Yahoo Finance How Much Can You Save By Not Owning a Car?
Depending on where you live and work, you may consider owning a car a luxury or a necessity. But have you stopped to calculate how much those four wheels cost you, both today and throughout your entire life?
I’m a Mechanic: The Best $100 You Can Spend on Your Car’s Maintenance
Check Out: Pocket an Extra $400 a Month With This Simple Hack
As it turns out, many people have crunched the numbers — and the results are prompting change. According to a recent ZipCar survey of over 1,000 participants, 35% said they’re contemplating going carless by 2030. Nearly 20% said they are very or extremely likely to do so.
The move, while viewed as drastic by some, is not as uncommon as you may think. Forty percent of survey participants said they already know someone successfully embracing the car-free lifestyle.
The Driving Factors
Take a closer look at the cost of car ownership. According to Kelly Blue Book (KBB), the average new car price in 2023 was over $48,000 in July. While the company acknowledges that automotive inflation is trending downward, a factory-fresh vehicle will still set you back a considerable sum.
Used car prices are significantly lower, per Experian’s State of the Automotive Finance Market Report Q2 2023, with the average cost coming in at roughly $27,000. However, buyers are still financing the expense over more than five years, regardless of new or used vehicle status. That’s a long time to carry a car loan.
Then, there are interest charges. New car buyers currently pay an average of 6.63%, while used car buyers pay an average of 11.38%. Your vehicle is already costing you significantly more than the sticker price.
But there are even more expenses to factor into the equation. According to the American Automobile Association (AAA), you can expect to cover the following costs as a car owner:
Gas: $0.16/mile
Insurance: $1,765/year
License, registration, taxes: $762/year
Maintenance, repairs, tires: $0.10/mile
Don’t forget about depreciation. You can expect your new car to drop in value by $4,500 per year, quickly eroding what you could get for it as a trade-in or during a sale.
See: These 10 Cars Could Drain Your Savings Through Constant Repairs
How Much Could You Save?
Just a glance at these numbers can make your wallet frown. But how much could you actually save by saying goodbye to your car? Here’s some math.
Say you’re planning to buy a new car for $45,000, slightly below the average price. Your interest rate will be 6.5%, and you’ll finance the entire amount for 60 months (five years).
Depending on your state, you’ll likely have to pay a few thousand dollars upfront to cover sales tax. You’ll also have to pay title, registration and other fees associated with the purchase.
Then, you’ll have an $880.48 monthly car payment. If you take the full five years to repay your loan, you’ll pay your lender $7,828.60 in interest, bringing the total cost of your vehicle purchase to $52,828.60 — not counting sales tax, registration, title or other fees.
Then, say you drive around 13,500 miles per year — the national average. Using the figures from AAA, you’ll spend $2,160 on gas and $1,350 on maintenance.
So, what’s the yearly grand total while you’re financing the car?
Auto loan payments: $10,565.76
Gas: $2,160
Maintenance: $1,350
Insurance: $1,765
License, registration, taxes: $762
Total: $16,602.76
That’s a staggering sum!
Of course, your automotive expenses will drop when your loan is paid off. However, as your car gets older and racks up the miles, it may require more maintenance. Plus, you may feel compelled to acquire a newer, more modern vehicle, thus potentially restarting the debt cycle.
Not floored by the potential yearly savings you could reap? Assume you drive for 70 years and get a new car every five years. Without changing the above costs — which would likely increase over time — your lifetime motoring expenses would be $1.16 million!
Investing Those Savings
Now, imagine investing $16,602.76 per year — $1,383.56 per month — into the stock market, which gives investors a 10% annual return, on average. In 70 years, you could turn your lifetime transportation expense into a $130 million nest egg!
Your numbers will obviously vary. This exercise aims to illustrate how much people spend on cars and what that money could do when allocated elsewhere.
But you don’t need to amass a literal fortune to make living without a car financially prudent. Brett Holzhauer, content marketing manager at M1, said, “I’ve been able to pay off my student loans, invest more and purchase a home, all in the last few years. And being carless has been a large part of that.”
Alternatives to Owning a Car
Not owning a car doesn’t mean you must stay home and have no life. You just need to plan ahead, put in more effort or get a little creative. Alternative transportation options include:
Public transportation (bus, train, subway)
Carpooling
Car rentals (including peer-to-peer)
Ridesharing
Carsharing
Walking or biking
Martina from Stack Your Dollars said, “We lived overseas in Japan for a little over a year without a car at all. I did a lot of walking in combination with the train and bus system. There are days I’d walk five miles back and forth to the grocery store wheeling my ‘granny cart.'”
Note: Other than walking, the above alternative transportation methods cost at least a nominal amount. Be sure to factor those expenses into your calculation of how much you could save being car-free.
Buying a Car Anyway?
If you’re not convinced that car-free is the way to be, you can still save money on your next vehicle purchase. Here are a few tips:
Pay in cash. You avoid interest charges and may be able to negotiate a lower price.
Buy a base model. Sure, the extra bells and whistles of the upgraded version are nice, but are they worth the additional cost?
Go with a manual transmission. You can shave hundreds, if not thousands, off the sticker price.
Remember: You’re in control of the transaction. If the deal doesn’t align with your budget and financial goals, walk away. A better opportunity is on the horizon.
More From GOBankingRates
Money Expert Rachel Cruze Recommends Buying These 10 Used Cars for Under $10K
11 Uncommon Investments That Can Actually Make You A Lot of Money
5 Fastest Ways to Raise Your Credit Score Without a Credit Card
This article originally appeared on GOBankingRates.com: How Much Can You Save By Not Owning a Car?
