I’m a little ashamed to admit it, but I’ve committed one of the cardinal sins of personal finance: I leased a new car; not just once, but twice! The first time I really didn’t have a clue as to what I was doing, but you think I would have learned my lesson the second time around. Nope! 😉
However, my lease is coming to an end, so decision time is coming back up again. What’s it going to be: Another new car? Another used car? Or shall I buy the car back? Alternatively, the book Early Retirement Extreme has challenged me to consider going carless, and Happy Heart and Mind also recently talked about it. I only really use the car on weekends these days, so this is an idea that could make a lot of sense.
Here are some of my options:
Buy another new car
When I return my car to the dealership, I’ll just get another new car.
- I get to drive something new.
- No need to worry about repairs while the car is under warranty.
- I would be able to choose among hybrid vehicles, which could reduce gas usage.
- I still need to worry about maintenance.
- The insurance and depreciation will really hurt.
Buy out the car I’m currently driving
I will purchase my car from the dealership and drive it for another 4-6 years.
- My car is low mileage and has never given me any problems whatsoever.
- I keep the same car, but at a lower carrying cost than what I’m paying currently.
- This is a bit more expensive than buying a similar car from the market.
- My girlfriend does not drive manual (though I have been teaching her a bit here and there).
Get another used car
Instead of buying my car out from the dealer, I could return the car when the lease ends and look for another used car.
- I could find an automatic car which my girlfriend would have no problem driving.
- If I go for a much cheaper used car, this could be the most cost-efficient option of car ownership.
- There may be hidden problems with other cars, and it will be more difficult to find a car that suits what I’m looking for.
- I’ll have to pay fees for scratches and things like that when I give my car back.
I could also just give up the car entirely and use public transportation, car rentals, and taxis for all of my transportation needs.
- After adding up all of the new costs for car rentals and such, I would save $100 a month up to potentially $200 a month if I could rent out my parking spot to another occupant of the building.
- No need to worry about car maintenance and repairs.
- I visit my grandmother almost every weekend, but she lives about 30 to 40 kilometers away. By public transport it’s an expensive and very long trip of about two to three hours each way. I also often drive my girlfriend home to see her parents, or I meet them there.
- If we need to go to the hospital, meet someone at the airport, etc… then we have to deal with the hassles of renting and reserving a car or paying for an expensive taxi ride. These sort of things happen when you least expect them.
The option I’m currently considering is: buy out the car I’m currently driving.
If I purchase the car outright in cash, and it depreciates to 1/3rd of the price that I will pay for it over the next four years, here is what I estimate to be the total monthly costs over those four years:
If we go carless, estimated total costs will decline to about $250, which includes the cost of additional rentals and public transportation tickets. Although my girlfriend doesn’t currently drive the car, I wouldn’t have to look for cheap car insurance for women, either. If I find someone in the building willing to rent the spot for $100 a month, then my estimated total costs decline to $150. My delta is therefore $100 to $200 a month.
Balanced against that $100 to $200 a month is the extra time consumed travelling and the extra headache of renting a vehicle every time I want to use one. I could also potentially save a similar amount if I go with a really cheap used car. While that is probably the most cost-efficient option, I am willing to pay a bit more to have a car that only I have driven, and that I know has never had accidents nor any mechanical troubles.
Going public-transportation free
Instead of going car-free, I’m considering going public transportation free in the warmer months of the year by riding my bicycle to work. Even if I purchase a few tickets for use in bad weather, I could still save $60 – $80 per month, and get some exercise at the same time! It’s about 10 kilometers one way to my work, so it’s not horrible. I have a friend that did a similar commute last summer and although he wasn’t in shape when he started out, he did just fine.
So, reader, have you ever considered going car-free? As transportation is one of our biggest expenses, which ways have you found to help cut down on transportation costs?