Here's How Rich You'd Be If You Stopped Driving

By Amanda Meadows on 23 June 2015 5 comments

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

Let's break down all the costs associated with driving, using average numbers crunched by AAA, assuming annual driving of 15,000 miles.

1. Car

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.

2. Gas

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.

3. Insurance

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.

4. Repairs

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.

How are you controlling your transportation costs?

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Guest's picture

This is why buying a new vehicle is lunacy. I get get a car (emphasis on car) with around 100k miles on it for less than $5,000 total. that greatly changes the equation in my favor. My goal is to average (with repairs) $100 per month for the life of the car. If I can even get close to that I come out very well even with two vehicles.

I do live in a rural are of a low tax state so it is easier to keep those numbers low and it makes it more necessary to have a second vehicle.

Guest's picture
Guest

We have always had one car and it has bode us well..We think people who lease and also have 2 and 3 cars are absolutely nuts..I walk everywhere and ride my bike on the back paths to avoid being hit and killed in our tiny community..I have always riden public transportation and we skipped me driving for our 41 years of marriage if something happens to my hubs I could in an emergency drive our paid for car, but only in a dire emergency..We don't get the thing about people going car nuts, we live in the west gasoline is ridiculous and we don't get Seattle at all, no places to park, expensive gas and horrible drivers with no insurance whatsoever and hit others with their cars and leave the scene immediately and the biggest dirty secret is the theft of cars in seattle the number one city for it's population for theft of cars! I would never own a car in that city whatsoever!!!!!!!!!!!!!!!!!

Guest's picture
lostAnnfound

We did one car for quite a few years because I work from home. Our two daughters drive now and so we have two vehicles now, but one is a cheap minivan - high miles, decent body, and only cost a thousand dollars. It runs well and we keep it for any local destinations (30-45 minutes).

Guest's picture
Olivia

Sadly, as the car is essential for my husband's work, we've had to have one. And it is a huge dent in our overall budget. We save by buying used with cash, thus avoiding higher car insurance, the first huge hit of new car depreciation, and horrible loan interest rates. We've also found a towing/car breakdown service similar to AAA is available for far less through our car insurance company. We don't have the travel planning perks or discounts of AAA, so this option might not be for everyone, but it meets our needs. Public transportation or car pooling is not an option in our situation.

Guest's picture
Guest

I understand the purpose of the article, but the investing amounts are off. Depreciation is not a cash expense, so there's no way to invest that savings. Granted, investing $4,000 per year would still give you a nice payoff in 10 years, but nowhere near $100k.