Smart Ways To Drive Down Car Costs

Some say the best way to reduce car ownership costs is to not have a car. That isn’t always the case. Car ownership can be practical and affordable if you take smart steps to reduce costs.

Here are a few thoughts about Rich Finzer’s article on giving up your car.

Smaller is Cheaper

As Mr. Finzer’s article points out, it is much cheaper to own a small car then a mid- to full-size car. According to the figures he provides from Kelley Blue Book, you’ll save almost $24,000 over five years driving a subcompact car than a mid-size SUV.

Some car owners might find it a better option to buy a smaller car than give up a car.

Keep Your Car as Long as You Can

This brings us to assumption #2, namely that you will keep the car for only five years and then trade it in.

But that’s a stupid way to own a car!

It means you take the biggest hit of depreciation on yourself before passing the car on to someone else who may be able to drive it for another ten years or more. The longer you keep a car,  the more the median ownership costs decrease, partly because you continue to use it after you no longer have a loan payment.

Pay Cash for Your Car

Assumption #3 is you are paying for your car with a loan, but you aren’t actually required to do that. If you have the money saved up, you can pay cash and avoid the interest. This can reduce the cost of car ownership quite a bit depending on interest rates.

A Break Down of Yearly Car Costs

It is fairly easy to determine what your car is costing you each year. Make sure you consider purchase costs, insurance, registration, gas, maintenance, parking and tolls.

You don’t need to factor in costs for parking tickets or speeding tickets as Mr. Finzer’s article suggests. Rather, simply drive and park legally to avoid these costs.

Also, consider how long you intend to own the car. Suppose it’s 10 years. Once you factor in the drop in costs during years you don’t/won’t have a car payment, add up the cost across all 10 years and then find the average yearly cost, you may find it costs you much less per year on average than suggested by the numbers from Kelley Blue Book.

The Costs of NOT Owning a Car

That’s enough about the actual cost of owning a car. Now, what about the cost of not owning one?

The article claims that it’s cheaper to use public transportation if you live in an urban area with an established transit system of buses or light rail. But is it?

It really depends on where you live and how often you and your family members must use public transportation. You would have to crunch the numbers to determine if giving up your car really is the cheaper option. 

If you live in a large city, owning a car is more expensive because you pay more for parking and tolls, so taking mass transit is probably cheaper. But if you live out in the suburbs and must commute to work, taking mass transit gets much more expensive. Suppose you have to make daily train and subway commutes. Getting a small car might save you more than the cost of train and subway passes.

And don’t forget to tack on the cost of renting a car for the occasional road trip, as suggested at the end of Mr. Finzer’s article. Renting an economy car for one week can cost as much as $500 depending on where you live, which doesn’t include the cost of gas. Do that twice a year, and add it to your annual public transportation costs. The cost of not owning a car might not make good financial sense.

Do Your Own Math

My point is not that owning a car is always cheaper than not owning one. That certainly isn’t the case. My point is that everyone’s situation is different, and the only way to know which is cheaper for you is to do the math.

Don’t simply assume that dumping your car will save you “a ton of money” just because some writer says so.

Related:

• How To Never Have Another Car Payment
• 5 Ways To Reduce the Cost of Owning a Car
• Could You Be a One Car Family?
• Know What Your Car Is Costing You

Reviewed July 2023

About the Author

Visit Amy Livingston at her Ecofrugal Living blog.