Think you can afford more house in the exurbs? Think again.


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.

Disclaimer: The links and mentions on this site may be affiliate links. But they do not affect the actual opinions and recommendations of the authors.

Wise Bread is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to

Myscha Theriault's picture

Nice breakdown, and timely.

Guest's picture

We experienced something similar but with renting. We rented a place in an outer ring burb because it was cheaper. But the extra gas we burned up between work and having to drive long distances to do anything or to shop was costing a considerable amount of money.

We found a place closer in but it cost about $500 more a month. We broke even because of buying less gas. We also gained time we were spending on the road.

Guest's picture

Buying house in suburbs is great when you can make your work at home and do not have to visit city every day. Growing prices for fuel stimulate telecommuting and it is not hard to find job of such kind.

Guest's picture

The challenge comes from large Metropolitan markets. I'm originally from Houston and decided the other day, based on a thread on another website, to calculate how long it would take me to earn a return on the additional costs of a house in the city versus a house of comparable size in the suburbs. Based on my (fuzzy) calculations, which didn't include the higher property taxes in town or TCO for the vehicle but did take into account commuting distance and gas prices, it would take 47 years.

My husband and I currently live in Chicago, where even in this market costs are between $175-$250/sf in our neighborhood. Using a similar commute and our Jeep Grand Cherokee, admittedly not the most fuel efficient vehicle, it would still take 35 years to pay the delta between a city house and one in the burbs.

Of course, in Chicago we have the luxury of public transportation so a second car isn't necessary :)

Philip Brewer's picture

By my rough numbers, the fuel costs amount to just under a third of the total costs of ownership for a vehicle, so that makes a big difference in figuring the payoff. Of course, basing the calculation on just the fuel costs is the right thing to do, if moving to town just lets you drive less, rather than letting you get rid of a car altogether.

Guest's picture

I would get a place in a nice neighborhood closest to work. I was young and renting, so I do not care about the other community aspects in the neighborhood such as school district, family with kids, etc.

This year, my husband and I seriously looking into buying a house. I got a new job out in the suburbs where we might buy our house. Travel time is a huge factor because it would take anywhere between 40 - 60 minutes to get from the suburbs to the place I was working in the city.

The big decision factor was that the schools in the suburbs tend to be better than schools in the city. For a young family like ours, that is most important. And there are more young families out in the suburbs. So for us, it is not an economic factor.

Guest's picture

It's all preference. If your life is at home, you want a lot of space and can telecommute, then the exurbs are a good deal. If you're out about town a lot, can work near home and don't mind being closer to neighbors then you're all about town life. The numbers break down okay if you're living a specific lifestyle.

Philip Brewer's picture

It's true that almost any lifestyle can be made to work, if that's the way you want to live.

My point is that it's worth reeavaluating your basic assumptions. 

Owning a second (or a third) car, for example, is now so common that most people don't even evaluate it any more.  And, once you have that extra car, all sorts of things (such as living in the far out exurbs) make a certain kind of sense.

Most people can't imagine getting rid of that extra car, because their whole life is structured around having it--they'd have to move, they'd have to change jobs, etc.

Since it's so hard to think about from that direction, I'm sugesting that people look at it from the other direction--if you competely restructured your life so that you could dispense with one car, what would the payoff be?

Because I think most people would be surprised to discover that they could afford $100,000 of extra house, just by foregoing one car.

It's not that people ought to live any particular way.  It's that everyone ought to go through the exercise from time to time of digging down to the bottom of the way their life is organized and figuring out what other organizations are possible, if they're prepared to make major changes.

Guest's picture

As the Wall Street Journal reported some time ago, many families are adding a 3rd car for commuting.

The new Honda hybrid (April 2009) is cheaper (under $20,000) and lighter (perhaps 50 mpg highway) than even the Prius.

That's much cheaper than paying the price to move to the city.

Philip Brewer's picture

I can see that adding a third car that gets much better fuel economy might be slightly cheaper than going on driving a car with poor mileage--although, since fuel is only about a third of the total cost of ownership of a car, I don't think it's a clear win.  But I don't see any way adding a third car can be cheaper than getting rid of a second car.

The cost of "moving to the city" might come to almost anything.  As I said, moving to Champaign-Urbana from one of the outlying towns or villages adds about $60,000 to the price of a comparable house.  Moving to Manhattan would probably boost your housing cost more (although even there, it depends on where you're moving from).

Guest's picture
Debbie M

It costs me about $2500 per year to own my car including gas, maintenance, repairs, insurance, and "payments" (saving for my next car). Of course I live in the city and do not drive to work--I generally fill my tank about once a month. (Also, I buy cars that are ten years old and reliable makes, and then I keep them ten years. I pay cash and do not get collision insurance.) So my car costs would be higher if I lived in a suburb.

Some of my friends live in a nearby town that is now considered a suburb of my city. There I could get a house that is half again as big as my house (1500 square feet vs. 1000) for the same price as what my house is supposedly currently worth. That town also has plenty of things in walking distance--lots of stores, shops, and restaurants.

With my friends living all over the place, though (of course they did not all move to the same part of town or the same suburb), I'd much rather live in the middle. In good traffic, nothing is more than 20 minutes away. Also, I live 3.5 miles from my workplace, and plenty of other workplaces are only 20 minutes away even during rush hour. Since I live near the center of town, I'm generally going against rush hour to get to work.

After I retire, I'm not totally sure I couldn't deal with living in a suburb, especially since the development of the internet and Netflix (which did not exist when I was growing up in suburbs). I suppose if property taxes got too high I'd have to consider it.

In conclusion, I have chosen to both live in town and have my own car by having a small house and an old car. (I suddenly feel rich. I have it all!)

Carrie Kirby's picture

This is really interesting because personally I have always felt people give up so, so much in terms of quality of living by moving far away from cities. But as one poster mentioned, that's a matter of preference -- I would find life in certain suburbs or exurbs soul-crushing while others would find an urban or semi-urban lifestyle too hectic.

 I hate it, though, when I read about great ways to save money, and they turn out to be the way I've always done it. Like, I'd love to save money by going down to just one car, but we've NEVER owned more than one car so I can't save money that way. Well ok I already am but that's not such exciting news, is it?

I blog at

Guest's picture

The school issue is a real one for some folks with kids. It's not for all of them, but, many definitely make education a priority. In my city, the numbers generally break down like this - public schools in the bigger city areas are down in the bottom 20% of the scores, in the more affordable suburbs, it's just above the median, and in the expensive suburbs they're scraping the top 20%. The top schools are usually specific schools.

Partly, this is because schools in the city blow more of their money on discipline costs, special ed, and student retention efforts. Partly, it's because the wealthier public schools push the parents to donate money toward sports and arts and other programs, freeing up the state money for education. Factor in the parental education levels, and there's this huge gap in test scores, as well as education quality.

It's an unfair situation, but, lacking a strong, widespread educational justice movement, it's hard to fault the parents for moving out to the affordable suburbs to seek better opportunities for their kids.

Guest's picture

Yes, it is much cheaper to change vehicles (SUV -> hybrid) or even add that 3rd car than to move to the city.

Not only is the housing more expensive in the city vs. the suburbs, other expenses are higher: property taxes, groceries, (bodegas vs. chain groceries/warehouse clubs), etc.

The dollars you put towards housing are so much greater than dollars put towards a private vehicle (hundreds of thousands vs. tens of thousands) that unless you are willing to radically downsize your living space you'll never make up the cost of moving to the city.

Sadly, there are other negatives as you approach the city center.

Not only the poorer schools, but usually increased crime as well.

Philip Brewer's picture

If dropping a car saves you $8000 a year (which, as I say, is about the right figure), that frees up $280,000 over the course of a 35-year career.  Which is my point:  Because of the way you spend the money, that feels like tens of thousands, but it's not--it's hundreds of thousands, just like housing.

In fact, if you invest the money so that you can earn a return on it (which you'll never get from a car, but which you might from housing), then it could be much more.  If you invest $8000 a year for 35 years at 6%, it comes to almost $900,000.

Of course, whether you want to live in the city is another matter altogther. That's purely a matter of personal preference.  But don't fool yourself--an extra car does cost you hundreds of thousands of dollars (measured over the course of a career).

Guest's picture

And haven't looked back. If I had my way we'd not have any car, but we don't live in an urban enough environment yet to make that a reality. The only people this one-car thing seems to bother is my parents who can't fathom how we live with just one car! (and they're divorced!)


Guest's picture

You're considering a straight payback instead of net present value.

Discounting back $8000/year over 35 years isn't half of your $280,000 figure.

Remember, the expenses of switching houses come up front:

- a 20% downpayment on the entire value of the house, not just the extra it costs to move to town

- transaction costs approaching 10%

And real returns on residential real estate are about 1% - it's an inflation hedge, not an investment.

Transportation and housing expenses (i.e. maintenance, taxes) are a function of the assets' cash value, but with an order of magnitude difference between the cost of each option.

Again, unless you choose to radically downsize your living space (4 bedroom home in suburbia to a 2 bedroom condo near the city center), you're better off keeping the car to commute downtown.