The Real Cost of Owning a Car

For a few years, I have been wanting to sell my car. I even had my car on the market for about six months in 2011, but I was unable to get a price that I wanted. In all of my travels outside the US, it has been extremely easy to get around without a car. Whether it’s a subway within a city or a bus connecting cities, there is almost always a way to get where you want to go by just purchasing a ticket.

Why not use public transportation in the US?

Public Transportation

Unfortunately, the US lags behind in this aspect. Most cities do not have a reliable form of public transportation. Homeland Security News Wire says that the US spends only 2.4% of its GDP on infrastructure, compared to the 5% of Europe and 9% of China. Greyhound does have intercity transportation, but it is expensive and the buses are generally old and dirty. Fortunately, MegaBus is creating new routes across the country and is very affordable, including the chance at $1 tickets for the first tickets sold. Hopefully that they continue expanding to the point where you can be sure there is a bus linking two close-by cities.

Because of the lack of public transportation, most people have automobiles. It has become a norm in our society for anyone over the age of 16 to have a car. Not only that, but to buy the most expensive car one can afford (presumably, to show your status). What I mean by this is when a 20 year old college student with no income purchases a car with a $17,000 loan. Does he really need this luxury? Well that was me. Looking back, I could’ve easily done well with a $6,000 reliable car.

A car is something we use to get from point A to point B. As long as it can get there safely and comfortably, it has served its purpose. Since when are we willing to pay thousands of dollars more for a car with an automatic closing trunk, a rear view looking camera, and an automatic starter? Sure, these seem great. But it’s a scary thing when you really start figuring out how much you’re spending on “extras” and how much time you’ll be working to pay these off.

The Real Cost of Owning a Car

Real Cost of Owning a Car

The total cost of your car may be more expensive than you think.

I recently did an analysis on how much I have spent on my car over the lifetime (Click here to download the spreadsheet to input your own numbers). The results shocked me in a few ways. I bought the 2005 Honda Accord Coupe for $16,900 in April 2007 when the car had 16,000 miles. Current mileage is 80,000 and I’m using a current Fair Market Value (FMV) of $8,000 according to Kelley Blue Book.

Car cost picture

First of all, the daily cost per day is frightening. $10.32 per day! This includes all the time I was living outside the country and not using the car, which added up to about 20 months of the total 70 months I have owned it. To put the $10.32 into perspective, I am currently paying $10 a day for rent/utilities. Granted that I am living in a low cost area, but this amount is shocking.

Secondly, the cost per mile is great! This is including ALL costs of my car…including fuel, repair work, etc. $0.35 per mile is fantastic when cars are normally expected to cost $0.50 per mile. This is most likely due to the fact that I bought the car at a discount from fair market value, the miles per gallon are pretty good, and that the car has held its value very well.

Finally, $22,299.56! That is a lot of money. This is all money spent. It’s gone. If I sell the car at the FMV, I’d still have thrown $22,299.56 into my car.

So how much are you spending on your car? Is it worth it to you? In what ways you can reduce this cost in your situation (such as buying used, buying a car with high miles per gallon, or biking to work)?

Image courtesy ofthephotoholic and ponsulak / FreeDigitalPhotos.net

About Trent

I started Frugal Purpose to share my love of personal finance to assist your pursuit of a more fulfilling life. I am a financial analyst by trade, traveler at heart, and want to share with you the beauty of this world.

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