Cars – The huge habit draining your net worth

By | December 18, 2013

This is the third installment of my ongoing series: Things that I don’t spend money on.


Cars are super convenient, warm in the winter, cool in the summer, not crowded with strangers, powerful, shiny status symbols. Not owning a car is almost un-American, eschewing all that she has to offer – the wide open country, the spacious suburbs, the quintessential road trip. For a new driver, car means freedom.

On the other hand, cars are responsible for about a quarter of carbon dioxide emissions, their appetite for gasoline contributes to questionable regimes abroad, and motor vehicle incidents are the fifth leading cause of death.

All good reasons for and against car ownership, but the tipping point for me came after calculating how much this habit cost me. For most of us, cars are probably the most expensive depreciating asset we buy. I spent an obscene amount of time commuting for my first job after college, a tolerable amount during law school and then happily turned my car over to my parents upon graduation. In my strategy to eliminate my student loans as quickly as possible, kicking my car habit greatly improved my financial situation. With this one move, I simplified my budget, eliminating a ridiculous number of categories for money to slip through. 

Budget categories eliminated after ditching my car:

  • Cost of the car/depreciation of the car
  • Gasoline
  • Maintenance
  • Parking
  • Vandalism
  • Tickets
  • Accidents
  • Repairs
  • Car Insurance
  • Savings for next car or interest on car loan

Phew! With all of these expenses, I tend to think of cars as a liability and not an asset. 

Astor buys a new $13,000 car every 10 years. Barack prefers his bike and takes the money Astor spends on cars and invests in a fund earning him an average of 5% per year. Here is where they stand after 40 years.

Astor spends $52,000 purchasing cars.

Barack takes that $52,000 and turns it into more than $200,000.

And these numbers ONLY take into account the very first category of car ownership – the cost of the car. Astor doesn’t actually drive the car. She keeps it in her driveway for show.

If Astor wanted to actually use the car, Barack would leap into the air with excitement. For simplicity sake, let’s say Astor spends $1,000 a year on gasoline, maintenance, insurance, parking, tickets, repairs, etc. Barack takes that money (hence the leap) and throws it into his wonderful investment.

After 40 years, Astor has spent an additional $40,000, but has only 10 extra pounds around her mid-line to show for it.

Astor spends $102,000 on her car habit.

Barack prefers his lower resting heart rate and more than $300,000. 

So far I have discussed my savings from refraining from cars, cigarettes, soda, paying interest on borrowed money, cable, coffee, and meat.

I don’t miss any of those items and forgoing them will allow me about 30+ more years of “retirement.”

You’ll never get rich spending money on depreciating assets!

5 thoughts on “Cars – The huge habit draining your net worth

  1. Darren

    What do you do when it rains? Where I live there is very little public transit. I am thinking of selling my car and just using a bicycle but I am waiting to get into nursing school which requires you to go between clinicals and lecture quickly. Would you have been able to do this while you were in law school?

    1. Thriftygal Post author

      I used public transportation when it rained most of the time. And no, I lived too far from law school to bike my last couple of years. I’m honestly not sure I could bike and not have a car if there was very little public transportation.

  2. dave

    difficult to earn money without a car for some that can’t afford to live close to work. I bought a new one 22 years ago a new honda civic. It still runs and I still use it. Amazing on gas minimal repairs mostly done by myself order cheap parts on internet and install myself.

  3. gulliamo

    I’d love to see this chart factoring in the some of the following costs:
    1. Uber
    2. Public transportation
    3. Higher mortgage/rent due to better location
    4. Higher cost of goods/services due to cannot drive to Costco/Safeway/etc.
    5. Opportunity costs of taking longer to get where you’re going (e.g. IF I get to work 15 mins faster will I get a larger bonus?)
    6. Opportunity costs of looking like you rode a bike to work (e.g. Will I get a larger bonus if I show up looking nice?)
    7. Car rental for travel (assumes one leaves their neighborhood).
    8. Increased delivery charges (e.g. IF I buy a mattress do I need to pay for delivery vs. strap it to my car?)
    9. Bike Maintenance/Vandalism/Accidents/Repairs (you listed both Maintenance AND Repairs for cars)
    10. Savings for next bike

    To be fair you could add the following in the cost of car ownership:
    1. Real and opportunity cost of sitting on ass. (e.g. Now you may buy a gym membership to spin for an hour)
    2. Health cost (see above)
    3. Environmental cost

    I am a huge bike advocate and feel bikes will still come out far ahead but I’d love to see the real math for both an individual and family.

  4. Rob

    For those who need truly a car (such as myself living in a mostly rural area) here’s a huge $$-saver:

    Don’t Buy Collision Insurance.

    There I was, following the herd, paying collision on my car and my wife’s car. Used vehicles worth about 10K each. Paid off. I realized I was spending over $1,000/year on comprehensive & collision insurance (additional to liability insurance).

    Let’s assume I invested this amount at 4% interest over thirty years. It would amount to $57,840. Now, lets say over that time I screw up and total one or two $10,000 cars. I would still come out ahead.

    Also, refusing to purchase collision insurance has side benefits:
    1) Lower vehicle costs – the temptation of buying that sweet $25K Mustang is lower, because I can’t afford to replace it out-of-pocket (if paying cash) and because if I don’t the bank will REQUIRE collision insurance;
    2) Safer driving – when there’s a huge snowstorm, I call my boss and tell her I’ll be working from home, and when the deer are running in the fall, I don’t drive in the evenings. I put the cell phone away. I drive more defensively, because I have $$ at stake. What’s also at stake?? My health, my family’s health, others on the road. Huge benefit.

    Of course, this is a broader principle – don’t pay for insurance you don’t need, because the game is rigged against you, unless you know that you are a higher risk that the insurance company thinks you are. I do carry lots of insurance – on my life, my health (disability and medical), and my rental properties. These are risks that I can’t mitigate or quantify. Skipping collision is a great money-saver if you can afford to replace your own wheels, or go without in the event you cause an accident.


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