Tuesday, July 17

Living Car-Free: The Path to Financial Independence?

A book caught my eye at the library yesterday and I have been steadily making my way through it ever since: "How to Live Well Without a Car"

I thought I would blog about it here because one of the author's major arguments is that owning a car costs so much that it may be preventing you from saving, buying a house (or a better house) and even reaching financial independence. All of which makes for rather intriguing contemplations. Is a car really that big a deal, financially?

Well, let's take a look at my numbers. I spend $412 per month on my lease, $100 on insurance, $100 on gas and $10 on car washes. I also figure that regular maintenance for an almost new car will be covered by about $300 per year for oil changes and the like. This is a total of $7,764 per year, without parking. Parking costs me a tonne of money because I have to park downtown to meet with my clients and I get lots of parking tickets, but since it's a company expense I won't count it. To be fair, I probably should include another $20 per month for miscellaneous personal parking, which will bring the total to $8,004 per year.


And I don't drive a luxury car or SUV, and I drive an average of 14,000 kilometers per year, which is well below average. So for many people this number may be much higher. That is simply incredible. I think that for myself personally, I only ever considered the monthly expenses, and never gave any thought to how things were adding up.

And to make matters worse, there is depreciation. Each year, while I may be building "equity" (if I weren't leasing) my car is losing part of that value, and I am basically "spending" this money because I can't get it back. So the true cost of owning my car might be closer to nine or even ten thousand dollars per year.

Now, of course there is more to the decision than just the cost of owning a car. There is the cost of not owning a car, whether that is a bus pass, car rentals, taxi rides, bicycle purchase and maintenance, running shoes or something else entirely. There is the convenience and lifestyle factor. There is the personal enjoyment and attachment.

But when it comes to the purely financial argument, I would say that living car-free is a slam dunk. There is simply nothing else that I could do to save around $8,000 so easily and quickly. And yes, spending $8,000 less per year would be enough to significantly increase savings, buy a house or reach financial independence much more quickly. It is certainly a large enough amount to impact any financial goal that I might have.

So is this even possible? Do any of my readers live car-free? Is anyone considering it? Any stories to share? I would be very interested to hear about real experiences with this strategy (and where you are/were living).


guinness416 said...

I've lived "car free" my whole life (I'm 30 and haven't bothered to get a Canadian drivers license). It was nice when I lived in New York where everything - 24 hr subways, delivery of EVERYTHING, people's expectations - lined up with this, and you could always rent or use a Zipcar type service to go further afield. A little harder in Toronto where you can get around but for work and social life you're usually expected to have a car. In addition to the (yes, enormous) savings I really enjoy the health benefits. I walk, bike, carry groceries; it definitely contributes to keeping me trim. I enjoy the street level enjoyment of the city, and the human contact on the streets/TTC. I remember walking everywhere as a kid; even as a 2-car family my parents preferred to leave them in the driveway. It's great.

guinness416 said...

Oh, and my transit pass is tax deductible now :) Every little bit helps.

krystalatwork said...

I've been living car-free for almost a year, in order to pay down my debt, and save money for a down payment.

That being said, I do own a scooter. I pay $15/month for insurance, and $5 worth of gas gets me 180kms. Having my scooter ends up being cheaper for me than buying a bus pass ($60/month)! I don't have to rely on the transit system, and I can come and go as I please.

The only downfall is not being able to go on the highways (the backroads are more pleasant anyway!), and it's not safe to drive when it's been snowing. But that doesn't happen a lot in Victoria anyway.

Getting rid of my car has been the best financial move I've ever made. While I see the BF spending well over $500/month for the comfort of his new car, I can't imagine having to factor a car into my budget now that I've owned a scooter. And honestly, I don't know if I would ever need to own a car, period.

mOOm said...

I don't own a car. I have a learner permit but not a full licence. So I have driven a car. I live in upstate NY. If you don't own a car you need to select your living location very strategically to give easy access to work, stores, and public transport. The only downside is if you go visit someone socially it's no problem getting there, but when you want to go home they usually won't "let you" take a taxi or public transport and then you feel like you are imposing on them to drive you. Parties are better. I ask around who is driving in my direction and hitch a ride. I've always been negative about cars on environmental grounds. Once I did a driving test and failed (in England). Haven't tried since. I'm 42 now... My girlfriend has a car though she lives in the next state (I fly there). When we move to Australia I expect we'll get a car some time though likely not at first.

Promod said...

I walked or took public transportation to work in Ottawa and Toronto for years. After marriage, we got a car. For the last two years, I've been visiting clients. So a second car became a necessity. And a convenience.

Here's the amazing (as in shocking) fact. The car costs more than a mortgage payment. So when I didn't have the car, we could have made a huge dent in the mortgage or invested oodles. We didn't. The money got swallowed up here and there.

So unless you're really careful, you can easily spend the money that would otherwise be spent on a car. Scary.

I'd find it difficult to give up my car now. The comfort and convenience are sooooo nice.

Deborah said...

We chose to live where my husband could walk to work and for about 12 years we shared a car.

He has a different job now and I work at all different locations. Transit would never work for me and it is very poor for where my husband works.

I don't know that I'd consider being without a car as a single person, but I would work towards being a single vehicle family again.

moneygardener (AKA investor99) said...

Vehicles are the worst investments on earth. Its always a loosing proposition financially, no matter if you own or lease.

I believe if you need to have a car the key is to keep maintenance, insurance, and gas costs down by making decisions such as what make to buy, properly maintaining the car, and driving responsibly.

If you choose to drive a quality make like Toyota or Honda for a long period of time (ie 10 years or more) I believe vehicles can become less of a financial burden, if you are lucky.

evannoble said...

I lease, but since I move downtown, I try to walk to everything. Unfortunately, I work in an industrial park, so I have to drive there. Talking about leases though - I wish they would use more realistic depreciations. All manufacturers use 50% it seems (for 4 years). But this is not realistic. Domestics tend to depreciate slightly more than that, while a good import (honda, toyota, lexus, acura) will depreciate much less (20-30%). If you're leasing a good import brand, then your total lease costs end up being much less as you can usually sell it at the end of lease for more than the buyout.

telly said...

I would love to live car free but there's no mode of public transportation that could get me to work and I'm just not willing to move to the US.

Most any vehicle manufactured today should easily last you 10 years with proper maintenance. My advice? If you need a car, buy yourself a used North American brand car whose resale value is much lower than that of a Honda or Toyota (so it can be had for much cheaper) and drive it to the ground.

I would offer to sell my 8 year old Ford Escort with over 200k on it but I'd rather drive it around for another 5 years instead of selling it for about $1000 if I'm lucky. :)

Believe it or not, we have friends with two car payments, one of which is higher than their mortgage! They now say they'd never buy new again.

moneygardener (AKA investor99) said...

We have 2 car payments....

We are still paying less now per month than we were with no car payments and contstant maintenance and high gas tabs.

Warren said...

Personally, I hate commuting, so I try to live near where I work, or work near where I live. This has worked out so far, although I do have a bicycle commute now.

I'd like to be car free, but its pretty tough. My girlfriend and I share a car now, which is ok for now.

The points raised here are good ones, and the main idea to take away is that cars are huge money pits, and despite what magazines, TV, etc, will tell you, they aren't a necessity.

SdR said...

We decided to try the car-free lifestyle when our car needed replacing. We live downtown and figured it would be worth trying, since we weren't using the car much anyways (we both can walk/bike to work). We joined the local car-share for $10 per month, which gives us the added benefit of maintaining our insurance records should we ever need to buy a car again (you lose your insurance history in Ontario the longer you go uninsured, which means higher premiums down the road).

We find that we don't miss the car at all. Our lifestyle has changed such that we now shop in our local neighbourhood on a regular basis and use the car-share for any car-necessary trips (less frequently than we thought). We rent a car maybe one weekend a month for out-of-town trips. One of the downsides is that you do have to plan ahead, since you can't just jump in your car and go, but we've found this to be less of a problem than we anticipated.

Not only have we saved a lot of $$ ($6,000+ per year!!), but we find we live a much healthier lifestyle due to all the walking we do now. One of the bonuses is that we don't have to spend any time renewing our insurance, taking the car to the garage for maintenance, or worrying about where to park it (we have on-street parking only). Plus, we get to drive a variety of brand new cars whenever we take a trip out of town in a rental. We've been very pleased with this experiment, and find that we pity people who own cars and have to deal with all the hassles and costs of keeping up their vehicles. We had a child five months ago, and we found that being car-free has not been a problem (contrary to popular opinion among friends and family). Cheers.

AGivant said...

We been living car free for almost 8.5 years, now with child it's hard to go without it.

Melissa said...

My husband and I have been car-free for about 6 or 7 years. We live in Montreal and have access to the metro (subway) and bus system -- our monthly passes are $65 each, which comes to $780 each per year (for a total of $1560 on transportation for the two of us). We deliberately choose to live walking distance from a metro station -- this is non-negociable. We also choose to live in a walkable neighbourhood with supermarkets, drugstores, etc on a "main street". We carry groceries a few times a week, and every month or so we do a huge grocery shopping and have it delivered for about $3.50.

Some people in our situation have a membership in a car-sharing program, but we haven't found that necessary. We can do what we need to do with public transportation. We don't have a need for taxis either.

In addition to the financial factor, we enjoy not having to worry about car repairs or snow-clearing. We walk and bike a lot, so we get more exercise than those who drive cars. We are also more connected with our neighbourhood and our surroundings because we experience life as pedestrians rather than being encased in a steel box. And of course there is the environmental benefit, which is very important in these days of climate change.