize: Chevy Monte Carlo

Premium cars

• Entry: Lexus IS 300
• Midsize: Lexus ES 330
• Large: Lexus LS 430
• Sporty: Lexus SC 430

Sport Utility Vehicles

• Compact: Honda Element and Toyota RAV4 (tie)
• Midsize: Toyota Highlander
• Large: Toyota Sequoia

Pickup Trucks

• Midsize: Ford Ranger
• Large: Toyota Tundra

For the sake of comparison, Consumer Reports released their list of the most reliable cars for 2008 earlier this year. These rankings are broken down by type of vehicle, though the categories differ slightly from the J.D. Power rankings:

• Family cars: Toyota Prius, Honda Accord (4-cyl), Ford Fusion (V6)
• Large cars: Buick Lucerne (V8), Toyota Avalon, Dodge Charger (V6)
• Small cars: Toyota Yaris Hatchback, Honda Fit, Toyota Yaris Sedan
• Minivans: Toyota Sienna, Honda Odyssey, Chrysler Town & Country
• Small SUVS: Honda Element, Mitsubishi Outlander, Subaru Forester (turbo)
• Midsized SUVs: Toyota Highlander, Honda Pilot, Toyota 4Runner

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• Common Sense. The cheapest form of defense is to simply lock your car and take your keys with you.
• Warning Devices. Having (and using) a visible or audible alarm is another way to make sure will still be there when you come back.
• Immobilizing Devices. “Kill” switches, fuel cut-offs, and smart keys can all be quite effective. If your car won’t start, it’s unlikely to get stolen.
• Tracking Devices. If your car gets stolen, a tracking system can help local law enforcement officials quickly find and recover it.

On top of these tips, I’d also add that you don’t want to leave anything of value laying out in plain sight. While having your car stolen would suck, being the victim of a “smash and grab” isn’t much better.

In the end, if someone really wants to steal (or break into) your car, they probably will. That being said, it doesn’t hurt to make your car a less attractive target than the one parked next to it.

In the end, this is a bit like putting up an alarm monitoring sign in your front yard even if you don’t have an alarm system. No, the sign (or even an alarm system) won’t stop someone that is determined to get into your house. It might, however, make the casual thief move on down the street.

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The National Insurance Crime Board has just released their list of the most frequently stolen cars of 2007. Topping the list once again are two older sedans from Honda — the ‘95 Civic and the ‘91 Accord. Here’s the full rundown:

1. 1995 Honda Civic
2. 1991 Honda Accord
3. 1989 Toyota Camry
4. 1997 Ford F-150 Pickup
5. 1994 Chevrolet C/K 1500 Pickup
6. 1994 Acura Integra
7. 2004 Dodge Ram Pickup
8. 1994 Nissan Sentra
9. 1998 Toyota Pickup
10. 2007 Toyota Corolla

And here’s the list from last 2006:

1. 1995 Honda Civic
2. 1991 Honda Accord
3. 1989 Toyota Camry
4. 1997 Ford F-150 Pickup
5. 2005 Dodge Ram Pickup
6. 1994 Chevrolet C/K 1500 Pickup
7. 1994 Nissan Sentra
8. 1994 Dodge Caravan
9. 1994 Saturn SL
10. 1990 Acura Integra

All in all, the list was fairly stable, with the top four slots remaining unchanged and six of the ten entries being identical between years. Despite these parallels, the vehicle theft rate dropped by 8.9% in 2007 vs. 2006.

As an aside, I’ve always been surprised at how this list tends toward older, presumably less attractive cars. On the surface, you’d think that people would be most interested in boosting late model, high value cars. It’s important to keep in mind, however, that most cars are stolen for their parts, and older (but popular) models provide the best market for stolen parts.

Photo Credit: Matt Biddulph

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With all the recent talk about how to improve your gas mileage, I thought I’d highlight some of the “coming attractions” in the automotive world. I’m talking here about plug-in hybrids (a.k.a., plug-in electric hybrid vehicles, or PHEVs), which are hybrid vehicles that can be recharged by plugging them into an electrical outlet, thereby reduces their reliance on gasoline.

Here’s a quick look at what’s on the horizon from the major carmakers…

Chevrolet Volt

GM claims that the Chevy Volt will be production ready in 2010, though I recently read that they are only planning on producing 10k units in the first year with an additional 60k coming in the second year. The Volt isn’t a true hybrid, in that it will run entirely on electricity. The on-board battery is projected to give the Volt a 40 mile range on a full charge. If the battery runs down, a small gas-powered motor will kick in to recharge the battery. GM’s goal is to keep the cost of the Volt under $40k.

Saturn Vue Plug-in Hybrid

GM plans to bring the Vue Plug-in hybrid to market in 2010. The Vue Plug-in will be an enhancement to the Vue Two-mode Hybrid that’s expected to hit the market in 2009. This vehicle will have a more typical gas-electric hybrid drive-train, but will also have an electric-only range of 10 miles.

Ford Escape Hybrid Plug-in

The Escape Hybrid Plug-in will combine a hybrid drive-train with lithium ion batteries that are expected to allow the escape to achieve 120 mpg during the first 30 miles of driving at “moderate speed” following a full recharge.

Ford Edge with HySeries Drive

The Ford Edge HySeries is similar to the Chevy Volt, though it use a hydrogen fuel cell as opposed to a gas engine as a backup generator. Like the Volt, the wheels are powered solely by electricity. Ford is projecting a 25 mile range on a full charge with the HySeries being able to go another 200 miles on a full tank of compressed hydrogen.

Toyota Prius Plug-in

There are a number of companies that already specialize in converting the Toyota Prius into a PHEV. On a full charge, these cars can go up to 7 miles at highway speeds using electricity alone. Unlike other plug-in hybrids, which use lithium ion batteries, the modified Prius uses an oversized nickel metal hydride battery. Toyota has since announced that, come 2010, you should be able to buy a lithium ion-based PHEV of some sort direct from them. As an aside, I just read that Toyota will be outfitting the 2009 Prius with solar panels to power the air conditioning. Not a huge step forward, but still… It’s something.

Toyota 1/X

The Toyota 1/X concept car, which was unveiled in 2007, is powered by lithium ion batteries and a small 0.5 liter flex-fuel engine. This car, which sports four seats and weighs in at just 926 pounds (compared to 2,890 pounds for a Prius) is capable of covering 600 miles on a four gallon tank of gasoline. The car is also partly made of bio-plastics produced from plants.

Dodge Sprinter Plug-in

The Dodge Sprinter is essentially a delivery van, and the plug-in version combines PHEV technology and an efficient diesel engine. The NY Times has added Sprinter plug-ins to their fleet and, after an overnight charge, they can go 20 miles on electricity alone.

Jeep Renegade Concept

The Jeep Renegade concept car, unveiled this past winter at the Detroit auto show, features all-wheel drive, two electric motors (one for each axle), and a 1.5 liter, 115 horsepower, 3 cylinder engine. On a full charge, it can go 40 miles on electricity alone, and it supposedly has a 400 mile cruising range.

*The CNN/Money slideshow lists the wrong mileage for the Toyota 1/X.

Source: CNN/Money*, Photo Credit: abeall

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On our way home from the airport last week, we noticed that our Honda Odyssey was “shimmying” way too much at highway speeds. We’ve also noticed a good bit more road noise than we recalled having in the past. We actually first noticed the problem on our way to the airport, but were hoping that it was just the roads that we were driving. Unfortunately, that wasn’t the case.

Upon returning home, we took a closer look at the front tires. There were much more heavily worn than the rear tires. The next day, our local tire shop confirmed our suspicions… The front tires were shot. No big deal, right? Tires wear out all the time. Ah, but in this case, the tires didn’t actually have that many miles on them relative to their rated life span. On top of that, the rear tires looked almost new.

The problem? We hadn’t rotated our tires.

Why rotate?

As it turns out, your front tires experience a good bit more wear and tear than your back tires, especially on front-wheel drive cars. They carry more weight, they’re responsible for putting the engine power to the road, they do a disproportionate amount of braking, and they do all of the steering.

Also, depending on your driving habits, the left and right tires each face their own unique burdens. For example, highway driving often means a lot of cloverleafs, which result in high speed right-hand turns. In contrast, on surface street, left hand turns are typically taken at higher speeds, but right turns are tighter.

The end result of all of this is uneven tire wear. The goal of rotating your tires is to ensure that the entire set wears at the same rate, resulting in an overall safer set of tires that don’t have to replace tires out of sync. Ultimately, you should be rotating your tires in accordance with the manufacturer’s specifications even if they don’t show signs of uneven wear. But we didn’t.

The end result

In our case, we burned up a pair of tires and didn’t have a leg to stand on warranty-wise since we hadn’t rotated them. While we could’ve just replaced the two worn tires, we weren’t particularly happy with these tires in the first place. For one thing, they appeared to have worn faster than they should have, even after accounting for the lack of rotation. In addition, while they had gotten much louder as they wore out, they weren’t exactly quiet in the first place.

We ended up talking to the tire shop about this and they agreed to buy back the two rear tires (at a reduced price) so we could replace them with a full set of matching (and better) tires. In case you’re curious, the old tires were Goodyear Integrity, whereas the new tires are Goodyear Assurance ComforTred. We’ve only had them a week, but we’re already much happier with them. They’re much quieter and also seem to give a better ride (though the latter point is a bit subjective).

Staying the course

Now… We just need to commit to regular rotations. It really shouldn’t be that big of a deal, as the tires come with free rotations. As long as we make a point of getting our oil changed at the tire shop, we can just have the tires rotated when the Odyssey is in for its regular service.

To assist with this, we’re stealing a page from MightyBargainHunter’s book, who recommends using one of your trip odometers (most cars nowadays have two) to keep track of mileage between service visits.

Photo Credit: livinus

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As a followup to my previous post about the best cash back credit cards for buying gas, I wanted to highlight a comment by a reader named Dave. As Dave pointed out, the Discover More card offers 5% cash back on a different set of “bonus” categories every three months. Well…

For the period of July 1 – Sept 30, 2008 the 5% categories are gas and hotels.

And after that, the 5% rewards will switch over to grocery stores, restaurants and movies. Unfortunately, the 5% rewards are capped at $400 in eligible purchases per reward period. All other purchases will receive up to 1% unlimited cash back. Given this, I’m still partial to the Blue Cash Rewards Card from AmEx, but the Discover More card isn’t a bad alternative. Click here to apply now.

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Drive a smaller car: While it might not be realistic to replace your gas hog or add another, more fuel efficient car to your fleet, most families have more than one car. If that’s the case for you, simply choosing to drive the more fuel efficient model whenever possible can dramatically decrease the amount of gas that you burn. If your family needs to use both cars at once, try to prioritize the more efficient vehicle for longer trips. The less time your gas hog spends on the road, the less fuel you’ll use.

Log and plan your driving: By keep a driving log for a week, she was able to spot patterns in her driving, learn how to effectively combine trips, and cut out unnecessary trips. She also started calling stores before she drove to them to make sure that they had her desired item(s) in stock. This has allowed her to delete at least one “random round trip” each day. Beyond the fuel savings, it sounds like she’s saving time, too.

Use public transportation: She’s switched to taking the train to work almost exclusively. For her, it’s a financial wash, but there’s a environmental (and conservation) benefit in that she’s burning far less gas. Also check with your employer. Some offer transportation savings account that let you pay your public transport fares out of pre-tax dollars. This could turn a financial wash into a clear gain if it’s available to you.

Make your gas go further: You can dramatically improve your mileage by accelerating smoothly, obeying speed limits, and minimizing unnecessary braking. This is perfectly in line with my recent driving experiment — recall that I was able to improve my mileage by 15%.

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What follows is an overview of one of the best options for a “mainstream” gas reward credit card. While there are a number of brand-specific offers available, I much prefer to be able to choose amongst gas stations based on price as opposed to being tied down to a single brand. Here goes…

» True Earnings Card from Costco and AmEx

This is a True Earnings Consumer Card, and also a True Earnings Business Card as well (anyone can apply for a business credit card). The beauty of this card is that it gives you a 3% discount on the already cheap gas prices at Costco (as well as elsewhere). You also get 3% back at restaurants and 1% on all other purchases. If you’re already a Costco member, the True Earnings card is definitely worth checking out. This card has no annual fee. Unfortunately, our nearest Costco is close to an hour away, so this one doesn’t work for us.

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Refueling charges

It’s no secret that rental car agencies stick it to you if you return your car with less gas than a full tank of gas, but this is starting to get ridiculous. When picking up your car, you have two main choices: prepay for a full tank of gas or refill it yourself.

The upside of prepaying is that they you’ll pay market price for gas. The downside is that you don’t get any credit for unused gallons. Thus, you end up paying for any gas that’s left in the tank when you bring it back. Given the recent runup in gas prices, you’re paying a lot for convenience with this option.

Conversely, if you choose to refuel it yourself and then fail to do so, they’ll gouge you like there’s no tomorrow. in our case, the price per gallon for returning it less than full is $7.99/gallon. Fortunately, I’ve never had trouble finding a gas station when returning a rental car, and I certainly don’t intend to start now.

Taxes

Regardless of how low the “normal” sales tax in a given area, you can typically expect to pay 10-15% (or more) in taxes when you rent a car. There’s nothing quite like building a tax base on the backs of visitors.

Airport fees

If you rent at the airport, you can count on paying additional “concession” fees. These are fees that are charged to the rental agency for the right to do business at the airport, and they’re pass on to you. Here’s a tip: If at all possible, pick up your car away from the airport. In our case, we rented from an agency about 2 miles from the airport, but we’re returning it at the airport — the concession fees only apply for renting, not for dropping off.

Additional drivers

I totally forgot about this one. We found a great price, but neglected to factor in the fact that my wife would need to drive, as well. If we were AAA members, this would have been free. But since we weren’t, they charged us $11/day (capped at 5 days) for her to be allowed to drive. I asked them to drop it, but they wouldn’t budge.

Loss and damage waiver (LDW)

In my opinion, this is second only to refueling charges in terms of price gouging. Rental agencies always push their loss and damage waiver on you when you’re signing up. This option typically provides you with zero-deductible coverage for any sort of loss or damage to the rental vehicle. Unfortunately, it comes at a price — usually $20-$30/day or more.

But guess what? Individual car insurance almost always covers rentals (check with you agent if you’re not sure). Moreover, many credit cards provide car rental insurance if you pay for your rental with the card.

Drop-off charges

If you pick up at one location and return at another, you might be subject to a drop-off fee, even if the other location is just down the road. This isn’t always the case, though, so check at the rental counter.

Partial days

Almost without exception, car rental agencies charge for each day, or portion thereof. Thus, if you pick your car up at 10AM, be sure to return your car by 10AM on the day you’re dropping it off or you’ll be charged for another full day. This is actually the reason we’re dropping our car off at the airport — the location from which we rented closes on Satrudays at 1PM and doesn’t re-open until Monday morning.

Since we were planning on returning the car late in the day on Saturday (following a morning pickup the previous week) they were not only going to charge us for an additional day, they were going to charge us the daily rate until they re-opened on Monday. By returning it to the airport on Sunday morning, we’ll pay the same that we would have with a Saturday afternoon dropoff, but without the charges running through Monday morning since the airport location is open 24/7. Better yet, there’s no dropoff charge.

Mileage limits

In many cases, car rental agencies limit you to a certain number of miles per day (usually around 150). Exceed this limit and you can expect to pay $0.25-$0.50 for each additional mile.

Frequent flyer fees

Many rental agencies charge a fee (usually around $2/day) if you want to earn frequent flyer miles in return for your rental. This is fine for business travellers (if they don’t mind wasting their company’s money) but it’s not a very good deal for individuals.

Child safety seats

When traveling with kids, it’s important to find out how much you’ll have to pay to rent a child safety seats. In our case, we had every intention of bringing out own. Unfortunately, we forgot two booster seats in our car at the airport. We actually realized it before the plane departed, but security was a nightmare and we didn’t want to roll the dice with a trip back out to the parking deck.

Care to guess what Hertz charges for a child safety seat? $60/week. Plus tax. Our solution? Buy a couple of new Graco booster seats at our destination for $18/each. We’ll probably leave these with family for future trips, but even if we didn’t we’d still come out way ahead.

GPS rental

If you want/need a GPS in your car, be prepared to pay $15-$20/day for the privilege. A much better option would be to print out directions from MapQuest or Google Maps before you depart. Also keep in mind that many hotels have free internet connections for looking up directions. Alternatively, if you absolutely have to have one, you might want to just buy your own and take it with you. For example, you can get this one for $150. This would practically pay for itself with a week-long rental and then you’d have it for future use.

Upsizing and reduced fuel economy

Last but not least, it’s not uncommon for a rental agency to run out of cars in a certain size class. In such cases, the standard practice is to upgrade you to a larger vehicle. That’s all well and good, except that bigger cars get worse mileage, and you might find yourself spending far more on gas than you had anticipated. Fortunately, we weren’t stung by this one. We got exactly what we asked for and the mileage hasn’t been too bad, even considering we’re hauling around six people (ourselves plus four kids).

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1. Drive at a moderate speed. Keeping a lid on your speed is the #1 thing you can do to improve mileage. In their test car (a Toyota Camry), CR estimated that mileage dropped from 40 mpg to 35 mpg when they increased cruising speed from 55 mph to 65 mph. Speeding up to 75 mph dropped mileage another 5 mpg. While the extent of the drop will vary across makes and models, keeping an eye on the speedometer, especially when driving on the highway, will save gas.

2. Drive smoothly. Avoid rapid acceleration and hard braking. Once up to speed, try to maintain a steady pace. Jackrabbit starts burn excess gas, and unnecessary braking just converts energy gained from burning gas into heat (and it wears out your brakes).

3. Reduce unnecessary drag. Even empty roof racks can reduce mileage. Try to keep your luggage inside your vehicle, and if you’re not using your roof rack, remove it.

4. Don’t use premium fuel if you don’t need to. If your car is designed to run on regular unleaded, putting in premium won’t help. Using premium won’t hurt, but you’ll be spending an extra $0.20 per gallon for no reason.

5. Minimize driving with a cold engine. Engines run most efficiently when warm. Try to group errands together. This not only minimizes back and forth trips, but also maximizes efficiency by not letting the engine cool off too much.a

6. Keep tires properly inflated. Underinflated tires can cause a number of problems, not the least of which is reduced gas mileage.

7. Buy tires with lower rolling resistance. Less friction = less wasted energy, which translates into more miles per gallon. Believe it or not, this can account for a 1-2 mpg difference.

8. Avoid idling for long periods. If you’re burning gas, but not going anywhere, you’re getting zero mpg.

And here are three gas myths that don’t help at all:

1. Morning fill-ups. I’ve heard on more than one occasion that you should buy gas in the morning because it’s cooler, and the gas will be denser. The argument goes that this will result in more gas for your money. Problem is, it’s not true. Gas is stored underground, and the temperature barely changes at all over the course of the day.

2. Air conditioning vs. opening windows. While air conditioning can reduce your mileage, so does opening the windows. But in their tests, CR concluded that both effect were negligible. Note, however, that this testing was done at highway cruising speeds. I suspect that air condition might have a larger effect in stop and go traffic.

3. A dirty air filter. A popular recommendation at oil change places is to replace your air filter since a dirty filter supposedly reduces mileage. That being said, CR’s results indicated that, unlike the case with older cars, the mileage of newer models is unaffected by a dirty filter. The reason for this is that modern engines can compensate for a dirty filter and keep the air/fuel ratio constant.

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As for the changes that I made, I didn’t do anything too extreme. Rather, I simply focused on accelerating gradually, anticipating stops and coasting where possible to minimize braking, and minimizing air conditioning usage whenever the outside temps permitted (though this didn’t happen very often during the period in question).

I started this experiment with a full tank of gas and tracked my mileage for two weeks, at which time I refilled the tank and ran the numbers. As I noted when I first talked about this, I’ve been getting very consistent mileage, so I have a solid baseline from which to work. For background, I drive a 2005 Honda CR-V 2WD, and I typically get right at 21.8 mpg for in-town driving.

During the course of the experiment, I covered a total of 265.2 miles, all of which was most definitely “in-town” driving.

What about gas usage? As you can see below, I burned through 10.455 gallons.

This works out to 25.4 mpg. Just to be conservative, let’s round my base mileage up to 22 mpg… That works out to an increase of just over 15% in return for a few relatively minor driving adjustments. Not bad.

Given that I paid $4.019 per gallon, that’s an effective savings of just over $0.52 per gallon. But wait… I paid for the gas with my AmEx Blue Cash Rewards card, which offers 5% off on gas purchases. Thus, my base price was really $4.019 – 5% = $3.82. The 15% mileage boost then takes that down to the equivalent of $3.32/gallon.

(Not an AmEx user? There are plenty of other gas credit cards available that pay you a little something back every time you fill up. Compare credit card offers to find the one that’s best for you.)

A few notes:

Like I said above, I didn’t go to any heroic lengths to achieve this improvement. I just drove a bit more carefully. I should also note that I’m normally a pretty reasonable driver, so it’s not like my baseline mileage was horrible due to lead foot. While I would imagine that the results would vary pretty widely across makes/models, it seems that pretty much any “typical” driver should be able to achieve a pretty nice gain.

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73% – Crude oil
11% – Federal and state taxes
10% – Refining costs and profits
6% – Distribution and marketing

Not surprisingly, the cost of crude oil accounts for the majority of the cost of gas. For what it’s worth, the distribution and marketing category includes the cost of getting the gas to market plus and gas stations profits. These are pretty thin margins for gas station owners, though they’ve grown percentage-wise a bit over recent years.

Given the recent run up in oil prices, I though it would also be interesting to take a look at how things have changed in the past two years. For historical context, I’ve put together a graph of gas prices (right axis) along with a breakdown of the percentage contribution of the four different categories (left axis) for 2001-2008. All data are from the month of April during the year in question:

Note that the components are expressed in percentages, so a small percentage decrease could actually be an absolute increase (in terms of dollars) given the huge overall increase in price.

Source: DOE Gasoline Components History

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If you want to make a difference, the answer is simple: drive less.

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I still remember filling my old Honda Accord to the brim for under $10 in the mid- to late-90s. In fact, I once paid as little as $0.699/gallon. But on this particular fill-up, I was paying $3.399/gallon. On top of that, we now drive a Honda Odyssey and I had let the tank run down pretty far, such that I needed 17 gallons of the good stuff.

The only silver lining here is that I received $0.17/gallon in rebates from my Amex Blue Cash Rewards card. But even with the 5% discount, I ended up paying well over $50 to fill my tank.

Which brings me to my question…

What’s the most you’ve ever paid for a tank of gas?

Please limit your response to personal vehicles — any dump truck drivers out there might skew the results — and record your response in the following poll. As always, I also encourage you to leave any comments that might come to mind.

Note: If the poll doesn’t work properly in the RSS feed, you’ll have to click through.

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[Source: Switched.com]

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While other brands are boasting 50-80% gains for their largest SUVs, GM doesn’t want to sacrifice towing capacity or off-road performance. Thus, they’re using a conventional four wheel drive system with low-range gears that will give soccer moms across the country the ability to tow up to 6200 pounds as well as the freedom to drive in mud or sand.

The downside for GM is that they’re projecting a lost on the sale of each hybrid, with the hybrid hardware adding $10,000 to the cost of each vehicle produced. While they’ll almost certainly add some of that back to the sticker price, they won’t be able to tack it all on and still sell vehicles. If these new hybrids catch on, however, GM will be able to push down the component costs and (hopefully) turn a profit.

My take: While I’m a huge fan of energy conservation, I hardly think that hybrid mega-SUVs are the way to do it. It’s better than nothing, but simply buying a smaller car would do way more to reduce your fuel consumption. Yes, I realize that there are circumstances in which such vehicles are necessary, but the vast majority of people don’t really need a monstrous vehicle. Okay, I’ll get of my soapbox now.

[Source: USA Today]

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While at least part of this difference has been ascribed to the fact that the mileage advantage of a hybrid is most pronounced in a smaller car, such as the Prius or Civic, Toyota still offers a hybrid Camry as well as hybrid Lexus models.

[Source: MSN/Money]

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Hoping for a reprieve as consumers scale back on their driving and opt for more efficient cars? Don’t hold your breath. According to David Pursell of Pickering Energy Partners, “Last year, we had pump prices well over $3 for the summer and gasoline demand was up. Would $4 gasoline cause demand contraction? I think it will, but I also thought $3 gasoline would.”

The real problem here (in my opinion) is that we’ve created a society in which driving isn’t optional. And unfortunately, fuel economy standards in the U.S. have lagged behind the rest of the world, meaning that we’re driving an inefficient fleet of gas hogs. The end result is that, no matter how high prices go, people will be forced to simply suck it up and pay them unless we make some major changes. Of course, money is a huge motivator, so maybe some good will come of this. Okay, end of rant. Back to your regularly scheduled programming…

It’s not just increased demand that’s causing the runup. It also seems that the supply side has been struggling as of late:

Gasoline inventories, measured by the days of demand they will cover, are at the lowest level in two decades for this time of year because of refinery fires, power failures and maintenance work oil companies failed to complete in 2006. No new U.S. refinery has been built in three decades, increasing the strain on existing plants.

Peter Beutel, an analyst at Cameron Hanover, Inc. thinks prices could threaten the $4/gallon mark if we have an active hurricane season. And we’re talking about a legitimate $4/gallon this time around, not a scam like they were running in Orlando.

[Source: Telegram.com]

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[Source: Orlando News-Press]

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How did I avoid a speeding ticket? Good question. No, I didn’t cry or flash him cleavage. In fact, I’m pretty sure that the former would’ve been met with laughter and the latter would’ve gotten me arrested). Rather, I kept my cool and tried to make the deputy’s job as easy as possible. As soon as he pulled me over, I rolled down my window, pulled out my wallet and put it on the dash, then shut off the car and put the keys on the dash. I then put my hands on the steering wheel and waited.

When he approached, he informed me that he clocked me at 65 in a 45 zone. Ouch. But I didn’t give him any B.S. excuses. (Late? Come on, we’re all late! All the time!) Instead, I was contrite, matter-of-fact, and apologetic. After running my plates and checking my license and insurance (I have a clean driving record, and everything was up-to-date), he came back and simply said:

“I’m going to give your license back and just ask that you slow down. You were going way too fast for this road.”

Whew! No speeding ticket, no points, nothing. While I can’t say for sure that my actions helped me avoid the speeding ticket, they certainly couldn’t have hurt. Given how quickly a routine traffic stop can turn ugly, I know that I’d greatly appreciate it if a driver went out of their way to make things as easy as possible for me — and I’d almost certainly look more favorably upon their situation if they did.

Then again, maybe I was just lucky.

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