Author: Mr DDU.
How much does your car cost?
It’s a very, broad and open ended question, but worth considering.
Nearly every married household I can think of has two cars, one for the husband and one for the wife.
In our household, we only have one car and my wife is the main user, she doesn’t drive very much but we still get the freedom of having a car when we need it. The reason for having one car is mainly for money saving reasons, which I’ll get to, but there are other reasons too.
The bulk of the weekly travelling we do is my daily commute into work on public transport – funnily enough due to rush hour traffic, I get to work quicker than if I was driving. I also get to avoid all the road rage as well as gain the benefits of 20 minutes walking a day (exercise to and from the train station). Another benefit is a ton of reading-books time, which is helping me smash one of my 2016 goals to read 25 books .
So how much do we save by only having one car?
Let’s start off with the headline number, the purchase price of the car. For our current car, thinking about our needs and what would be good value, we bought a second hand mid-2000s model Mazda for $11,750 cash from our bank account, we didn’t take out a loan (no interest!). If we were going to buy a second car, we’d get something similar, so there’s $11,750 saved straight away. But the real benefit of this choice is going to be for our whole lives: we’ll always have one car. So, seeing as the car was already a few years old when we purchased it, I’d say holding it for another 7 years until it’s 15 years old is reasonable. If I kept driving until I was 75, 51 years away, I’d buy another 7 cars in that time..so in 2016 dollars:
7 cars x $11,750 = $82,250
That is not including any finance loans or interest as this greatly adds to the cost of a car. You could expect to pay an extra 10%, maybe more or less depending on the interest rate and length of the loan. So over the course of 7 cars that would cost approximately $8,225 extra (nearly a whole extra car). As my wife and I aim to always buy our cars outright with cash and no loans I’m not including that extra cost in this calculation but it is something to keep in mind.
But there’s more to owning the car than just the initial purchase. There’s the registration number, insurance, petrol, average annual check up and road-side assist. Annually, we’d approximately spend respectively $750 + $600 + $1,500 + $300 + $100 = $3,250. Again, assuming I’d drive for another 51 years, so in 2016 dollars:
$3,250 x 51 = $165,750
Add in the cost of purchasing the cars and that comes to a whopping $248,000. Over a lifetime that’s a quarter of a million dollars. Even with choosing 2nd hand, good value cars without a loan and holding them for 7 years, it costs a HUGE chunk of money.
To make this a fair calculation, I have to add back the cost of public transport, which for a full year’s pass is $1,500 for unlimited travel on the network.
So $1,500 x 51 years = $76,500.
Still a cool $171,500 saved over my working life by not owning a car.
I’ve made a graph so you can see a visual representation of the difference.
This one major choice can shave years off how long I need to work. The average Australian full time wage is $74,724 before tax, leaving $56,043 after tax, meaning I would spend almost 3 whole years working just to pay for the expense of cars.
Thanks to not having a second car, we are 3 years closer to living the life we want to live.
How many years do you hold onto a car for? Do you buy brand new or second hand?
Thanks for reading this article about our investing journey Down Under.
Onwards and upwards!