The Globe and Mail featured an article talking about Mr. Money Mustache. I had never heard about him before, but apparently he is a Canadian-trained computer scientist who decided to do something different with his money – stash it away.
One of the key ways that he saves money is by driving as little as possible. The money he would have been spending on an extra car at home, he just socks away. Whenever he can, he rides his bike.
Unlike many of us, Mr. Mustache relies on a single small vehicle. He bikes wherever he can to avoid auto-related expenses. By reducing auto usage to a minimum, the Mustaches put themselves thousands of dollars ahead of their peers, year after year.
This is not a small matter. The Canadian Automobile Association estimates that a person driving a mid-sized vehicle 20,000 kilometres a year will have total costs of about $10,700 annually, including gas, insurance, depreciation and maintenance. A two-car couple can easily spend more than $20,000 a year on car-related expenses.
So what happens if that couple cuts back to only one car and invests the savings instead? At a 4-per-cent annual rate of return, they wind up ahead by nearly $1-million over the course of a 40-year working life.
I had my own experience of trading in a car for savings. I sold my 2003 Honda Civic for $14,000 back in 2007 and used that money towards my down payment on my tiny little apartment. For a few years, my wife and I were able to focus on paying off the apartment faster and putting money away for retirement. So for a few years, we ran life without owning a car. This was all before car sharing ever showed up in Vancouver. If we needed a car, we’d borrow one of our parents’ cars. Thankfully, they lived a quick 20 minute walk or 8 minute bus ride from our place.
I was happy without owning a vehicle for a few years. Then my wife needed a car for her job. We purchased a 2008 Honda Fit, which we still own. We were paying about $600 a month on car payments and $2000 a year on insurance payments alone. That’s a grand total of $9,200 a year, and that doesn’t even include parking, maintenance, and gas.
My wife went back to school for a few years and now her job situation is completely different. We still have the car and now it’s been paid off. In 2014, I spent about $3,100 on automobile related costs. That’s gasoline, parking, insurance, maintenance, and the odd car share rental. That’s still not a small number to sneeze at.
I could do a lot with an extra $3,100 a year:
- Pay more into my RRSPs and reap the rewards of compound interest
- Put it towards my mortgage and save all the interest
- Buy new camera equipment
- Go for a nice trip to Europe
I guess we could have sold the car by now, but we still have it. We still use it running errands across town on weekends. The car has also been useful with family in town the past 2 weeks. It’s better to cart family around in one’s own car than a car share that I have to book ahead of time.However, our little Honda Fit sits in its parking spot most of the week. We both take transit to work during the week. At least we don’t have a second car like most families.
When I look at the numbers, I don’t think I would come close to spending $3,100/year if we went the car share route. The $3,100 does definitely buy us the convenience of just having a car at hand when necessary. No booking or searching for a car is needed. We’ll see what else life throws at us before unloading the car at this point. Even Mr. Money Mustache still has his car.
2 thoughts on “Cost savings by not owning a car”
I just want to add a datapoint for car sharing. My wife and I (and our six-year old dauther) don’t own a car. We get around primarily by transit and walking, but we are also both members of modo, Vancouver’s car-sharing co-op. We use modo fairly frequently, at least twice a week. We also use it for longer car trips to visit family (as far as Victoria or Mission) and for vacations (as far as Tofino, up the Sunshine Coast, or to Clearwater).
In 2014 we spent $4767 on modo.
I think modo is ideal for a second car, and could work for some people as a first car. Economically speaking, it doesn’t look like it’d work for you, but you might also take into account less stress and time wasted dealing with your car. With modo there are no trips for oil changes or routine maintenance, no stress over what you’d do if the transmission dropped out, and you get a really wide range of vehicles to choose from (anything from a Fiat 500 to a cargo van).
Brad, thanks for sharing your numbers. I always wondered how much it would cost to use Modo exclusively.
I’m a Modo member myself. I used it when my wife needed the car for work full-time. Occasionally, I needed a car for work to do presentations. So I would book a Modo car and take it to where I needed.
Nowadays, with my wife taking transit to her new job. I don’t require Modo much anymore. I think it’s been 1.5 years since I last used it. But I’m reluctant to give up my share in case I do need to use it again some time in the future.