With fuel prices rising there’s lots of advice going around about how to lower transportation costs. I hear everything from “hypermilling” to making sure your tires are always full. The biggest consideration on cutting back on driving costs is to determine whether you can get rid of your car entirely.
Admittedly, this can be an extreme measure for some. The reality is that our ways of life often require vehicles, particularly when we live in the “burbs” quite a ways from work. However, we should all evaluate whether or not we can get by without a car. When public transport is readily available, explore using it. When there are multiple cars in a family, consider downsizing and sharing.
Owning a car costs quite a bit more than most realize. We typically only consider the cost of filling up our gas tanks, but the reality is that you end up paying monthly insurance bills, recurring and non-recurring maintenance, and it costs of money to simply hold the capital asset (if you sold your car you could pay off other bills, i.e. credit cards that come at a high cost).
For instance, if your car is worth $10,000 and you have that much in 16% APR credit card debt, the cost of driving must include the interest payments you could otherwise erase. In this case, it amounts to roughly 1.32% per month, or $132. That’s pure interest expense, for which you derive no worldly benefit!
Totalling the obvious and more subtle costs can easily bring monthly vehicle expenses to $500. Remember that this is after-tax dollars going to what is often a luxury. We should all give it some serious consideration on whether or not we can downgrade to a single car per family, car pool with friends, or take public transportation.
Add A Comment