Car Accrual Account & How it Works

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My Car Accrual Account

Car Accrual Account Towing

If you are new to the site, then you may not understand the term “car accrual account.” An accrual account is a bank account where you place money that you know you will need for future purposes. With regard to budgeting, we budget money to be put into our accrual account every month so that we always have the cash to pay for our expenses that we would otherwise place on credit cards. I have my accrual account set up in a Capital One 360 Checking Account, but you can set it up at any bank you want. I like the fact that this one is electronic and I have a debit card to use for my major expenses. I don’t have a separate account for every future expense. I have one account and I maintain a ledger that shows me the balance of each “sub-account” in my accrual account. One such accrual account is for our cars.

What We Put in Our Car Accrual Account

Our situation is unique by normal American standards. My wife and I each have a car, but neither one of them has a payment on them. We decided that once our cars were paid for, we would never have a car payment again. However, that doesn’t mean that we don’t need to budget for future car related expenses. My last car payment was $547.10 per month on the BMW that I paid off in 5 years, but drove for 13. My wife’s last car payment was over $500 per month on her Mercedes that she is still driving. Doing quick math, that’s over $1,000 per month in car payments that are no longer in our budget. It is a nice feeling to not worry about a car payment each month. It’s an even nicer feeling to know that you have the money to pay for any maintenance issues when they arise.

This past week, we were on vacation at the beach. It was supposed to be a relaxing time with family and friends, but we will leave that story for a different day. I had just finished loading the last of our stuff into my car to head back home, jumped in the front seat, turned the key and……nada. The car was getting juice from the battery, but it wasn’t wanting to turn over. Not good. Thank goodness that we have AAA. We called them and they towed the car all the way back to our town to the garage of my choice. The towing was free, the car repair was not. In fact, the repairs were nearly $1200.00 for a new fuel pump, fuel filter, new hoses and a variety of other things. I have another $1200 in expenses that “could be done,” but chose to wait to have those done until next month.

Having Money Set Aside Relieves Stress

While I was stressed out about not having a running vehicle, I was not stressed about the money. I went into the shop this morning, slid my Captial One 360 Debit Card and picked up my car. Here’s why I able to do this. Annie and I figure that we will have about $4800 per year in maintenance expenses on the 2 vehicles. That’s less than 1/2 of the two car payments that we used to have. We also know that we will want to by another vehicle as we continue to grow our family, so we put money into the accrual for that as well. To be exact, we save $600 per month for that. In essence, we are still making our car payments, but we are making them to ourselves. Each year, we have $4800 saved for the repairs, oil changes, tires, etc. We also have $7,200 saved up for our next vehicle. That may not seem like much, but after 3 years, we have $21,600 just in new car savings and that doesn’t count the fact that we will have money left in the maintenance budget. After 4 years, we will have $28,200 in new car funds and will have paid for our repairs all along the way.

Having a car accrual account set up like this, is one of the best ways you can set yourself up for staying out of debt. Car payments are a horrible investment and leases are even worse. Even if you are one of those people that are financing your car at 0% interest, you are overpaying for a new car on the front end and many times are buying as much car as you can finance instead of the right car for your budget. Stay tuned as we are going to hammer this topic even more going forward.


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  1. Great article! Thanks so much. Looking forward to more articles such as these.

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