What’s car ownership really costing you? | MintLife Blog | Personal Finance News & Advice

What’s car ownership really costing you? | MintLife Blog | Personal Finance News & Advice
What’s the best financial decision you’ve ever made? I’ve been thinking about mine. Actually —no surprise— it was my wife’s.
Late summer, 1999. My wife, Laurie, was fresh out of grad school and we were both looking for work. We had gone to see a man about a car. It was a used Mazda 323, blue, manual transmission. It was fun to drive, and it reminded me of my first car, a 1980 Mazda GLC, which I bought for $950 in high school. We drove it to a garage and had it checked out. Good as new, said the mechanic. And the price, $5000, was quite reasonable. Let’s buy it, I said.
“We don’t have $5000,” said Laurie.
I was annoyed—I’d already visualized myself driving around town in a shiny, blue Mazda. But Laurie suggested we wait and buy a car after we had some actual income. Crazy, I know.
That was almost twelve years ago. We haven’t gotten around to buying that car yet, and the price of gas and a new report from AAA got me wondering how much money we’ve saved.
AAA to the rescue
To answer my question, I turned to the latest edition of AAA’s Your Driving Costs, which came out last week. Since 1950, AAA has calculated the five-year total cost of ownership for various types of new cars. Here are a couple of 2011 highlights to give you a sense of the numbers:
Medium sedan (e.g., Toyota Camry or Chevy Impala) driven 15,000 miles/year: 57.3 cents/mile, or $716/month.
4WD SUV (e.g., Jeep Grand Cherokee or Nissan Pathfinder) driven 20,000 miles/year:63 cents/mile or $1050/month.
These are total cost of ownership or TCO calculations, which take into account depreciation, financing, insurance, gas, maintenance, and license fees. And the report was put together before the most recent spike in gas prices.
Of course, I’m a cheapskate and have never bought a new car. The last car we bought was a used Nissan Sentra which we named Don Carlos (and which promptly needed a $1000 engine rebuild). To calculate how much we’d save by buying one of these instead of a new sedan, I turned to Edmunds.com. I specified a base-model 2005 Sentra. Over five years, it would cost us about $24,632, or $411/month.
Let’s be conservative and call it $400. If we’d owned a car, we would have spent less on bus fare but more on parking, so let’s call that a wash. How would our lives have been different if we’d been driving around in a metallic blue Mazda all these years instead of a Metro bus?
Three ways of looking at the motorized money sink
I pulled out my calculator and came up with three answers to the question: “What happened to that car money?”
1. It went into our retirement savings. We have about as much in liquid retirement savings as we would have spent on owning a used car. Why don’t people have enough retirement savings? It all went into their cars.
2. It took us around the world. Since deciding not to buy the Mazda, we’ve visited England, France, Thailand, Laos, Canada, and Japan. The total cost of these vacations was much less than we would have spent on a car. Having an extra $400/month expense would have put most of these trips out of reach.
3. It made us wealthy. Now I’m going to cheat, but only slightly.
We know plenty of couples who own two cars. Owning two cars is slightly less expensive, on a per-car basis, than owning one, mainly because insuring the second car is cheaper. But the overall cost is way higher. Let’s call it $750 (not much more than a single new Chevy Impala, after all).
We are fortunate enough to make slightly more than the median income for a Seattle family. Subtracting $750/month, however, would knock us down below the median. It would drop our standard of living from middle class to lower middle class. But at least we’d be able to sing along with the car radio, right?
You lucky bastard
Sure, I’m a lucky guy. My wife rides her bike or takes the bus to work; I walk, and our daughter walks to school. You’re already objecting, I’m sure, that your situation makes it impossible to get rid of your car, and I’m an urban elitist who just doesn’t get it.
For some people, some family situations, some neighborhoods and jobs, no doubt a car is necessary. But there are plenty of people who believe they need a car but would be just as happy—and much wealthier—if they didn’t have one.
Our home (on Capitol Hill, Seattle) gets a Walk Score of 97: “Walker’s Paradise.” Only 9 percent of Seattle residents have a higher rating. Yet we know a few of those people and they still own a couple of cars. Something’s wrong with this picture.
Not long after we turned down the blue Mazda, Laurie spent two years working as a substitute teacher. In the evening—or sometimes at 5am—she’d get a call telling her which of Seattle’s dozens of public schools she’d be reporting to. It would have been an obvious time to break down and buy a car, and we’d probably never have gotten rid of it. Instead, she drew up a master list of how to get to every Seattle school on the bus. Yes, it was a pain in the ass. You know what else is a pain in the ass? Taking a $400/month pay cut so you can get to work 30 minutes faster.
A couple of years after that, we were expecting a baby. “You’re going to have to get a car now,” everyone told us. We didn’t. When Laurie went into labor, we took the bus to the hospital. (Admittedly, my parents gave us a ride home.) That baby is seven now, and we’ve never even considered adding a four-wheeled member of the family.
In other words, we’re your typical one-child family, and there are plenty of families just like us who think they just have to own a car or their kid will never go on a playdate or learn to change a flat tire, or something.
Save for retirement. Become debt-free. Buy a house. For many people, becoming car-free belongs on this list of financial goals. It means getting rid of a ruinous ongoing cost and having more money to spend on things that don’t break down and don’t need to be fueled up at $4/gallon. (If driving a nice car is what makes you happy, that’s fine, as long as you understand the total cost.)
Not owning a car doesn’t mean you can never drive one. Aside from car rental (Enterprise has the most locations and often lets you drop the car at a different office for a small fee), Zipcar, which had a gangbusters IPO last week, has cars in over fifty cities. Car sharing seems expensive on a per-hour basis, but all of those different costs from the AAA report are included in the price.
Hmm. Maybe I was wrong. My best financial decision wasn’t saying no to the Mazda. It was marrying the woman who told me not to buy the Mazda.
Matthew Amster-Burton is a personal finance columnist at Mint.com. Find him on Twitter @Mint_Mamster.
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14 Comments so farleave a comment

Ravi Gupta
43 days ago
I think you make some great points! I live in Miami most of the time (doing an internship in Illinois) and not having a car for these last couple of months has saved me a tremendous amount of money in gas prices alone. I’m not a big fan of counting depreciation because it’s a non cash expense.
-Ravi Gupta
1 like

TsuKata
43 days ago
I admit that when I went to the link, I was thinking AAA had made a real calculator as opposed to a chart. I wish that there was an actual calculator app where I could plug in the car that I’m currently driving, the higher mpg car I want, the miles I drive per year, and get an estimate of cost savings and expenditures, categorized by fuel economy, maintenance, etc.
Specifically, I currently drive a PT Cruiser from 2008. It has a trade-in value of roughly $10K. If I bought a used (but newer than 2008) hybrid, I’d probably pay around $27K and get 10-30mpg more (depending on what model I bought). So, the question is, how many years does it take for me to make up the $17K difference in fuel cost savings at current fuel costs? And then what if prices go up? I made my own spreadsheet for my specific situation, but it definitely seems like a reasonable question for others to ask themselves. Also, with AAA’s or Consumer Reports’ knowledge of car maintenance costs by model, they could factor that in as a separate line item.
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Matthew Amster-Burton
43 days ago
TsuKata, did you try the Edmunds.com link? It doesn’t offer everything you ask for, but you can find your car model (or something similar) and get a much more specific estimate than AAA offers.
Also, everyone’s being too nice! Let’s hear from the skeptics.
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LD
43 days ago
just silly
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4AutoInsuranceQuote
43 days ago
Congrats on your no-car decision. I think it’s a really smart choice for people who live in urban areas with good public transportation. Last year, I chose to drive a car in Boston. It cost me $100/month for insurance, $100/month for parking (at my apt complex), about $200/month for gas, and around $50/month for toll booths. This doesn’t even include repair costs. All in all, having that car was costing me around $500/month. I sold my car last August, and I couldn’t be happier. I take the subway or walk everywhere now.. it only costs me about $90/month for a metro card that I can use on both the subway and bus lines. Apart from saving around $400 monthly, I also get more sun, more exercise, and generally feel better about myself. All people should look into getting rid of their cars if they have the chance.
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Peter, Billerica, MA
42 days ago
I really can’t disagree more with you here. For certain jobs being the city or being able to have this “high walking score” is very necessary. Majority of people live outside of cities because housing is cheaper and much better quality. You can argue that more jobs are in the city where I would argue that better jobs are outside the city.
Life in suburbia is much different than life in the city in many ways. There are distinct pros and cons of both, however I really believe that suburbia is much more sustainable and kinder to raising children than any city setting. It is much harder to own your house while living in the city.
Kids shouldn’t be cooped up in a 1,000 sq ft apartment where it can be dangerous after dark and the tv is their ‘recreation time’. Kids should be able to explore where they live, play in the woods, play sports with other kids in the neighborhood and be able to ride their bike without constantly worrying about traffic or being too loud for the neighbors. Having a front or backyard may seem like a waste often, but giving kids a place to play outside is more beneficial than any toys you could buy for them to play in their room. A sense of community can be important and you don’t get that in the city like you do in a suburban neighborhood.
Buying a car is paramount to living in suburbia. My first 2 cars were over 10 years old with over 150k miles so I know what it’s like to have the constant worry about car maintenance. When I had the money saved I bought a new car 2 years ago and have had no issues. My plan is to pay it off within the next year and then use it for a total of 10 years before replacing it with a gently used or another new car depending on price and situation. I really think this is the way to go for people who plan on taking care of their car. By planning on taking care, I mean not going to sketchy shops for half-assed repairs on newer cars (old cars, ok) and following a maintenance schedule that means you have to pay $300 from time to time even when nothing is wrong.
I really think you place way too much emphasis on the traveling bit. Being outside the US sucks and there’s no place I would rather live, period. I like to vacation as much as the next guy, but being happy everyday should be more important, instead of placing your happiness on a two week or less vacation from your reality. Delusional people may think that going somewhere for a week can change you life, I prefer to work hard enough so that I enjoy my everyday life so I don’t have to dream about places on the other side of the world. Maybe you just love not having to be responsible (taking the train, bus, etc.), so-called “green living,” and going to bars every weekend. The “green living” bit is a very long argument that goes nowhere, so let’s not go there.
I am not much to care for retirement savings, but I plan on working for the next 35+ years and maybe beyond 60 so I think my salary will increase over time, thus allowing me to save more later while enjoying now instead of worrying about all the time. The more savings you build up, the less likely you are to spend them on what you really want. I have seen it over and over with people saving their whole life, then getting sick and cannot enjoy their money or people being put in positions to have to use their savings for other purposes (bailing family out of debt, court costs, etc) just because they have this money saved. Life is going to mess with your plan no matter what, might as well enjoy it, be a good person and do the things that makes sense to take care of yourself and your family.
You seem like a worrier so I will admit we are very different. I like to shop at places where price isn’t so dependent on location (being walking distance from neighborhoods) so I would likely rather drive to get supplies knowing that I can buy more/better quality and gas is still cheap. I also like the freedom that a car allows me to pick up and go wherever I want, whenever. Trains, buses, etc. all have schedules and limitations.
Again the responsibility part is important. I loved taking the subway in college and would still love it if I lived near bars with a bunch of friends as roommates. You don’t have to be conscious of where you’re going, pay for gas, insurance, or maintenance on the transportation that you rely on everyday. You can drink more play on your phone, maybe do some work, read, etc. Essentially the city is taking care of you. However, you have absolutely no control or ability to change that without drastically changing your daily habits. The part about your wife being pregnant on a bus really defines your article.
It would be tough for me to tell my wife that we would have to rely on public transportation when the time comes. That becomes part of being successful or not. Protecting your family should always be #1. Doesn’t it make you think twice if something happened to your wife or child during the birth? I’m sure you did some research, but you only have one chance to do it right. I know in the old days people would deliver at home, but the infant mortality rate was much higher, even though people gave birth much earlier. Your wife sounds educated I will go out on a limb and say she was probably near 30 if not older when pregnant and the older the wife the more the trouble in general. You are right that you’re lucky, but that’s all you are. I like this website, but this message, about being lucky…
Usually smart, lucky people don’t brag about being lucky…so I’ll leave you with that.
1 like

Matthew Amster-Burton
42 days ago
I think you missed the point of my column.
As I said, for many people in many situations–like yours–car ownership is both affordable and appropriate. I’m talking to the people who are living in a situation where they could get rid of their car but choose not to and then wonder where all their money went. Does that describe a majority of Americans? Of course not. Does it describe far too many? Yes. We vastly overestimate the necessity and underestimate the cost of driving.
Peter, this was not meant to be an argument about cities vs suburbs. I wonder, though, how much time you’ve spent raising children in the city. I’ve been doing it for seven years, and I simply don’t recognize your description of it. Is it possible you had a bad experience that hardened into a stereotype?
Finally, you write:
“I plan on working for the next 35+ years and maybe beyond 60 so I think my salary will increase over time, thus allowing me to save more later while enjoying now instead of worrying about [money] all the time.”
You have an amazing opportunity here. I’m from the future. Some years down the road, you’re going to look at what you wrote and say, dude, what was I thinking? Why didn’t I save a little more when I was in my 20s and get in on some of that sweet, sweet compound interest? But you can fix the future today! Biff doesn’t have to take over Hill Valley.
Best,
Matthew
4 likes

John Ulzheimer
41 days ago
Biff is the man!! He was smart enough (or at least the grandfather version was) to get the sports almanac back to the past so he could wager his way to great wealth. He just got too wrapped up in Loraine and it was his undoing.
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Mary
40 days ago
Peter, you’re got to be kidding with some of the stuff you wrote:
“I really think you place way too much emphasis on the traveling bit. Being outside the US sucks and there’s no place I would rather live, period.”
This part alone makes me think that you are not serious. If you are serious, you spent a LOT of time trying to justify your narrow mind.
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Matthew Amster-Burton
37 days ago
You’re right, John. I would like to apologize to Mayor Biff; any slight was unintended. Also, would anyone like to buy a slightly used sports almanac?
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Nick Russell
37 days ago
This article is so great. Although I love driving, I don’t own a car, and barring any big changes in my life’s circumstances didn’t particularly plan to get one anyway (too much hassle!). But the correlation between the cost of a car and the cost of retirement saving had never occurred to me, and it’s SUCH a fantastic argument for the importance effective public transportation. Individual circumstances may vary, but on a national level the math just doesn’t work out: we can’t afford cars.
Also, Peter Billerica’s beliefs about cities are just silly. I live in a beautiful, safe, inexpensive neighborhood across the street from a large park in Brooklyn; I’m sure neighborhoods like this exist in every city across the country.
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Adrian
37 days ago
Hi Matthew,
Great article. Though I couldn’t get the edmunds.com link to work for my car (a Focus 2008 SE).
I’m 34 and bought my first car last year, for a move and a new job where I was told I need a car (on occasion, I do). I bought it with my savings from not owning a car before this. Prior to this, I lived in Ottawa, using a Vrtucar (a local version of Zipcar) for personal errands, because I had taxi chits for work travel, and got to work via public transit or bicycle. Now I’m in a smaller city with limited public transit (the closest drop point is about 800 yards from my office), no car share (density’s too low to create a business case for one) and much poorer snow clearing, so winter saw much more car usage – I think I drove 800 miles from November to March!!! My car has been a massive expense, but hopefully I can resell at a reasonable price when the opportunity presents itself.
Peter could not be more different from the other people writing on this. As someone who’s travelled a fair bit through the world (about 24 countries) there is much to learn and experience from other places. The variety of the USA provides opportunities to learn as well, but there’s much to gain from going to places like Amsterdam, Berlin, Delhi, Bangkok, Johannesburg, etc. as well. Peter – I didn’t get the sense Matthew’s a worrier, especially since he’s got a 7 year old that he hauls around on the bus or by foot. I’m sure you both believe in protecting your family – it’s just that you see different sources of risk (the car is one of our greatest sources of risk in day-to-day life – both in terms of health and finances). I also had a great community that I lived in while in downtown Ottawa, with terrific friends close by. In a more dense city, you’ve got a lot more people living close to you; it’s easier build your own community based on mutual interests as well as on geographic proximity, since there’s just more of you.
Jane Jacobs once said “The point of cities is multiplicity of choice.” I think that’s close – it may not be the ‘point’, but it’s definitely the outcome. And one of the best parts of that choice is the ability to choose your form of mobility. Suburbs (especially single-use suburbs) often aren’t designed to offer that.
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TrainMon
36 days ago
Peter,
Holy COW did you miss the point of the article, but I think anyone can determine what your agenda is.
While the author certainly talks about giving up on car ownership entirely, I think the biggest issue for the average fat, lazy American is giving up the notion that life cannot exist without REGULARLY using the family automobile(s). How ironic is it these days that, even to get that exercise that most of us need so badly, we need to DRIVE to get to a recreational facility rather than simply incorporate the trip to and from the facility as PART OF the exercise?
*We drive to the gym to get on a stationary walking mechanism (treadmill) or biking mechanism (spinning). Fair enough on a frigid or rainy day; not so much on a nice Spring day. In fact, on a nice Spring day why be cooped up in doors working out anyway if all you’re doing is walking or biking?
*We throw the bikes on the back of our automobiles to drive to the bike paths. Fair enough if they’re 10+ miles away; not so much when they’re right around the corner.
*The whole “Soccer Mom/Dad” mentality where children get driven to/from their sporting events. Ironically, most learn nothing of carpooling and, as they get older, feel the need to drive individually from event to event just to “show off their rides.”
And speaking of “cooped up,” if anything city children, and those of parents who use public transit regularly are MORE streetwise. Walks to and from local playgrounds and to and from bus stops and train stations bring children past the neighbors and shop owners of their community. On board public transit, the children are exposed to myriad of cultures and walks of life they otherwise would get limited exposure to.
And so the ready answer to all of these concerns is, “Well fine, but I live in an area that does not have adequate public transit.” This is, indeed, unfortunately true in too many areas, including urban areas. All for the mirage of “better” neighborhoods and “better” housing, Americans are all too easily lured into living in remote suburbia where they become so car-dependent that they cannot fathom any other way of life. But, slowly but surely, politicians, city/town planners and the general public are coming to realize that, with the advent of bike lanes and public transit services, people CAN have a choice.
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