It’s the worst investment today.
It will give you freedom… but at a huge cost. Better options are available.
The investment I’m talking about is your car.
Fancy or not, it drains your savings. Last week I showed you Lifestyle Inflation. You can easily do without a fancy car.
Now today, I’ll show you how you can save thousands. But first, let’s look at the true total cost.
Worst Investment Today
The average used car sells for about $17,000. That’s a big upfront cost. And with loans you would pay even more in interest.
Now on top of that, let’s add the indirect and hidden fees. Below I’ve listed just five categories…
Closing Costs ($1,300)
Closing costs vary for each state and car dealer. They can include a registration fee, title fee, license fee, documentation fee, compliance fee, emissions testing fee, advertising fee, and sales tax… just to name a few.
I’m low balling this cost at $1,300.
It’s illegal to drive without insurance. The average annual car insurance is about $830. And the average used car will last about eight years.
Depending on the area… $6,640.
You see the fuel costs most often. The average one-way commute is 25 minutes and about 20 miles. Both ways, 40 miles. Five days a week, 200 miles. In a year, 10,400 miles. Eight years, 83,200 miles.
I won’t include getting lost and other trips. Now the average car gets about 27 miles per gallon. Cost of a gallon of gas is $2.16 on average today (expect this number to go up). So 83,200 ÷ 27 × $2.16 = $6,656
Another low ball number… $6,656
Oil Change/Maintenance ($7,200)
With a cheap used car you save thousands upfront… but maintenance is more expensive. Oil changes, fuel filters, air filters, the battery, timing belts, spark plugs, windshield wipers, tires, breaks… the list is huge.
Another underestimated number at $7,200.
Parking, Toll Roads and Tickets ($800)
I pay $50 dollars a month for subsidized parking at work in Baltimore. Most folks live in cities. Parking isn’t cheap. On top of that toll roads take a bite. You can’t travel through America without paying huge tolls.
Many toll roads take pictures of your licence plate and send you the bill. Ticketing is also camera based today. But let’s assume you’re a perfect driver and get no speeding ticket fees.
In this category expect to pay over $800.
Total Costs = $32,956
Every case is a little different… but I used low-end costs. It’s based on the average used car with a life expectancy of eight years. At the end, your car would be worth little to nothing.
Now, there is one more huge cost to car ownership. Your time.
I find my time to be the most valuable cost here. Instead of driving, you could be working. The average daily commute is 25 minutes. That’s 108 hours of your life each year. Or 4.5 days.
In return for these huge costs, you have the freedom to drive. But better options are popping up everyday.
If you live close to work, bike. It’s good for your health. If you live further away, carpool.
When you take longer trips, borrow a friend’s car. Just fill up the tank before returning it. Paying in food and beer is always a great option too.
If you can’t borrow, rent a car. Renting a car keeps getting cheaper each day. Technology is pushing this trend. Zipcar is a good option.
My favorite driver option today is Uber… For the riders at least. It’s much cheaper than taxis. Most of the drivers don’t realize how little they’re really making. The video below breaks down the driver’s costs…
The Uber drivers and all car owners are paying huge indirect fees.
For many folks today, buying a car is not worth it. It’s the worst investment today for the average person. If you live in a city, I recommend that you try living without one. It will save you thousands.
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