Rachel Cruze Explains Why Car Expenses Are So High And How to Save Money
Written by
Heather Altamirano
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Maria Concepcion
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Unless you live in a city with plenty of public transportation options, cars are a necessity. However, owning a car, especially a used one, is more expensive today. The costs associated with cars are increasing, which can be a big financial blow to repair and maintain.
“The cost of used cars now has dropped back to normal, but all other expenses related to cars, like insurance premiums, repair services, and replacement parts, have drastically increased recently,” Rachel Cruze said in a recent YouTube video. “Not to mention, interest rates being crazy high over the past couple of years, which affects you big time if you’re taking out a car loan.”
Why are prices rising? Cruze breaks down the reasons and shares tips on revamping your budget.
Jump in Insurance Costs
You’re not alone if you’ve been hit with higher car insurance prices. According to a Fox Business article, Cruze said, “The cost of auto insurance jumped 1.8% in April of 2024, causing the annual gains to reach about 22.6%. According to data from the Labor Department, this is the fastest yearly rate on record.”
She listed inflation and “the car insurance industry tends to be delayed and reactionary” as reasons for this. She explained, “We’re living in the aftermath of the supply and demand challenges we faced a couple of years ago following the pandemic.” There was a global shortage of cars and parts during that time, and prices have risen.
Repair Costs
The cost of car repairs has also skyrocketed.
“We’re now experiencing a shortage of mechanics and other service professionals who specialize in car repairs AKA essential worker jobs that help keep society running smoothly literally are becoming less popular for young adults today,” Cruze said.
She explained this is happening because a lot of people think they need a college degree to make money and live in today’s world.
“The truth is you guys, the trades is still a great place to make great money. People are still actually finding out that if you get in a niche part of a trade, and you’re good at what you do, you do make a lot of money.” She added, “The average American is still feeling the pain of this perfect storm that’s happening.”
Know What’s Happening with the Economy
Depending on where you live, most people need a car and transportation is a basic need you should have in your budget to pay for. Cruze said a good strategy during tough financial times is to stay up to date on the economy and “know what you can control.”
Cost Car Evalutation
When it comes to your car situation, step one is to make sure you’re not overspending on your vehicle.
Cruze explained, “make sure the total value of your car or if you have a family the total value of all the cars you own does not exceed 50% of your annual salary. So if you make $80,000 household income and you’re driving a $50,000 car and your wife is driving a $60,000 you know SUV that is more than your annual salary. You have too much car and so making sure that that is in limit so anything with motors and wheels needs to be 50% of your annual income.”
Consider Selling Your Car
Step two is adjusting your budget to meet the high cost of owning a car. Consider selling what you currently own if you can’t pay off the loan in 18 to 24 months.
“There’s a good chance that you’re underwater on your car you bought,” Cruze said.
Eliminate Your Car Payment Altogether
The third and final step in affording to own a car in this landscape is to not have a car payment.
“Not only could this free up again hundreds of dollars for you every single month that can help to pay off other debt that you have or go into savings, you want this to be back in your life,” Cruze said. “The money that is going out in your car payment you want back to you.”
She added, ” If you’re someone who dreads every single time that your car needs gas or an oil change you know or new tires you want to make sure that you are planning for all of that so if you’re doing your budget every month have car maintenance in there.”
She reminded viewers that cars cost money, even when you don’t have a payment, so plan ahead and create a detailed monthly budget and suggested using the free app EveryDollar.
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