Not Owning a Car Added $66,000 to My Savings Account
I bought a car shortly after I got my driving license… at age 29. And I only did that because my boss said I needed to drive in order to do my job. Growing up in Paris, where I had great public transportation options, I never felt the need to drive.
Are the expenses of a car worth it?
Some of my friends still don’t have their licenses at age 35. Having a car is expensive over there. Just renting a parking space costs $150 to $200 a month, and insurance can be as much as $700 on a $2,500 car.
But even outside the big cities, the cost of owning a car can run into thousands. So buckle up – I am going to take you on a ride through the real cost of owning one.
Say you’re not going overboard and decide to get a $5,000 starter car. You won’t get much for that price, but it won’t be a complete wreck.
That means it needs quite a bit of TLC. Let’s budget for a couple of oil changes and one major repair per year – say, $1,000. Changing tires set me back $600 last time. And I do my own oil changes – oil costs about $30.
Now you need to insure it. If you are young, it will cost you extra. My first year of insurance was around $500.
I never drove much around town, but I took my car on several road trips, and put 10,000 miles on it. That’s just over 25 miles a day, which would be your daily commute and errands run. My car did 20 miles per gallon, and 500 gallons at $3 cost $1,500 a year.
You also need a place to park. Street parking may be available where you live, but the weather outside doesn’t do your car any good. By not having a car, I was able to rent my parking space out for $120 a month. That’s $1,440 a year I would have to stop earning if I needed to park my own car instead. Plus, a monthly $10 car wash costs $120 a year.
And there are a few added costs such as being “the one with a car” and helping friends move or driving everyone home after a party. But let’s say we’ve covered everything.
In five years, your car will be worth next to nothing, so we will assume a $1,000 a year cost-of-ownership. Your brand-new, $20,000 car will lose more than that each year.
That is $463 a month, if you have the means to buy a car by paying cash down. With a payment plan, you can add a couple hundred for the instalments.
If you don’t have a car, you can put those expenses elsewhere.
As I said before, I never needed a car – and I have traveled to over 80 countries. It just takes a little creativity. Back in college, it was hard my first year, as I lived 15 minutes away from the supermarket, and my hands hurt as I carried heavy grocery bags home. I have found myself walking home when I had missed the last train and taxis were nowhere to be found or were too expensive for my student budget. But that extra $500 a month? I have invested it and made it grow.
But if you must have a car do everything you can to keep your costs as low as possible!
BY NOT HAVING A CAR FROM AGE 18 TO AGE 29, I HAVE SAVED $66,000.
Invest your $500 a month for 11 years at five percent, and you will have $88,118. (Do the math with this calculator.)
Never add a cent to your nest egg and let it grow until age 65, and you will have $531,093. Pretty cool for retirement, isn’t it?
Of course, I had transportation costs. I was the proud owner of roller skates, several bicycles that were stolen, and a bus pass. I pitched in for gas when my friends took me places, and I rented cars the year I got my license. Additionally, I took trains, boats, taxis, and planes where I would have driven otherwise. I also paid for grocery delivery, but you could argue that the $5 is pretty much what you would spend on gas to get to the supermarket. So my calculations aren’t entirely correct. But most months, it was $50 for a bus pass instead of $500 for a car.
Now that it is easier than ever to rent a car, get a ride-share back home after a dinner, or ride the bus, I want to encourage you to rethink having a car:
Do you really need one? How often do you use it? Could you do with just one if you have two? It takes a little planning to rethink errands, but it’s manageable for many people. Just imagine what you would do with the savings, and it gets much easier.