You Won't Believe How Much the Average American Family Spends on Transportation
- The average American family spends $819 per month on transportation expenses.
- You might be able to cut costs by paying cash for a car instead of taking out a loan.
- Other ways to save include shopping around for the best auto insurance and reducing how much time you spend driving.
Transportation costs may be high, but there are steps you can take to minimize how much you spend.
According to a study by The Ascent, the average household spends $5,111 per month on expenses. Of that, we spend a whopping average of $819 per month on transportation.
How are we spending more than $200 a week on transportation? Here, we break it down.
|TRANSPORTATION EXPENSE||AVERAGE MONTHLY SPENDING||AVERAGE ANNUAL SPENDING|
|Gas and oil||$131||$1,568|
|Vehicle finance charges||$22||$258|
Our second-largest expense
After housing, transportation is the second-largest monthly expenditure for most of us. What's interesting about this is that average transportation spending decreased by 8.5% between 2019 and 2020, which could be due to COVID-19 restrictions that saw many of us working from home.
Some people find it easy to budget for expected vehicle-related expenses, like paying a car loan and auto insurance premiums. Things get a little trickier when occasional expenses are needed, like new tires and unexpected repairs. We can also let other costs, like paying for a rental car while ours is in the shop, slip our minds.
What about public transportation?
There's no denying that some of us could save money if we had access to public transportation. However, according to the American Public Transportation Association, 45% of Americans have no access to public transport of any kind. That means no buses, subways, commuter trains, streetcars, ferries, or paratransit for people with disabilities or older commuters. For nearly half of us, it's a matter of driving or staying home.
How to cut transportation costs
At this point, the best many of us can do is minimize costs wherever and however possible. For me that means I'll begin with saving money when we buy a vehicle. The cost of buying a car has gone through the roof since the beginning of the pandemic, due primarily to a lack of components needed to manufacture new vehicles. In turn, this has sent the cost of used cars soaring. With that in mind, here are six tactics that could help.
1. Pay cash
Probably the easiest way to keep monthly transportation costs down is to pay cash for a car and skip the loan payments -- if you can afford to. The caveat is this: You won't end up saving money if you purchase a vehicle that is constantly in the shop. No matter how much of a deal you believe you've found or how in love with a car you are, take the time (and pay the cost) of having it thoroughly inspected by a car mechanic before making the purchase. This point should be non-negotiable. If the seller does not want you to have the car inspected, it's likely because they know there's a problem.
2. Look for an insider hook-up
Right now is the wrong time to buy new if you're trying to keep your costs down. As we mentioned, though, the cost of used cars is also at an all-time high. What that means for you is networking. Ask everyone you know if they know anyone selling a car at a fair price. Even if it's the second cousin of your best friend's dentist, an inside connection is an inside connection. Work those connections to find a vehicle at a price you can afford.
Let's be honest about this. Now may not be the best time to buy your dream car, but that doesn't mean that you can't find dependable transportation.
3. Finance if you need to
If the only way to buy a car right now is to take out a loan, there's good and bad news. The bad news is the high cost of vehicles. The good news is that interest rates remain low. We're not at the rock-bottom rates we experienced last year, but they're still pretty darn low.
You'll likely qualify for a low rate if you have a strong credit score. If you have a lower credit score, you may consider looking for a cosigner or postpone the purchase until you have time to boost your credit score.
4. Focus on auto insurance
One way to keep your monthly costs down is to land an auto insurance policy at a reasonable price. Given the competition among car insurance companies, this goal is within reach. Shop around until you find a policy with the coverage you desire at a price you can afford.
Take our word for this: Car insurance companies are not in cahoots. They're competing for your business, and every company wants to be the one you choose. If you have to contact 10 or 12 companies for auto insurance quotes to find a price you like, do it. If you work with an independent insurance agent, they can shop for you.
5. Outsmart gas prices
The cost of fuel is a hot-button issue right now, but over time, gas prices go up, and gas prices go down. Depending on what's going on geopolitically, you can expect fluctuations. But you might be able to outsmart prices while they're high by driving less.
You can look at your schedule and lifestyle, and then get creative with ways to cut back on your costs. For example, that might mean inviting friends over to hang out instead of driving around on a Friday night. Or you could take Amtrak for a mini-vacation instead of driving to your destination. And you might be able to carpool until prices cool back down.
A few more points regarding fuel prices:
- If you buy a car, make sure it's not a gas guzzler.
- Drive the speed limit. MPGs drop rapidly at speeds above 60.
- Use the lowest octane gas safe for your engine.
6. Maintain that baby
Because we spend such a large chunk on transportation costs each month, it can be tempting to delay maintenance. The problem with putting off maintenance is that it invites trouble, and by the time something goes wrong, it's more expensive to repair. Stay ahead of potential issues by changing the oil as often as your car manual suggests, rotating tires, checking air pressure, making sure the windshield wipers work, and having any weird sounds or odors checked out by a professional.
Admittedly, it's pretty dull stuff, but it could ultimately save you money over time.
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