Making the decision to reduce your household fleet can be intimidating. We have become so accustomed to having a personal car at our disposal, that the prospect of operating any other way seems like it would earn you a freak-badge from your friends and neighbours.
These thoughts are understandable in light of the statistical data. The U.S. Census Bureau reports that the average household owns 2.28 vehicles.
Even more alarming are the trends over the last 30 years. They show that the proportion of households with no cars, halving from 15% to 8%. Households with 2 or more cars increased over the same period from 50% to 58%.
Many factors impact vehicle ownership: the cost of the car, fuel, financing, maintenance, taxes, and repairs. But access to alternatives, such as mass transit, or the practicality of bicycling should not be under estimated.
The sprawling design of urban environments makes it virtually essential to primarily get around by car. The historically low cost of fuel has made the car a very convenient option. It has become the default method of transportation, without any analysis of the alternatives, in most cases.
What if you decided you could cope with a little inconvenience by transitioning to a 1 car household? How much better off would you be?
Let’s assume that the car we are giving up is an average mid-size sedan, like a Honda Accord, or Toyota Camry, with a purchase price of $25,000.
Edmunds.com estimates the total cost of ownership over 5 years to be $35,000. This includes depreciation, financing, taxes and fees, fuel, insurance, maintenance, and repairs.
According to these costs of ownership, the household would spend $7,000 less if it did not have to operate this second vehicle. That’s a significant boost to cash flow. The cost of parking should also be added to this figure. In major cities, this can add up very quickly.
However, because the other vehicle (now the only vehicle) is being shared, you can expect these running costs to all increase. The additional miles that are added to this car, will determine the additional running costs. It’s reasonable to expect that aggregate running costs will be less for a single car, than a fleet of two, even with additional use in a single car scenario.
Some costs won’t increase with extra miles, like taxes and fees, and financing for example. Others may increase, like insurance, if the multi-car discount is lost.
The cost of mass transit should also be factored in. For regular commuting this is likely to be a substantial amount of money, but probably much less than the cost of operating a car.
The transition to one car will be easier for some. Access to mass transit or reasonable proximity to destinations that allows for bicycling, are important considerations.
Assuming the household consists of a couple, and some children. Arranging for the delivery of children to school is paramount. How will this be achieved, in all weather conditions?
Can the couple commute together, in a single car? If only one adult works, which person will have access to the car, the worker, or the person at home?
In an emergency situation it is reassuring to know you have access to your own car, in case a quick trip to the ER is called for. This is even more important when children are concerned. Planning should take this into consideration.
Some people may take a hit to their ego by giving up a car. A nice car is viewed as a status symbol; a sign that you are doing well financially. Are you willing to swallow your pride?
The health benefits from doing more walking or bicycling will become immediately apparent. Either walking to and from mass-transit or just walking to the convenience store instead of driving will improve fitness.
The Bottom Line
The overall financial savings realized by switching from 2 cars to 1 are significant. Assuming you would save an extra $5,000 per year, would this be something you are prepared to do?
The additional cash-flow would significantly help families, by paying down your debt ceiling or boosting savings and investments. An improved net-worth would result. The transition to a different transport routine would be challenging at first, but this represents a realistic opportunity for many households to take the path less travelled, and get ahead.
This is an article written by Hunter. He writes for Financially Consumed on every-day personal finance issues. He is married to a Navy meteorologist, proud father of 3, a mad cyclist, and recently graduated with a Master’s degree in Family Financial Planning.