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.
Pros:
- 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.
Cons:
- 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.
Pros:
- 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.
Cons:
- 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.
Pros:
- 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.
Cons:
- 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.
Go carless
I could also just give up the car entirely and use public transportation, car rentals, and taxis for all of my transportation needs.
Pros:
- 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.
- Renting a car for special occasions just like you would rent a party bus, these can be found easily on https://www.limofind.com/az/tucson-party-bus-rental/
Cons:
- 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:
| Depreciation | $146 |
| Insurance | $67 |
| Maintenance | $30 |
| Repairs | $40 |
| Gas | $67 |
| Total | $350 |
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?
We could have gone carless. We don’t drive to work in any season. We can get to some retailers and grocers walking or biking (tho some of the local ones cost quite a bit more).
Ultimately we decided we didn’t want the hassle, that measuring convenience on a financial scale is impossible to do. As we will consider having a family in the future we also recognize we may have to drive to a day care and as the kids age to extra-curricular activities.
We also own a very large dog that has a lot of hair. Rental companies don’t like to find their cars covered in hair. Our folks live 2hrs and 7hrs away respectively, our cottage is 2.5 hrs away – to rent each time, then get the car professionally cleaned and deoderized … well, we just decided we can afford a few extra dollars to own.
Our monthly fuel use is super low, our 2011 Outback is less than $70 per month to insure. The dog fits into the rubber lined back of the vehicle and it is pretty good on gas for a CUV (22/29 mpg or 9.5/6.9 L/100 km).
We’re frugal in soooo many parts of our lives that we allow ourselves to, once in a while, enjoy some of our hard earned, smartly saved money.
There are ways to bring the costs of a car down to where you probably wouldn’t save much if any money by going for a rental, depending on how much you use. With a large dog as a pet, I agree that I wouldn’t want to have to get the car cleaned every time I use it!
One thing that isn’t clear to me in your figures is whether you’re talking about buying the car you’re currently leasing outright for cash or if you’ll be financing the purchase price. If you’re paying cash and can afford to part with a chunk of money, then go ahead and do it.
Certainly going car free is great for many people, but if you’ve analyzed your lifestyle and come to the conclusion that it would be a small (but affordable) luxury to own a car, then that’s a viable choice you are entitled to make.
Another option that may be open to you is car-sharing. Here in Chicago there are two major car-sharing services: iGo and Zipcar. In many of the denser neighborhoods this is a great choice for people who only occasionally need a car for things like loading up on heavy groceries and getting to a location that is a real PITA on public transit. One of my friends has gone carless in the past year and uses iGo for the few times she needs a car. It works out well for her.
For me the car-sharing option wouldn’t work as well since there are no vehicle locations near my house. I take public transit when I go to the office, but I telecommute a few days a week which brings my transit cost to $0 for those days. 🙂
Cycling to work is a good option; I occasionally do that in good weather, but the 18 mile round trip can be a bit much for me at times. My car has been completely paid off for a few years, so I just maintain it well and drive at will. That doesn’t mean I drive a lot, though. Parking in Chicago can be a real hassle and quite expensive, so when going around the city I most often take public transit; driving is a must for suburban excursions, though.
Oh, and don’t be too hard on yourself about leasing. Another Chicago anomaly is that leasing a car involves paying a monthly Use tax. So, if a person leases a car in Chicago, they pay the Illinois state sales tax (which is usually rolled into the monthly payment) plus the Chicago Use tax in their monthly lease payment. If they buy the car outright at the end of the lease, they pay Illinois state sales tax on the resale value, PLUS any applicable county and city sales taxes. Yeah, leasing a car in Chicago is *really* financially unwise but people do it. Suckers.
Hi Linda,
The numbers that I put is if I buy the car outright for cash. I then divided all the estimated costs by 48 months to see how much it would be per month, assuming that I sold for 1/3rd buying price at the end. If the interest rate is very low I would consider financing, though.
I took a look at car-sharing and the alternative costs would be about $100 less than owning a car, but with the hassles of having to reserve the car and not knowing whether the car would be available (I live in an area with a lot of high-rises and students, so demand is likely high).
I also take transit during the day, and cycling could be a great option by mid-April or whenever temperatures have thawed out enough.
I’m still not completely convinced. I could save some money by giving up the car, but it’s not big money. An extra hundred bucks is always nice, but it depends on the tradeoff! If I lease a new car the delta will be much more than $100 so I won’t do that again… but again, I’m not convinced. Since I only use the car on the weekends anyways it’s fairly close, and some days I feel like keeping it, other days I feel like I could go without entirely.
I think going completely carless would be very difficult. Not to mention, who needs that added stress of figuring out how to get form Point A to Point B?
Can you get a deal on your current car when you go turn it in? My husband’s lease is up in March (it was a company car, then he changed jobs, so we got stuck with the lease). I would consider buying it if they offered a decent price. However, I don’t think they will, and I think I can do better buying a different car with less for the same amount of money they want to charge to keep his lease car.
For my last car, I bought it used as a dealership and it had 3000 miles on it. It was certified, never been in an accident and we got a full warranty on it. Kind of a combination of a new and used car deal. We got a fantastic deal, and it was almost like buying a new car. It took awhile to track down the deal, but it was worth it.
I’ll have to do some research soon to see if I could get a good deal. If it turns out there’s a difference of a couple thousand between what the dealers sell and what they’re asking of me, I might be able to negotiate something. I’m not sure that this is actually the case so I’ll have to do a bit of hunting soon to see what the pricing is like!
I don’t know. I’ve always bought a car with a few thousand miles on it after the new models come out and then drive it into the ground while carefully keeping up the maintenance. My analysis has always ended with the reading of Consumer’s Reports and the sticker showing mpg.
I like your analysis!
Given that I’ve already taken much of the depreciation hit, keeping the car to the end is a thought that appeals to me. I do enjoy the car, after all, and there is a feeling to owning something that nobody else has ever used. I also know that the car has never been abused… at least, it mostly hasn’t. 😉
If you can make going carless work you would save a bundle of money, but that is a lot easier said than done. Low millage used cars with clean records are the cheapest way to go. Let us know what you decide.
The money delta doesn’t seem great between keeping the car and going car-less, so it’s really about weighing the convenience versus an extra $100 or potentially more a month. It seems pretty close. I think I probably will keep the car but something could always change that would push the scales onto the other side. My grandmother might be moving closer to the city soon which would also have an impact.
I thought about going carless but I network in so many different cities, it just wouldn’t be feasible.
I guess the train’s not much good for that eh? I think the future of public transport might be automated cars; with all of the roads that have been built it would be a great way to re-use the infrastructure!
Is there a car sharing program in your city like Zipcar in the US?
We used Zipcar for about 3 months and it was pretty good. We cut down drastically on the driving and it was ok for 3 months. Maybe you can try that for a few months. We got a new car eventually though and I like that a lot more. It’s a lot easier.
If you are going out of town every weekend, I don’t think it’s worth going car free. Too much trouble.
There is one, but I wouldn’t save that much money by switching to it! And as you said, there are the hassles…
I have to admit, reading through your post, I would probably buy out the current car as well. All though going car-less is most cost effective, it is not the most convenient. With all your weekend activities, you’re certainly facing a lot of hassles; and as you mentioned, I would hate to have an emergency and be left to the mercy of public transportation.
Also, knowing you have a dependable car is definitely a valuable quality – I would hate to purchase a used car just to run into a laundry list of issues.
Where we live, a car is a necessity – it is not an urban area where public transportation is readily available. There isn’t much we can do to cut down on the transportation costs that we have.
Yeah, see that’s the thing that always keeps me coming back to the “keep the car” camp even though it’s more expensive; I used to be reliant on public transport and I hated it. You know how monopolies treat their customers, right? Well it’s not a great feeling. Now I use public transport, but I have a car, and I live close enough to be able to bike to work (at least during the warmer months). I have choice, so it’s a completely different feeling. I have options. If I give up the car I’m giving up the most convenient option that I have, and placing myself on the mercy of a monopoly.
Cars are one of those things that does not make any money, but can cost you a fortune. Leasing was once explained to me as renting! I would love to go carless, but in Los Angeles it is very inconvenient, particularly if you need to be somewhere on time. If I lived in a city like San Francisco, Chicago or New York, I would definitely go carless. My cars are economical, inexpensive (Hondas) and reliable. That is close to carless.
Haha, I spent entirely too much money on them when I was younger! That was a waste of money… if it was 4 years ago the better decision would have been getting a used car then, not leasing a new car…
Cars are never an asset so I never look at it as an investment. It’s more about how much you can comfortably afford to lose=)
Leasing isn’t always a bad thing especially if you drive less than 12,000 miles a year. Personally I bought a car coming off a 2 year lease, and saved around 50% of what it would cost new. I know a few people in the auto industry and the general consensus is that if you don’t need to have something new, this is the way to go. Most cars will still have 2 years left on the full warranty and you can also choose to extend it – for a price of course.
Given that much of the depreciation hit happens in those first couple of years, that makes a lot of sense. Now, if only I could go back in time… 😉
Other than five years in Singapore without a car (where public transport rocks, nothing’s far away, there’s no snow and cars are ridiculously expensive) I’ve never gone without a car. I sure wouldn’t go without a car in Canada or in the U.S. My upcoming book has some car buying strategies you’ll really get a kick out of. I have lost money on some cars, and gained money on others when I sold them, but I’m actually ahead of the car buying “game” because I always treated it like investing (did my research) and loved it. With my last car, however, I’ll be shredding that record. I bought a 1974 Mercedes Benz four years ago. Enough said there! But I do love the car. Kevin, if you really want it, I’ll email my book’s section on car buying. I think you’ll like it, and it might be useful.
Your approach is an interesting way to buy a car; that’s for sure! Readers: head over to Andrew’s site and check out what he has written about negotiating with dealerships for used cars — I think you would find it interesting!
Good analysis…you’ve really been thinking about this for awhile haven’t you? 🙂
Car-free is not an option for my wife nor I, now that we’ve moved to a community just outside the city. We both have older cars. Hers is 7-years old, mine is 11. We live 17-km from work, door-to-door. We’re “due” for a new/slightly used car in another couple of years. Until then, it’s pretty nice not to have car payments. We’ll pay down the mortgage instead.
To cut down on transportation costs, we carpool as much as possible. We run errands in the city at lunch so we don’t have to drive around all night. We have efficient smaller cars that only take, at most, 1 fillup every week. Pretty good I think.
Cheers Kevin!
If I’m lucky I can make it three – four weeks on a fillup; depends what i’m doing on the weekends and during the week! It’s a really big purchase, so I have been putting a lot of thought into it…
Kevin,
I think leasing the car works for business for personal car it always been suggested it is a bad idea. Although I have bought many lemon cars, I am happy with what we have. I have thought of going car-free but it is not simply practical with kids and public transit not so people friendly in california here. Good luck with car situation and thanks for mentioning my post!
Preeti
My first beater was a lemon. The head gasket blew, then one of the pistons melted and finally it was rear-ended! I got more from the insurance than I had paid for it…
We have considered going carless but with horrible public transit around here it doesn’t sound like a good option. If I end up quitting my job, I am definitely going carless. Transportation is one of our biggest expense too. I did live carfree during my graduate school days and first 3 yrs of my job, but that was back east where there was “some” public transit. I would do it again in a heartbeat if I move out of this place.
Yeah it’s always good to have alternatives. I wouldn’t like to be at the mercy of the public transport monopoly but living next to a subway station is very convenient. The road network is pretty good around here too, but the main reason I take the subway to work is because driving would take longer and it would be more expensive. For that kind of a trip, the subway makes a lot of sense.
During the summer biking might make even more sense!
I appreciate your analysis. I absolutely cringe at the thought of going carless for several reasons. Here public transportation leaves much to be desired for example. Based on what you have written, I definitely can understand why purchasing your current car is appealing.
I don’t like to be at the mercy of a monopoly with a monopoly union, that’s for sure!
No sooner you go car-less, then you’ll be finding multiple needs for one. Your current plan looks to be reasoned and fact-based, as a good plans should be. A vehicle is just a very expensive tool with a set-point residual value.
I think it’s a good idea to have the option there, even if I have to pay a bit more. Since I’m not leasing a new car again, the delta should not be too large. I might very well be over-estimating the expenses, too; I decided to go on the high side for insurance, repairs, etc…. but I might not necessarily actually spend that much.
… and on the other hand the engine could always explode the day after the drivetrain warranty expires… so then I’m looking at a residual value of more like $0 instead of 1/3rd. So, I guess it can cut both ways.
I went car free the year I was in England. I walked everywhere and I have never been in such good shape before or since. I didn’t even use public transport unless I was going to the next town over. You’d be amazed at how walking a mile or two seems like nothing after a while.
Another side benefit is that it limits your grocery spending. If you’re carrying your groceries home with you on foot, you really are more mindful of only buying the essentials. I never bought junk back then. I think there is a good chance your spending in other categories would go down as a result too.
Going car free is not practical in my area as I live in a small town, plus I have a company car that is well worth the personal use fee I pay. If I were in a bigger city with a different job, I think I could be pretty easily to do again. It’s not as bad as you imagine. Also, there’s nothing saying that the decision is permanent. You can certainly try it for a few months. You have nothing to lose and it would give you a lot of material to write about on the blog.
I already go car-free during the week, so I can definitely ramp that up. During the warmer months me and my girlfriend can do almost everything without the car, save for heavy groceries. I thing I like the most is having the option to use it if I need to, rather than being dependent on other services, but if my grandmother moves closer to the city that would be a big help! I’ll have more information in a couple months and hopefully still before the lease expiry date.
I have gone carless but I still have my car. I just leave it at home unless I absolutely need it. Right now I am very fortunate because I can walk to work, to the store, to pilates, and to the spa. I only take my car when I have to do a big grocery shop or we are travelling. This has saved us a ton of money on gas and parking and it also has minimized our carbon footprint. We have kept the car because we plan on having a family and we will need it to transport the kids around when the other is at work.
Give walking or the bus a try first and see how that goes. Then you can evaluate from there.
Last summer we were nearly car-free except for road trips and things like that; maybe this summer I can go public transportation-free too, and ride my bike on many of the days. At least I’ll try it for a couple of weeks, and if I hate it I can always go back.
I read it as going careless at first, ha ha!!!
For your situation I would either buy out the car or buy a cheaper but good condition second hand one. Would suck to have to drive to your Grans on hired cars or using public transport for that amount of time. Just go carless mon-fri if you can. Canada is pretty decent in cities for public transport I find.
Yep carless mon-fri already saves me a lot of money on gas and wear & tear. I’ll look at cutting down the trips even more this summer, and perhaps I can go public-transit free for a while, too.
It’s an interesting topic – going carless. I think that if one lives in an urban enviroment with good public transportation options, a car doesn’t need to be owned. It would make life a bit tougher, I think, but it can be done. Might help one’s health, by moving more on foot or bike (when public transport is not needed).
Also, it depends on a person’s life situations. With no dependents, it can be be done (again, in the right environment I mentioned above). With kids, it gets much tougher. I personally couldn’t operate without a car, it would not be possible at all with family and professional responsibilities. Again, others might who are in a different situation. In that case, it’s actually a cool concept in my view.
If I had kids around I would definitely not do it because I would want that option to be around. At the same time I don’t want the kids to be dependent, so when they are old enough I think I would do a lot of walking with them, too.
Living close to the city, going car-free mon-fri is already a reality for me. It’s the weekends where I need to do trips that I can’t really do with public transit (well, I can, but at a great cost of time and inconvenience, and it’s not really much cheaper than driving). Maybe this summer I’ll try out the biking for a few weeks and see how it goes. I think I’ll be fine because I used to do a lot of commuting by bike when I was younger and didn’t have a car, but I got somewhat lazy in the interim.
I could go car-less but it would be a hassle. When we were first married we could not afford the insurance on my car so we parked it for 2 years. It was difficult running all our errands on foot or using the bus (ever take a sick baby to the Dr on the bus? Not fun). I consider having a car a luxury that is so worth it. I try and minimize the cost by having a non-luxury, cheap to insure, small and reliable car. I keep up on the maintenance and drive it as long as possible. My current vehicle is an 11 year old Honda Civic (bought new). I hope to get at least 3 more years out of it.
I have considered going car-free, and I reached a compromise. I decided to ditch my own car, and shared a car with my cousin who lives with me. We work near each other, so we car pool together, and we decide that we’ll share it during the time we dun work, by calling each other beforehand when we need to use it a prolonged period of time. So far, it’s going well for both of us.. and saves us both money as we split costs.
I would like to see some history of Durant production in Canada. The factory was located in the town of Leaside, a former suburb of Toronto. When my father was young he said the new cars were driven along his street after coming off the assembly line. I have pictures of the factory taken in the 1920s.