Why We've Never Owned a Car

We have never owned a car in our entire lifetime. This comes as a shock to most people in North America since they've never met someone like that before. In fact, we've never owned any other motorized vehicles either such as motorcycles, scooters, mopeds, hover boards, boosted boards, etc. This is a very conscious decision for us and I'd like to explain why in this post.

Does your car look anything like this? Perhaps you might be over-spending a tad

Does your car look anything like this? Perhaps you might be over-spending a tad

Not owning a car is the ultimate frugal hack of all time. Especially in today's day and age where 3rd party on-demand taxi services such as Uber and Lyft are so popular and so easily accessible with the touch of a few buttons. For people who drive less than 10,000 miles a year, using Uber regularly in lieu of owning a car is actually more cost-effective when you factor in gas, cost of car ownership and maintenance.

Owning a car is ridiculously expensive if you factor in the total cost of ownership. The only way you can compute that accurately is to get yourself, or someone who already owns a car, to write down every single cost associated with car ownership throughout the year, both direct and indirect. It's important to pay particular attention to the expenses that don't appear periodically and are sort of "hidden" costs of ownership. You then tally up the numbers at the end of the year. 

Car ownership, depending on the car itself and its age can easily run you a fine sum anywhere between $300-$1000 per month. At an amazing salary of $100k/yr, that's 20% of your net income at $1k/yr. Do you really want to let your personal car take up 20% of all your disposable income especially when it sits idle most of the time? Let's look at some of the common costs associated with car ownership:

  • Initial downpayment/cost of the car
  • Registration/DMV costs
  • Monthly interest on your lease/financing (can easily be $100-200/mo)
  • Lease excess mileage costs
  • Parking (can often be $300/month in big cities!)
  • Insurance (~$200/month!)
  • Gasoline (~$100/month!)
  • Break-ins / window replacements
  • Flat tires + labor
  • Snow tires + labor
  • Tickets
    • Speeding tickets
    • Parking tickets
    • Incline tickets (it's when your wheels aren't turned correctly when parked on an incline)
    • Red-light tickets
    • Street cleaning tickets (the worst)
  • Regular maintenance , brake checks/replacements, oil change, etc.
  • Repairs (if you have an old-ish car)
  • Lost money in commuter benefits
  • Lost money in future stock market gains + dividends from not investing these car expenses
  • Makes you lazy + cranky -> translates to future health costs

And this doesn't even include all the wasted time and hassle of waiting in traffic, street lights, at pumps, dropping off + picking up your car from the mechanic, etc. It also doesn't include the environmental costs associated with these gas guzzling machines. 

 

How we live without a car

These days we just Uber everywhere. With the Uber ride pass, our rides cost us an unexciting $3.50/ride. Public transit is between $1.95 and $2.25 a ride. If we're planning any day trips on the weekends, we rent cars from National for $32/day + gas. For hourly rentals, we use a combination of car-sharing programs like ZipcarGetaround, and Enterprise Car Share pretty heavily (the options in your city may vary).

For regular work commuting, we rely on a combination of inexpensive public transit, biking, and walking. If none of these are viable commuting options for you, you should consider living closer to your workplace. There are many benefits to reducing your commute time, and being able to live car-free is the biggest financial win. The fresh air during biking and walking is highly stimulating. Bike maintenance is a paltry $150-$200 per year depending on how much DIY you do. And if you don't want to buy/own a bike or maintain it yourself, you can use any number of bike sharing programs out there. And while taking public transit, I usually read blogs on frugality to keep me occupied and to spark my mind with new ideas I can try implementing in my own life to make me more frugal everyday.

To make things worse, cars have unfortunately become a social status symbol in our culture these days. I'm perceived one way vs. another depending on whether I drive a Toyota Corolla, a Civic, a Jetta, or a BMW. Car ownership is the canary in the coal mine when it comes to lifestyle inflation. If I don't drive any car, there is nothing to judge me on. So that's the best insurance against lifestyle inflation, problem solved! Now, I can peacefully read or play a puzzle game on my phone as my Uber driver drives me to my destination safely.

Not owning a car is one of the biggest reasons our savings rate has climbed up from 50% to an intense 70%, which by the way shaves off an impressive 8.3 years off your retirement schedule. Fancy that!

Do the math on your own car. Could you sell it off now and save that $500-700/month expense that you're currently incurring unnecessarily? What if you invested that money monthly into the S&P 500 instead? Where would be in 5 years? 10 years? $500/month is ~$90k in 10 years, while $700/mo is a whopping $130k in 10 years at an 8% compounding rate. Ain't that impressive?

Mr. Frugal Hacker

San Francisco, CA

Born in India. Grew up in Dubai for 15 years. Studied and lived in Canada for 8 years. Backpacked in Europe for 2 months. Lived in Toronto for 1.5 years. Working in San Francisco for the past 4 years. Runner, cyclist, software engineer.