Many people who live in the far-out suburbs move there because they can buy more house for the money than they can in town.  As an example from where I live, a house in Champaign-Urbana would cost about $60,000 more than a comparable house in one of the nearby towns or villages.  If you do the math, though, $60,000 is a pretty small sum, compared to the cost of owning one extra car.

According to the American Public Transportation Association, replacing one car with a combination of walking and public transportation saves a household $8059 per year in reduced spending on fuel, maintenance, insurance, registration, depreciation, finance charges, etc.  (Even after adding back in the cost of public transit.)

So, if you bought a house in town--close enough to work that one member of the household who currently drives to work could give up a car and instead get around by mass transit and walking--you'd free up enough cash to boost your mortgage payment by $672 a month.  At current rates on a 30-year mortgage (6.52%, according to the St. Louis Fed), that much extra per month would let you buy $106,097 more house.   

Of course, having an extra car is handy for other things besides just getting to work--there's also transporting the kids, running errands, getting to doctors and dentists, and so on.  But, it's really not that hard to get by with one less car--the person who keeps the car takes on those errands that simply can't be run without a car; the person who gives up the car takes on those errands that can be run by bus or on-foot.  Transporting kids arguably gets easier once you give up a car, because kids can start taking public transport on their own at a younger age than they can start driving.  (I was riding local buses on my own when I was in 4th grade.)

The original idea for this post came from a radio interview with Christopher B. Leinberger that ran two days ago on my local NPR station.  Leinberger is the author of a fascinating-sounding new book on walkable communities called The Option of Urbanism.

I was a bit dubious about the American Public Transportation Association numbers.  (They are, after all, an advocacy group for public transit.)  So I did my own back-of-an-envelope calculation and came up with these figures:

  • Fuel 15,000 miles in a car that gets 30 mph burning $4/gallon fuel = $2000
  • Maintenance (including oil and tires) wild guess = $600
  • Insurance = $900
  • Registration, inspections, etc. = $100
  • Depreciation ($20,000 car that lasts 7 years) = $3600

That totals up to $7200, so I'd say $8059 is in the right ballpark.  Of course, it gets way cheaper if you buy a cheaper car, drive it less, and make it last for more than 100,000 miles.  If you live in the exurbs, though, you're probably driving it more, not less.

Two notes on the math:

  1. $20,000 divided by 7 is just $2857, but you either have to borrow the $20,000 and pay interest on the loan, or else you have to pay cash for the car and lose out on the investment return the money could have earned you.  Either way, I figure you're out about $3600 a year over the lifetime of the car.
  2. Remember that those car-ownership costs are after-tax expenses--you'd probably have to gross an extra $11,000 or $12,000 a year to have that much money available for spending.  Many home-ownership costs, though, are tax-advantaged, meaning that it's more tax efficient to buy housing than it is to buy car transportation.