Could You Live Without a Car? See How Much You Can Save
When you have somewhere to be, there’s nothing easier than tossing your stuff in your own car and driving there — all while listening to your favorite music and keeping the temperature in your personal Goldilocks zone. The trade-off is cost, of course, because buying and owning a car, truck, van or SUV is expensive.
You might feel married to your ride, but is divorce out of the question if breaking up with your wheels could save you a life-changing amount of money? Because that’s exactly what might happen if you decided to ditch your car and use public transportation instead. Let’s explore.
All the Wrong Records Are Being Broken
The toll of the ongoing microchip shortage is evident in the average price of a new car, which has now topped over $48,000 for the first time in history. According to Kelley Blue Book (KBB) it’s a record $48,043 as of June 2022 to be exact. That’s a year-over-year increase of nearly 12.7% compared to last year.
Presuming you’ll be financing, the average monthly payment for a new car is now around $700, according to J.D. Power — another all-time high. To make matters worse, according to KBB now is an especially lousy time for deals and discounts, as dealers are responding to tight inventory mostly by holding prices at or above MSRP. Incentives are also the lowest on record — just 3.9% of the average transaction price.
In the used car market, records are being smashed more than broken. KBB recently reported that the average used car now costs more than $28,000 for the first time in history — a record $28,312 — an increase of 28% over the year before. The average monthly payment for a used car is now a record-shattering $555 per month, up from $437 just one year ago.
If you buy a car, you’ll have to budget for a whole lot more than just your monthly payment. According to the most recent data from AAA, the average cost of vehicle ownership is now approaching $10,000 per year — $9,282 or $773.50 per month. The biggest factor by far is depreciation, which accounts for 40% of that cost, more than even gas and maintenance.
Here’s part of the breakdown for the average cost of vehicle ownership:
- Fuel costs: 11.6 cents per mile driven
- Maintenance, repairs and tire costs: 8.94 cents per mile driven
- Insurance: The average $1,194 per year
All in all, owning a car costs 76 cents per mile if you drive 10,000 miles per year, 72 cents per mile if you drive 15,000 miles per year, and 70 cents per mile if you drive 20,000 miles per year.
A 2022 AAA report says people spend $658 monthly for a vehicle loan, along with the $3,656 a year associated with the costs of depreciation. That’s $963 a month until you pay off the loan, but by that point, the cost of repairs will have risen as your car ages and begins to fail just as your warranty expires.
Until that day comes, you’ll have to contend with expenses like full-coverage insurance, which AAA says costs an average of $1,588 annually. Taxes and fees for registration and licensing will run you $675. Then, there’s the cost of finance charges for your loan, which, as previously stated in 2021, averages 4.12% — that comes out to an average of $712 per year.
A Cheaper, Safer Alternative
According to the American Public Transportation Association (APTA), the average American family could save $10,000 by taking public transportation and learning to live with one less car. The average household spends 16 cents of every dollar on transportation, according to the APTA, 93% of which goes to purchasing, maintaining and operating vehicles. Buying and owning cars, trucks and SUVs is the average household’s biggest expense after housing.
In terms of indirect costs, you’re very likely to save money on health care by foregoing your car for public transportation. According to the APTA, public transportation is 10 times safer per mile than traveling by car — taking public transportation reduces your chance of being injured in an accident by 90%.
Just before the pandemic, PSECU, the largest credit union in Pennsylvania, conducted a study that compared the costs of the most common kinds of public transportation. While it was unique to the Keystone State, the results were representative of the country as a whole.
Keeping in mind that the average car payment alone is now $700 — and not counting the hundreds of dollars in ownership and maintenance costs — here’s what the alternatives will run you:
- Bus/subway: $60 per month
- Taxi/rideshare: $500 per month
- Trains: $1,200 per month
More From GOBankingRates