Should You Really Own a Car?
You grow up. Graduate. Nab that first job. What’s the next step? Unless you live in a city with a great transit system, you have to buy a car — right?
The future of driving is going to look very different, and it’s coming sooner than you think. The independent think tank RethinkX predicts that by 2030, 95 percent of the miles traveled in the U.S. will be covered in self-driving electric vehicles owned by ride-sharing companies. “I think a child born today is unlikely to learn how to drive,” says futurist Juan Enriquez, co-author of Evolving Ourselves: How Unnatural Selection and Nonrandom Mutation are Changing Life on Earth. In this near-future scenario, you won’t need to own a car, or even have a license: We’ll all just be ferried around by on-demand self-driving cars.
But we don’t need to wait for that self-driving future to see that the economics of car ownership has already changed. When you add up the costs (and sometimes headaches) of car ownership, and factor in the proliferation of ridesharing services, you really start to wonder whether owning a car makes sense.
Here’s how to make the call on car ownership.
The average American puts around 13,500 miles on his or her car each year, according to the U.S. Department of Transportation. Not hitting that mark? Then you have a case for finding alternative routes, be it leasing, public transportation or ridesharing. If you still want a car, there’s a chance you can get a better price on a lease, because they’re miles based, says Ron Montoya of Edmunds. And if you’re driving less than 10,000 miles a year — and you’re living in an Uber-friendly city — then it turns out to be cheaper to rideshare, says Enriquez.
That’s something Americans are starting to figure out. Research from consulting firm Magid Advisors found that found Uber usage increased from 4 percent to 17 percent from 2014 to 2015, and that 22 percent of Uber users ages 18 to 64 were delaying or holding off buying a new car because of it.
Consider the Array of Alternatives
Do you live in Chicago, Detroit, Los Angeles, Miami, New York, San Diego, San Francisco, or Washington, D.C.? In these cities, a NerdWallet study found that using ridesharing services for your weekly commute is cheaper than using a personal vehicle. In San Francisco, for example, you could save over $330 a month.
Does Owning Fit Your Monthly Budget and Lifestyle?
Right now, the average price for a new car is around $34,000, according to Kelley Blue Book, making the average car payment around $500 a month. If this seems high, a lease payment may appeal: On average, it’s $200 a month less.
But a monthly car payment is only part of the equation when you’re calculating the costs of car ownership. The other costs include insurance, fuel, maintenance, and (in some locations) parking. Some not-so-obvious ones include depreciation, license and registration fees, and taxes.
How much do those add up to? The average annual insurance premium varies by state, but it was roughly $910 in 2014, according to Quadrant Information Services. The cost of parking is the other biggie for many people in cities, says NerdWallet’s Amy Danise — though it’s worth noting that if you’re living and working in a city, the cost of parking is partially offset by reduced fuel costs due to your shorter commute. Similarly, maintenance costs will depend on the vehicle. If you commute to work, AAA says you can expect about $57 in total vehicle expenses per 100 miles.
To get a more tailored estimate for all of the above, use a calculator like Edmunds.com’s True Cost to Own.
Can You Live Without One?
If you currently own a car and want to see if it’s cheaper to ditch the wheels, then start experimenting. Once you’ve figured out your cost of ownership, you could use the fare estimate tools offered by many ridesharing services to see how the monthly cost would compare. But to really get a sense for how costs differ — and to see if it suits your lifestyle — then you might try leaving your car in the garage for a month and test your other options. Conversely, if you don’t own a car, then track how much you’re spending on transportation each month and start comparing it to the average ownership costs listed above.
Something that isn’t as quantifiable, though, is the personal time you get back by using ride-sharing services or public transportation. Whether you’re using that time to tackle emails, catch up with loved ones, or enjoy time to yourself, “that could be an advantage that tips the scales towards not driving,” adds Danise.
With Kelly Hultgren