How rich would you be if you stopped driving?(Read article summary)
Cars may seem like a necessity, but they can be a financial burden. What does a car cost you every year – and how much money would you save if you stopped driving all together?
Cars are useful, but they can also be an unnecessary burden on your budget. My first car was a sky blue 1993 Mercury Sable. It was a boat of a car, but it was lovely and near-mint because I bought it from a senior citizen who only used it for church and the grocery store. I lived in the suburbs, but I would often carpool with coworkers or take the bus to save money. Eventually, I sold my car and moved to a place walking and biking distance from work and school. With the money I saved, I paid for two years of college tuition!
Here in Los Angeles, walkable neighborhoods are flourishing, plus bike lanes and new rail routes are opening regularly. I rarely need a car to run basic weekly errands. My household shares one Honda Fit and we invest the money saved by not owning a second car. Here's why you should try it, too.
Here's What a Car Costs You Every Year
Many people lease their cars; but let's assume you buy yours outright. A car actually depreciates in value everyday you drive it — at an average total of $3,571 per year — depending on the type of car you have, of course.
Let's assume you don't live in major cities like L.A., Seattle, or NYC, where gas is the most expensive in the nation. In most other places, the average cost totals $2,168 per year.
Another money-pit, insurance is legally mandatory almost everywhere. Depending on your age and driving history, it can be very pricey. The average cost overall is $1,029 per year.
Depending on your car's age and whether it's domestic or imported, repairs can also be an unavoidable money drain. On average it can be 4.97 cents per mile, or $745.50 per year.
5. Services Like AAA or OnStar
While having a AAA membership is highly recommended, it is an extra cost of $66–$126 per year.
Total Yearly Cost of Driving = $7,513.50*
*Counting for depreciation of the average car per year, so that we can calculate a yearly savings. Car prices vary by make, model, and state of purchase, so I recommend subbing in the first value with your own. Here's a car depreciation calculator.
What if You Invested That $7,513.50? Answer: $$$$
If you thought cutting out $5 lattes was a big investment, this one will make your eyes pop right out of your skull!
I calculated a 10 year plan with a compound interest calculator. Let's say you invest the same amount every year for 10 years, with a conservative 6% interest rate. At the end of year two you're looking at $16,408. In five years, you'll have $44,899. In 10 years? $104,983!
Honestly? If you got rid of your car, you could buy real estate in just 10 years.
Some might argue: "If I ditch my car, I'll spend more on other costs like public transit and Uber!" True, but the difference could be negligible. The costs of those extras is generally not enough to compete with saving what you'd spend on a car — unless you use them with unusually great frequency.
Absolutely Need a Car? Consider Only One Car Per Household
In my household, my husband and I only need one car, as only one of us works outside the home part time. The rest of the week, we work together on our small business. We drive together on business trips. This means better fuel efficiency and ability to use the carpool lane.
Try planning a carpool strategy that allows everyone to get to work and come home together. Here's why. You will benefit from cutting your commute related costs nearly in half, but you will get to spend more time together as spouses, family members, or friends.
How do you decide whose car to keep? See who has the most of the following:
- Newest model;
- Best fuel MPG;
- Fewest recent repairs;
- Lowest insurance rate.
If one car is at least three out of four, that's the one to keep! Alternatively, try these six ways to cut car ownership costs.