In Post 22 and Post 23, we were introduced to Cayla, who is a 22 year old young professional. She just moved to a new city and is thinking about buying a car. She has $3,000 saved up and ready to go. But before she started test driving different options, she decided to do a little research on the costs of owning a car.
She first looked at buying a new car for $25,000. After her down payment of $3,000, she would have a car loan for $22,000. After she added up all the costs, she realized that a $25,000 new car would actually cost her $24,100 in the first year alone and that she would still have about $18,000 left to pay on her loan.
She then analyzed the option of buying a used car for $10,000. She looked at buying a five-year-old Toyota Camry with 80,000 miles. After her down payment of $3,000, she would have a car loan for $7,000. After looking at all the costs, the first year’s expenses came to $13,800. This was a much better number than the one from the new car option, but she still wasn’t comfortable.
So she decided to look at one more option: not having a car at all.
How about no car?
Before she pulled the trigger and bought the used car, Cayla decided to look at what life would be like without a car, although she was dead set against that idea. Not having a car wasn’t really an option for her. None the less, she still decided it would be smart to at least look into the option.
Cayla lives in a neighborhood where some things are close, but not everything. Her gym and coffee shop are within walking distance. Her best friend and a mall are a short bike ride away. But her grocery store and her job require transportation.
There is a public transportation option for Cayla to get to work, but it takes more time than driving. “There’s always Uber or Lyft, too,” she thought. And one of her co-workers lives two blocks away. Maybe she could pay him a little gas money for a ride to and from work sometimes.
Recently, at a friend’s birthday party, Cayla and the entire group rented e-bikes and biked to a park and back just for fun. She remembered how fun it was and wondered how much one of those would cost. “Or,” she thought, “an electric scooter would be kind of fun.”
A friend of hers rented a car to drive back to her hometown for Thanksgiving, and Cayla thought that could work if she wanted to drive home to see her family.
All of this sounded kind of doable, so she decided to run the numbers:
- Down payment: $0
- Sales Tax: $0
- Car payments: $0
- Insurance: $0
- Deprecation: $0
- Maintenance and repairs: $0
- Gas: $0
- Registration: $0
- Car washes: $0
- Parking: $0
- Bike: $0 (she already owns a bike)
- E-bike: $1,500
- Two car rentals a year: $1,000
- Uber and Lyft per year: $3,120 (Three trips per week at $20 per trip)
- Gas money paid to co-worker for carpooling to work some days: $1,500
Total for the first year without owning a car: $7,120
After a lot of consideration, Cayla decided not to buy a car…for now. She decided to give life a try for a couple of months without a car to see what it was like. After all, she can buy a car at any time if she changes her mind. She would only be out the $1,500 that she plans on spending for an e-bike, but she could always sell that.
She knows that it will be inconvenient at times not to own a car. But she also realizes it can be inconvenient to remember to make insurance and car loan payments, to take a car in for oil changes and tire rotations, to keep track of maintenance, and to deal with a potential accident.
But, Cayla realized the most significant benefit of going car-less is that she can take all the money she’ll save and invest it for her future. She did the math, and she will save over $40,000 over the next three years by not buying that brand new car! That put a big smile on her face and is the reason she is giving this a try.
What Cayla learned
- Don’t EVER buy a new car.
- If buying a used car, do it without a car loan. Only spend money that is already saved.
- Cars are not an investment. They do not increase in value over time; they decrease.
- Cars are also not a “real” asset. They cost money; they don’t make you money.
- If one does purchase a car, take care of it. Put an annual reminder in their phone to take the car in for regular maintenance and get oil changes when needed.
- Trying life without a car can be just a trial. You can change your mind at any time.