Can owning a car put you in debt fast?

It’s no secret that owning and maintaining a car is a big commitment, especially financially. You have to consider fuel costs, car insurance costs, and maintenance fees.

Many people absolutely need a car for work or for a variety of other reasons when public transportation is not an option for them. However, many people do not realize exactly what they are getting themselves into.

Many people cannot afford their own car or at least don’t realize it. They can provide initial vehicle costs, but then have a rude awakening when it comes time for an unexpected repair.

80% of car owners endure repairs that cost $500 or more. Meanwhile, 40% of American adults don’t have the funds available for an emergency over $400, which means any unexpected cost over $400 must be charged to a credit card.

That’s a pretty considerable number of people who can be construed as not realizing the magnitude of the costs involved with owning a car. Or in other words, a high percentage of Americans underestimate the cost.

Now back to the 40% of American adults who have to charge unexpected costs to a credit card… Why is this so bad? Honestly, it’s not that bad… if the credit card holder can pay the bill at the end of the month.

However, many people find themselves with the problem of not being able to pay the bill. This means that you must pay interest as long as you can’t afford it. Consequently, that means you’ll end up paying much more for the repair than you needed to, risk getting into credit card debt, and risk damage to your credit score.

So how do you avoid this snowball effect? The key is to establish an emergency savings account that experts recommend accumulate up to about 3-6 months of living expenses. That may sound like a lot, but it will really add up if you make $100-$300 per month. Also, some vehicles may end up needing repair before others, so you’ll want any excess funds before you burn them.

Financial experts also advise reviewing your budget and finding small areas to cut spending to realize this amount of savings. You may need to cut some luxuries out of your routine or even pick up a side job so that you have the cash that isn’t yet earmarked to go elsewhere in your budget. Save as much cash as possible, that means from gifts too.

So don’t let your personal vehicle put you in debt. It can be prevented as long as you are proactive and take the right steps to save money that you can use when you really need it. Remember to keep in mind how much a typical auto repair really costs, and you’ll surely be prepared to handle most vehicle-related costs that come your way.