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Stop Losing Money by Renting Cars: Here’s How to Afford One of Your Own

Automated vehicles
Image source: Getty Images

Written by Amy Legate-Wolfe at The Motley Fool Canada

Young Canadians aren’t buying cars. And sure, I get it. Buying a car is a huge financial burden, or at least it can be. Now, according to a recent study by Chevrolet, 34% of Canadians between the ages of 18 and 34 don’t even own a vehicle. And that’s because 58% believe car ownership is far too expensive.

However, car ownership may not be as costly as you think. In fact, you could actually be making money. How? Let’s get into it.

The rising costs of rent

It used to be that when you went to get a vehicle, renting or buying used was a great option. Yet since 2019, supply-chain issues have caused rent and used car ownership to become more expensive. The continued cost-of-living crisis has made it difficult to get a vehicle, with the average Canadian spending $900 per month on vehicle payments, according to Financial Educator Jessica Moorhouse.

Instead of “keeping up with the Joneses,” Moorhouse recommends doing your research to set a clear goal of how you want to use your car. This goal will then be applied to finding what you need from a car, rather than what you want.

“Getting really clear on the goal of the car is just like buying a house,” Moorhouse said in an interview with Motley Fool. “‘This is what my affordability is, this is what I want my payments to be, so I can keep saving for my future and pay my debts.’…Sometimes the base model is perfectly fine for what you need.”

Lower your costs

When I say costs, I’m not just talking about the cost of the vehicle, but everything that goes with it. This is something that many Canadians often forget. Yet, there are ways to lower your costs, especially by trying to increase your credit score.

In general, Canadians should be looking over their credit report once a year. This can help them identify issues that could be lowering their credit score, which Moorhouse says is common. From there, make sure you’re maintaining your vehicle. This will reduce costs whether you plan on reselling, or keeping it until it dies.

Running diagnostics on your vehicle, cleaning it, addressing issues and getting it regularly maintained will help it run longer and better. So whether you plan to run it into the ground, or sell it in three to five years, Moorhouse says this is an excellent way to save on future costs.

Make it an asset

All this is well and good, but what about affording it in the first place? Moorhouse says not only is this doable, but can even create more cash flow. Apps such as Turo allow you to rent out your vehicle. Uber and Uber Eats are also good options to make some extra cash. Furthermore, you can simply make more from your day job!

“Even though we’re at a high interest rate environment…find other ways to use that vehicle as an asset to produce extra income, or using the vehicle to take that job that’s perhaps a little more out of town, but increases your salary by $20,000,” Moorhouse suggests.

Save and invest

A good rule is to then always save for your vehicle. Whether it’s to buy one in the first place, pay for insurance, or future costs, put just $50 to $100 aside each month. This can then be invested to create even more cash in the event of an emergency, says Moorhouse.

Investing in this way for just three years could allow you to afford a car such as the 2024 Chevrolet Trax, which is $24,570. It’s a solid car for first-time owners and won’t blow your budget. Then, continue saving for repairs by creating those automated payments and putting them towards a safe stock such as Toronto-Dominion Bank (TSX:TD).

TD stock will provide you with dividend income and growth. It’s also a Big Six Bank with decades of growth behind it. And now is a great time to buy while it trades at just 9.9 times earnings. So stop losing money on your rental cars, and start making money from you car today.

The post Stop Losing Money by Renting Cars: Here’s How to Afford One of Your Own appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has positions in Toronto-Dominion Bank. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.

2023