Can owning a car put you in debt fast?

It’s no secret that owning and maintaining a car is a huge commitment, especially financially. You need 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 what exactly they are getting into.

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

80% of car owners put up with repairs costing $500 or more. Meanwhile, 40% of American adults do not have the funds available for an emergency of more than $400, which means that any unexpected cost of more than $400 must be charged to a credit card.

That’s a pretty sizable number of people who can be interpreted as people who don’t realize the magnitude of the costs involved with owning a car. Or in other words, a high percentage of Americans underestimate the cost.

Now, going 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 encounter the problem of not being able to pay the bill. This means that you must pay interest while you cannot pay it. Consequently, that means you’ll also end up paying a lot more for the repair than you needed to, risk credit card debt, and risk damage to your credit score.

So how do you avoid this snowball effect? The key is to set up an emergency savings account that experts recommend building 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 sooner than 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 back and make this amount of savings a reality. You may need to cut some luxuries out of your routine or even pick up a side job to have cash that’s not already allocated 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 almost certainly be prepared to handle most vehicle-related costs that come your way.