Can you afford a car?
I often say that I couldn’t live without my car (really, without two cars in this family. I don’t share well). What I really mean is, I couldn’t live without the convenience that having a car provides me.
But, when you really do the math, owning a car is a huge cost centre. Is it one that you could do without?
The minute you drive your car off the lot it starts to go down in value. Literally. This is the reason that I personally will never buy a brand new car, although that new car smell is pretty alluring.
You’ve heard of good debt and bad debt. A car is certainly not good debt because of its ability to grow in value over time (for example, in a decade your home will have grown exponentially, while your car will likely be in a scrap yard)
It’s not really “bad debt” either though. Some classify it as “necessary debt”. Is it necessary for you?
Long Term Car Loans
The other issue is that car loans have now been extended over crazy long amortizations, in some cases lasting up to eight or nine years.
The good news is that with these long loans, your payments are low and affordable. The bad news is that you are tied into a debt on a dwindling asset over a long period of time- shelling out far more interest than you should.
And then there is the cost of gas. The huge cost of gas. Depending on how gas-guzzling your auto is you could be looking at shelling out major bucks on a weekly basis just to get from point A to B.
Don’t forget about paying for insurance, car repairs and maintenance and parking (potentially). Wallet empty yet?
Owning a car means having transportation at the ready, right? Are there other alternatives that could work for you? How accessible is public transport for you? Could you walk, bike or roll your way to work or to other places.
As with so many other things in successful budgetary management, planning ahead is important. If you can plan out your transportation needs and are willing to be flexible, life without a car is doable. While it might be inconvenient, pocketing the wads of cash you’ll save is not.