Lesson Two

Calculate Your Real Car Cost: 100 Hidden Expenses of Owning a Car.

By Chris Balish, bestselling author of How to Live Well without Owning a Car

“If you buy what you don’t need, you steal from yourself.”
 – Swedish proverb

In Lesson One, you learned how owning or leasing a car, truck, or SUV wreaks havoc on your finances. We showed you how car ownership can destroy your ability to save for a house or to start a business, and how it can quietly rob you of financial freedom and a secure retirement.

Not only do cars devour a huge amount of money, but for some reason people don’t notice this. Most people have little idea just how much their car is costing them. In this lesson we’ll show you how to calculate what your car is really costing you. Prepare for a shock.

Step One: Calculate Your Current Car Expense

Essentially, Drucker’s quotation means that when you measure or quantify an activity or a way of doing something, you are forced to pay attention to it. When you pay attention, you begin thinking of ways to improve, streamline, and optimize. So the first step in determining if a car free lifestyle is a fit for you begins with a simple spreadsheet.

Are You Clueless about Car Costs?

Most people have little idea just how much their car is costing them. If you ask someone what they spend each month on housing, you’ll get a pretty accurate answer. “My rent is $1,800, cable is $90, and electricity is about $70.” But when you ask the same person how much their car costs each month, they often have no clue. Or they just add up the car payment, gas, and insurance, believing that’s all there is to it.

This gross underestimation of how expensive cars are to own is so widespread it’s a national epidemic. The misunderstanding is fueled by an endless barrage of automobile advertising purposely designed to make cars seem more affordable than they really are. Commercials that promise “A brand new car for $199 a month! Just $199 a month!” are so misleading they should be illegal.

“Advertising: the science of arresting human intelligence long enough to get money from it.”
 – Stephen B. Leacock, Economist

How many college students do you know who are so broke they can only afford mac-n-cheese for dinner, yet they just financed a new car to get them to and from class? They probably thought, “I can afford $199 a month.”

How many working adults do you know who constantly complain about money problems, yet they just leased a brand-new SUV? The sad reality is that cars come with dozens of unavoidable expenses that the average car owner either doesn’t notice, doesn’t want to notice, or just accepts as part of life without giving any real thought to the consequences.

Source: American Automobile Associaiton 2019 Your Driving Costs Study

The figures above are a good baseline, but the only way to know for sure what your car free savings will be is to run the numbers for your own car. This is where most people make a common mistake; they forget about dozens and dozens of car expenses and therefore they vastly underestimate what their savings would be by going car free. Check out my video titled “The Hidden Costs of Car Ownership” below.

To figure the true cost of owning your car, you must add up a lot more than just your monthly payment, gas, and insurance. The website Edmunds.com has a nifty calculator tool called the True Cost to Own (TCO). The TCO calculator includes the following costs: car payments, depreciation, financing cost, insurance, taxes and fees, fuel, maintenance, and repairs. That’s getting warmer, but it’s still not even close to a complete list of all car related expenses.

The Total Car Cost Worksheet is my own original research, and it lists more than 100 car expenses. Please print this page and then take your time filling in the blanks. Better yet, click on the button at the bottom of this lesson and I will email you the Total Car Cost Worksheet as an Excel spreadsheet; it makes the calculations much easier because it will do the math for you. Once you add up all the categories you will see how much money you’ll save if you ditch your car.

It’s best to run these numbers based on a full year, because you won’t incur every expense in every month, and many will be lumped into certain times of the year. If you don’t have actual receipts and hard data, it’s okay to estimate, but be as accurate as possible.

If you lease your car you do not technically have depreciation, since you don’t own the vehicle. However, you do have to give the car back at the end of the lease. This is essentially a balloon payment at the end of the loan. Additionally, all lease contracts require the lessee to pay a mileage overage fee for miles driven in excess of those allowed in the contract.

So, when figuring the total annual cost to own your leased car, take the balloon payment amount (usually described as the “end of lease purchase price” in your contract), add any estimated mileage overage fees plus any turn-in fees at the end of the lease, then divide by the number of years in the lease. Write this amount in the “Depreciation” line in the Car Cost Worksheet above.

Of course, living car-free doesn’t mean you won’t have any transportation expense. You will. But it will be a fraction of what you’d pay to own even the cheapest used car. For example, Anne Scarletta lives car free in Portland, Oregon. She wrote me this email itemizing her car-free transportation costs.

Your annual car-free transportation costs could be higher or lower than Anne’s, depending on how far you live from work, how often you rent cars, ride mass transit, take Uber, airport shuttles, and so on. But in my experience $700-$750 per year is about average for car free transportation cost. And remember, we’re comparing that to $9,282 per year to own a car.

To get an accurate picture of how much money living car free will save you follow these steps:

1) Use the worksheet above to calculate the total annual cost of your current vehicle.
2) Estimate the total annual cost of all the car free transportation you expect to use.
3) Subtract #2 from #1.

This is how much money you can expect to save by going car free.

Related Question: How Much Does a Monthly Transit Pass Cost?

In most cities, a monthly transit pass costs around $65. But many employers now subsidize monthly transit passes and even Uber rides. Inquire with your HR department. Plus, there are usually discounts for students, seniors, and others. There are often discounts and freebies to be had on alternative transportation because most cities are trying to incentivize people to stop driving.