A car can give you convenience and freedom, and most people think they cannot live without one. However, cars can also have a big impact on your finances. From the moment you buy a vehicle, it starts to cost you money. Do you really need a car, or can you get by without one?
Impact on Your Finances
It is important to consider how much owning a car affects your finances. First, if you have a lease or a loan, there are monthly car payments. Even if you purchase a used car and do not have to pay for a loan, you still have to pay for insurance and gas to keep the car legal and running. In addition, owning a car requires paying for license plates and registration fees, which are usually annual.
Taking care of your vehicle can lead to bills for maintenance and repairs. There are also car wash and valet services fees. Some people also have to pay for parking and toll road fees. If you are not careful, you may also have traffic violation fines and tickets.
Even if you can reduce some of these costs, every car starts to lose value the minute you buy it. If you use a depreciation calculator, you can see how much value your car loses over time. In general, a car is worth 20% less after one year and 60% after five years.
Alternatives to Owning a Car
There are many alternatives to owning a motor vehicle. First, consider using public transport like trains, buses or subways to get places. Most large cities have some type of public transportation available that is not too expensive.
If you live in an urban city, you may be able to walk, bike, rollerblade or skateboard to nearby places. Your fitness level and the distance you have to travel will affect your choices. The weather and area also influence what you can use to travel.
Carpooling to and from work with coworkers who live in the same area is another option. Check with your job to see if they have a list already or start your own carpooling group. You can take turns driving and picking up people.
Renting a car only when you need one can work for some people. It will cost more than public transportation but will give you more freedom. This is a short-term solution for most people because of the costs. You also have to keep in mind that you cannot control how many rental cars are available and may not be able to get one all the time.
Using a taxi or rideshare service when you need one is another popular option. For example, you can use a rideshare service like Uber to get to appointments and return home. Prices will vary based on where you live, the demand for cars, and where you are going.
Researchers believe that fewer people will own cars as more places become urbanized and rideshares become a bigger option. Self-driving cars may also become an option in the next few years, which will make it easier for people to get around without owning a vehicle.
Lowering Vehicle Expenses
If you cannot live without a car, there are ways to reduce your vehicle expenses. The first option is to buy another type of vehicle that is cheaper to own, like a scooter or motorcycle. You could also get a used car that is cheap and does not require a loan or lease. Downgrading to a one-car household can work for some people too.
Cutting down on vehicle running costs, like gas or maintenance can work if you drive less than usual. Another option is to shop around for a lower car insurance rate. You may qualify for a low-mileage insurance rate, and your gas and maintenance costs will also drop.
If you need a new vehicle, try to buy a more economical car. A smaller and more fuel-efficient car could save hundreds of dollars a year. Leasing a car instead of buying one usually equates to a lower monthly premium, but this works best if you do not plan to keep the car for a long time.
You always want to shop around for a lower car loan with a lower interest rate. It is a good idea to get several estimates before buying anything and committing to a new car.
Only you can answer the question if you really need a car. Some people live in large cities with ample public transportation that gives them options to not own a car. Others live in areas that do not have many options and are forced to get a car. There are no wrong choices here. You have to decide what is best for you and your lifestyle.
