1 in 4 Americans Couldn't Cover a $500 Car Repair Bill

For some people, owning a car is a luxury. For others, it's an absolute necessity. And if you live in an area that lacks public transportation, owning a car might spell the difference between being able to hold down a job and function or not.

But owning a car is an expensive prospect. Not only do you have to cover the cost of car payments and auto insurance, but you also have to pay to maintain your vehicle regularly.

And then there are car repairs to worry about. Those could be quite substantial, depending on the issue at hand and the type of vehicle you own.

But recent data from Jerry found that 26% of Americans don't have enough money in the bank to cover a $500 car repair bill. And seeing as how some repairs could cost a lot more than that, this doesn't bode well.

Our Picks for the Best High-Yield Savings Accounts of 2024

Capital One 360 Performance Savings APY 4.10% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Sept. 27, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	APY 4.10% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Sept. 27, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
American Express® High Yield Savings APY 4.10% Rate info 4.10% annual percentage yield as of October 7, 2024 Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	APY 4.10% Rate info 4.10% annual percentage yield as of October 7, 2024	Min. to earn $0
Discover® Online Savings APY 4.10% Min. to earn $0 Open Account for Discover® Online Savings On Discover Bank's Secure Website. Member FDIC.	APY 4.10%	Min. to earn $0

You need to be prepared for larger repairs

The cost of replacing a transmission on a Honda Accord is about $3,000, says Jerry. Yet 58% of the people it surveyed say they don't have enough money in their savings account to cover a repair that large. And clearly, many people couldn't even cover a much smaller repair to the tune of $500 without risking debt.

In fact, 29% of car owners actually did take on debt over the past two years in the course of paying for a car repair. And 6% of vehicle owners said a car repair bill caused them to default on an auto loan over the past three years.

Racking up debt to cover car repairs could cost you a boatload of money in interest. And defaulting on an auto loan could not only damage your credit score, but put you at risk of having your vehicle repossessed.

That's why it's so important to maintain an emergency fund for your vehicle -- or to pad your regular emergency fund so there's money to tap when a car repair expense arises. Now it can be difficult to estimate the cost of a car repair until you're in that situation. So you may just decide to build a car repair emergency fund that contains $1,000, $2,000, $3,000, or whatever it is you can afford.

Another option is to focus on maintaining a general emergency fund with enough money to cover three full months of essential living costs or more. That way, you'll have enough cash reserves to pay your bills during a shorter period of unemployment. But also, that sum of money would most likely be enough to cover a range of vehicle repairs.

Make sure all of your costs are covered

When you buy a car, you take on a lot of expenses. So make sure you're accounting for possible repairs as well as monthly auto loan payments, insurance, and maintenance. Otherwise, you might suffer some pretty nasty financial repercussions if your car stops running and you don't have the money in savings to address the issue at hand.