Budgeting for Car Repair Costs

Old cars, new cars, gold cars, blue cars—all of them have one thing in common. Well, technically they have lots of things in common, but right now, we’re talking about how every car eventually needs repairs.

The really frustrating thing about car repairs is they can cost as little as 10 bucks for a spark plug or thousands of dollars for a new transmission—and they can pop up at practically any time.

So, how do you budget for car repair costs? We’re glad you asked. This article has all the info you need to be money-ready for whatever car issues come your way.

The Top 10 Most Common Car Repairs

First, let’s look at the most common “check engine” car repairs. These are the things that are most likely to turn that “check engine” light on (which means a trip to the mechanic to figure out what’s really wrong). And that little light can mean an expense ranging from just $25 all the way to nearly $1,400 to fix.¹

1. Catalytic converter
   Total average cost (parts and labor): $1,356
    
2. Oxygen sensor
   Total average cost (parts and labor): $243
    
3.  Ignition coil and spark plug
   Total average cost (parts and labor): $387
    
4. Mass air flow sensor
   Total average cost (parts and labor): $319
    
5. Loose fuel tank cap
   Total average cost (parts and labor): $25
    
6. Ignition coil
   Total average cost (parts and labor): $214
    
7. Fuel Injector
   Total average cost (parts and labor): $420
    
8. Evaporative emissions purge control valve
   Total average cost (parts and labor): $141
    
9. Thermostat
   Total average cost (parts and labor): $235
    
10. Evaporative emissions purge solenoid
    Total average cost (parts and labor): $147²

Now that you’re armed with the breakdown of the numbers above, you can start budgeting for those repairs. Let’s talk about how.

How to Pay for Car Repair Costs

It’s time to sort through the actual mechanics of how to budget and financially prepare for all those car costs.

Make car maintenance part of your regular budget.

Let’s go over the difference between a car repair and car maintenance. Part of being a car owner is knowing that some costs are regular things that need to happen. So things like oil changes shouldn’t be considered part of the “repair” category in your budgeting. That’s just general maintenance on the car.

Since your transportation is essential to maintaining your household (it’s one of your Four Walls—which also includes food, utilities and shelter), you should include a line item in your budget for maintaining your car. How much you budget will depend on things like your monthly income, the age of your car, how often you drive it, and what your car needs done each month.

In other words, you might not need to budget for an oil change or tire rotation every month if you don’t drive your car a lot. Figuring out how much you need to budget for car maintenance will take some planning on your part, which is why a zero-based budget is best for this kind of thing. After all, if every dollar in your monthly budget has somewhere to go, you can be sure to assign a few of those dollars to car maintenance.

Create a sinking fund for big car costs.

A sinking fund is a special compartment in your budget where you save up money over many months for big purchases . . . like a big car maintenance cost.

Say you know you’ll be needing a new set of tires or brakes soon (those things squeak to let you know). You can sink money into your sinking fund for a few months to pay for that stuff.

Dave's easiest money-saving tip: See if you're over paying for car insurance.

You can even use a sinking fund to save up for a new (to you) car and pay cash for that sucker! Imagine that . . . no payment necessary.

Save up an emergency fund.

One of the reasons many people get in a bind over budgeting for car repairs is they don’t have any emergency savings. In fact, over a third of Americans (36%) say they have no savings at all!³

Financial Peace University has helped millions of people save money, pay off debt and build wealth for the future with its Baby Steps plan. And Baby Step 1 is saving up a $1,000 starter emergency fund. A $1,000 emergency fund doesn’t sound like a lot, but it’s enough to cover most of the car repairs on the list above.

Later, when you’re debt-free (Baby Step 2), you’ll save up a fully funded emergency fund of 3–6 months of expenses (Baby Step 3). That’ll cover pretty much any critical car repair that could come at you.

The way you build up an emergency fund of any size is by being intentional and creating an emergency fund line in your budget. Month by month, you’ll see the fund get bigger and bigger. This will require some short-term sacrifice (might have to put off some non-essential expenses for a while). It’s hard to do at first, but millions of people have done this successfully—and so can you!

Use the emergency fund for actual car emergencies.

Sometimes, there are real emergencies that happen with your car. You blow a tire, your transmission needs fixing, or your catalytic converter gives out (yikes!). That’s the kind of thing your emergency fund is for! It turns a potential crisis into an annoying inconvenience.

However, if you can cover an emergency without going to your emergency fund, that’s good too. Maybe you can do a little tweaking to that month’s budget. Try trimming up a few budget lines to free up cash or seeing what you can give up that month. If you still don’t have enough cash to cover the car emergency after you cut back, then you take money out of your emergency fund.

So what do you do after you use any money from your emergency fund? Well, that emergency fund line goes back into your monthly budget until the fund is topped off again.

3 Tips to Reduce Car Repair Costs

So, now you’re cash-ready for those car repairs. Great! But you still want to be careful not to make poor decisions that will end up costing you even more in the long run. Use these tips to help you reduce your car repair costs and make sure you’re making all the right decisions.

Stay on top of car maintenance.

The number one way you can avoid big car repair bills is by making sure your car is in tip-top shape. Take care of all the maintenance things we mentioned above and make them part of your normal budget. Change your oil regularly. Keep those air filters clean. Check your tires. Get regular tune-ups. Little expenses like these could save you thousands down the road and extend the life of your vehicle.

Figure out if you can DIY.

Don’t get yourself in over your head or anything, but plenty of minor car repairs can be done from home. The internet is full of how-to guides (both articles and videos depending on your learning style) to help you with some of the basics. If you can DIY the repair, you’ll save all those labor costs.

For example, say one of the cables on your Honda CR-V’s battery is on the fritz. Unlike most carmakers, Honda requires custom parts for its vehicles, and the battery cables are no exception. You might think you’ll have to pay hundreds of dollars for a Honda technician at a dealership to replace your part—but hold up! Replacing the cables is actually easy to DIY, and you can buy the part for around $30 from the dealership.

Shop around and do your research.

There are lots of ways to save on car repairs if you’re willing to put in a little bit of work. Get a second opinion. Ask for a discount. Search for online coupons. Figure out what can wait, then do the time-sensitive repairs right away and save up for the rest. These are just a few of the ways you can put the research pedal to the metal to save on car repairs.

And don’t forget to check your car’s owner manual. Seriously. If you’re wondering how often you should get tune-ups, check the manual. How to troubleshoot common problems? Check the manual. Want to know how to check your car’s fluids? You get the picture. Don’t think you’re one of those people who doesn’t need instructions. Get to know your car and follow the care directions.

Get Your Budget in Gear

It is possible to be prepared to take care of your car. But you’ll actually need a budget to do that and the will to put it into action. We know you have the will, and the EveryDollar budgeting tool can set up your first budget faster than you can change a flat tire (unless you’re in a pit crew for the Indy 500).      

Budget for both the expected and unexpected. Then you can easily take care of your car with cash in hand. You’ve got this.

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