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Pssst – wanna lower your cost of living – I mean really lower your cost of living and do it for good? Ditch your car. No, I’m not kidding, ditch your car! It’s mind-boggling how much you can save by not owning a car.

Most people cut costs by trimming along the edges – clipping coupons, reducing eating out, eliminating vacations and the like. But sometimes that isn’t enough. You can cut all of those and still end up with a tightly stretched budget. One that doesn’t allow much room for savings and investment, for debt pay down and payoff, or for a plunge into the career unknown – a major theme on this blog.

It comes down to a choice between micro- and macro-frugality – do you cut your smaller expenses across the board, or do you target two or three of the biggest? For most people, housing is the biggest single living expense. But cars are a comfortable second. For many, cutting or eliminating car expense is far easier than making the same choice on a home.

How much can you save by not owning a car?

Before we go any farther on this topic, it?s helpful to get an idea as to what hangs in the balance with this move. Let?s take a look at owing a typical car ? if there is such a thing.

You buy a new car for $25,000, with a 20% down payment ($5,000) and a five year loan at, say 8% ($406 per month), on the balance.

The $5,000 down payment, often thought of as an ?investment?, is nothing of a sort. Since it will almost certainly be wiped out by depreciation?and very early in the process ? it?s actually a non-recoverable, upfront expense. Let that sink in for a moment.

As to the annual cost of ownership:

$4,872 per year in monthly payments ($406 X 12 months) Repair and maintenance, $500 to $1,000 (late model car), so let?s say $750. Car insurance – as a licensed driver you have to have it anyway. But premiums are largely affected by the cost, make and age of your car. So let?s just add another $750 here and I don?t think we?ll be too far off in either direction. Gasoline: if you drive 15,000 miles per year and your car gets about 25 miles per gallon; that means you buy 600 gallons of gas per year, and at the current rate of about $2.50 per gallon, that?s $1,500.

Adding it All Up

So we have $4,872 in car payments, plus $750 in repairs and maintenance, plus another $750 for higher car insurance, plus gasoline of $1,500. Total? $7,972 – and that?s each and every one of the first five years of owing the car.

Over the five year period of the loan, you?ll have paid nearly $42,500 ($8,472 X 5 years) ? plus the $5,000 down payment expense that you paid (and lost) up front. That’s $47,500 for the privilege of owning your $30,000 car. If you?re in the habit of buying a new car every five years, well? – you can figure out how that will play out.

We haven?t even factored in tolls, parking, insurance surcharges, license/registration or ad valorem taxes, all of which can be substantial in some jurisdictions. Oh, and here?s another cost most of us don?t think much about?how much income do you have to earn ? before taxes ? to cover the nearly $8,000 in car expenses you?re paying each year? $10,000? $12,000? $15,000? It all depends on your tax bracket, but that?s the REAL cost of owning a car.

Can you see why this is so much more important than it seems at first glance? What else could you be doing with that kind of money?

Who can ditch their car – and who can?t?

OK, I know what you?re thinking?”this guy?s crazy ? I could never go without a car?no one could, not in this day and time!” And you?re absolutely right, not everyone can. But many ARE in a position to do just such a thing, but choose not to and pay thousands of dollars each year as a result.

When should you consider going car-less?

You work at home, and there are more people doing that all the time.

There’s a major debt problem, career crisis or career transition and you seriously need to cut living expenses to deal with it.

You live in an area that?s well served by public transportation, and/or most of the amenities you need are within walking distance. This is mostly urban areas, but increasingly includes many built-out suburban locations.

By renting your home you’re are in a position to relocate close to your work.

You have no dependents who need to be chauffeured all over town.

You live fairly close to work, and can either walk, bike, carpool, or take public transportation even part of the way in.

Your household includes two or more cars.

You have the kind of driving record that makes car insurance ridiculously expensive.

Now I?ll agree that many people are not in a position to do this. Certainly people with long commutes, many with children, and those who live in areas with no public transportation come to mind. But certainly many singles, couples without kids, retirees, and especially those who work at home can consider it to be viable money saving option.

Alternatives that Can Make Car Ownership Unnecessary

You need to be able to get where you need to go, and obviously that effort will be compromised if you don?t have a car. But there are ways to get around car ownership that a lot of people are in a position to take advantage of.

Public transportation

Not every one lives in such areas, but many people do and they still own cars and drive everywhere. But one of the advantages of living in an urban area should be the fact that you don?t need to own a car at all. Are you taking advantage of that?

Walk/Bicycle

Part of the reason we feel a need to have a car is that it?s become an extension of our legs. We drive even to the places we could walk or bike to. Not only do walking and biking have long term health benefits, but it?s also an environmentally friendly way to travel.

Work-at-home

We live in a time when more people are working from home than ever. That eliminates the single biggest justification for car ownership. If you work from home it means most other transportation alternatives suddenly become possible.

Own a ?Beater?

If you work from home, or live close to your job, all you really need is a vehicle for short trips. A ?beater? will fit the bill. Owning an older car means no car payment and no collision insurance. And you can fix it with used car parts and a good backyard mechanic.

Car Rentals

I work from home and don’t have my own car ? after all, I have no commute and my trips are short. But there are times that I need to drive longer distances. When I do, I?ll often rent a car for a day, a weekend or a full week or even longer. You can rent an economy car for about $40 a day (or $150 for a week) at major car rental companies, and even less if you do some digging. That?ll get you where you want to go if you don?t own a car.

Car Pooling

The preference is usually to ride with people who work with you, but if that isn?t possible, you can probably find people who work in the same general area. The internet has made this easier than ever. Chipping in $20-$30 a week for gas would be welcome expense money for the driver, and much cheaper for you than owning your own vehicle.

One Household, One Car

One of the unfortunate cultural norms is that we?ve moved from ?a car in every garage? to a car for every adult in the household. That?s an expensive lifestyle! If there are two cars in your home, can you find a way to get by with just one? If one spouse needs the car to commute, but the other works from home, maybe shopping and other trips can be done in the evening, or by some other arrangement that eliminates the need for two cars.

Our Current Car Arrangement

My wife and I currently have one late model car that we bought “gently used” (three years old and with just 17,500 miles on it). It serves as our family car, and is currently our only car. We make it work, though admittedly it isn’t always easy. My wife uses it for her commute, six miles each way, five days a week. I plan my excursions around her work schedule for the most part. But on days when I need the car for a specific purpose, I’ll drive her to work and pick her up, and use the car for what ever purpose I need it for.

My loose plan is to buy a beater sometime next year, just to enable me to make short trips around town. But who knows? We’re making it work with one car, so maybe that won’t ever happen. It’s amazing what you can get used to, and once you do, you hardly feel inconvenienced.

You can combine several of the above in order to eliminate your car. For example, if you could work from home or move close to where you work, you may be able to bike or walk to what ever else you need, and rent a car for long trips. Based on the above it?s even possible to construct a life that doesn?t require car ownership. We?ve covered how much that can save you.

Do you think that living without a car is possible today? Is it something you?d ever thought about? Can you suggest other ways that might enable a car-free lifestyle? We?re looking for ideas here!

( Photo by NCDOTcommunications )