When we think about cars, we almost never consider what it costs to own and operate them day in and day out.
Imagine you had a taxi meter running in your car every time you used it. The average vehicle — defined as a small sedan like a Chevrolet Cruze, Ford Focus, Honda Civic, Hyundai Elantra or Toyota Corolla — would cost 59 cents per mile to put on the road, according to AAA estimates.
Here’s a closer look at the real price of car ownership
Everyone thinks the big expense with a car is gasoline. But of the 59 cents, you’re only paying 13 cents in gas. The other 46 cents goes for expenses like maintenance (5 cents), tires (1 cent), insurance ($1,023/year), depreciation ($3,510/year), and other factors.
That puts operational costs right at $8,876 for 15,000 miles of annual driving. That’s nearly $750 a month for your car, on average, for the typical driver.
So how do you attack that cost? For most people, the longer you keep the car, the more you’re going to lower that cost. Depreciation and the interest cost on any loan you may have on a car are giant chunks of the cost in the early years of ownership.
That’s why you always hear me say if you buy new, drive it until the wheels fall off or for a minimum of 10 years. Or buy used and keep your used car for at least 4 years. That’s how you lower the true cost to own a vehicle.
A more radical alternative to car costs in your life?
I want to tell you the story of Robert Johnson and his wife Cia, which I tell in full in my latest book Clark Howard’s Living Large for the Long Haul. The Johnsons have no car. And no, they don’t live in the heart of an urban area with prolific public transit like New York, Denver, or Boston.
They willingly went carless six years ago in Columbia, Missouri—right in the heart of the Heartland—and continue that lifestyle today in Barrington, Illinois, about 20 miles west of Lake Michigan.
“My financial reality is far different than most others because of it,” Robert told me. “Imagine taking every dollar that you spend on car payments, repair, maintenance, gasoline, insurance, and registration, and instead saving and investing that money. You not only stay in great shape bicycling and walking, but you become wealthy very quickly.”
That “different” financial reality includes having paid $18,000 in cash for the final year of Cia’s post-graduate studies $18,000, plus having eliminated $72,000 in other accumulated student debt in just 12 months. And it will continue when they expect to pay off their mortgage in late 2014.
Read more about Robert and Cia in Clark Howard’s Living Large for the Long Haul, available in stores and as an e-book or audio book. In this new volume, I relate 50 inspiring stories from real people who turned their financial fortunes around. From real estate to retirement savings, cars to travel, entrepreneurship to health care, you’ll also get more than 200 powerful takeaways anyone can use to take control of their wallet and stretch a buck!