About cars 🚗
No, not the Disney movie from 2006, although I can recommend that one. But the question we will answer is: can you live on a tight budget and still drive and own a car?
Should I get a driver’s license?
Most people will during their younger years get their driver’s license. It makes perfect sense. From your 20th till your 80th, there will doubtlessly be moments where having your license is helpful. But won’t self-driving cars become a reality? Good question. As a kid, I would read books, that were published in the 1970s and 1980s and that predicted self-driving and self-flying cars by the year 2000.
But, since our frakking with progress (I will write a separate article about all the things that went horribly wrong since 1914 and quickened since 1971) has stalled the development of self-driving cars, it seems reasonable to say that for the next decade or two you can still get a Return Of Investment from a license.
There are some cautions, however. Getting a license will cost you roughly €2000-€3000. That might be 1/6 (2 months) of salary. This is the kind of expense that you can only take on when you are young, living rent-free at your parent’s place, and have a job or substantial savings.
I think that overall, it is a good investment to get your driver’s license, even if in the end you’ll end up mostly going places on foot, by bike or on public transport. Why? Because part of the process of getting your license is also learning the local traffic and road laws. Even while riding a bike, knowing the laws that the surrounding cars should abide by, is very useful and might one day even be lifesaving.
Should I drive a car?
I, personally, love driving, especially when there are not too many other cars around.
I’ve enjoyed driving through the Canadian Rocky Mountains ️ to the National parks in Banff and Jasper, onwards to Whistler, and all the way to Tofino on Vancouver Island. Likewise, I’ve made road trips, both in my car and in rental cars, all over Europe, from the Azores Island to the Croatian Plitvice Lakes National Park . And recently, I got to enjoy the long and winding scenic seaside road Highway 1 in California, between San Francisco (what a lovely city) into to Los Angeles (what a crowded pump). ️
Once upon a time I owned a classic American car, an Oldsmobile Delta 88 Royal Brougham with a Buick V6 4.8 Liter engine, thanks for asking . I know my fellow European readers will drool, and my American readers will laugh at this car. In the USA it’s an “old ladies’” car and in Europe is a “classic American” car, but I digress.
So, I love driving a nice car and I love the experience of going places in style.
Should I own a car?
Having said all that, I am not convinced that people really need to own and drive a car all that often. And if you only rarely drive a car, then it’s probably a waste of money to own a car that’s mostly standing still anyway.
This is not just an economic sum, but more a lifestyle. The question “do I need a car” might depend on where you live and how long your commute to work is. I would always recommend getting a job near your house. That way, you don’t waste precious time and money on commuting.
I get that many American cities are simply built on the assumption that all people will have a car, but many older (European) cities will be more pedestrian and bike friendly. So, I’m referring here to the situation in many countries, big cities, and city-states nowadays:
Public transport is good and cheap.
Going anywhere on bike is fast, probably just as fast if not faster than by car.
Walking might be practical, enjoyable, and is in any case very cheap.
My personal situation is that I can walk to work in about an hour. It’s a boring road, however, and it would mean that I “waste” two hours a day on commuting. So instead, I go on bike, which costs me ± 35 minutes per workday. Yes, you read that correctly. My total commute, from house to work and back home, is only 35 minutes.
What I hope to make clear to you, dear reader, is that choosing a simple lifestyle with a simple job, opens new possibilities. You see, having a part-time job near your home means that you don’t waste much time on it. Instead, you can focus much more time on what makes you happy and thrive. Walking, for example, is very healthy for the mind and body, but hastily walking to work through a boring economic zone isn’t all that much fun.
What does a car cost?
Let us do some ✨math✨ to figure out what a car costs on a yearly basis. Only when we know all the costs can we quantify if it’s worth it.
I will necessarily use rough and round numbers, everybody’s home country and situation are different.
Let’s assume:
That you work close to home but still drive occasionally. You drive roughly 8000 kilometers or 5000 miles per year.
You don’t have children, and you are not disabled, so driving is a luxury and not a necessity. Therefore, the kind of car you would drive is not very relevant. Anything will do.
situation 1: Buying a small, efficient new car
I once bought a new car, almost the smallest Toyota existing, an Aygo.
It cost me €10.500 in early 2012. The same car now costs €15.000. I drove that car exactly 9 years and then sold it for €5.000. A side note on selling cars: be careful. Read this post, then come back here. Hello again, let’s continue. So, without counting insurance, taxes, fuel, or repairs and maintenance, what did it cost me? €10.500 - €5.000 = €5.500 in 9 years time. That is €611 per year or €51 per month.
Taxes, when the tax-free period expired, were roughly €28 per month.
Insurance began expensive but got gradually cheaper over time. Let’s say it was over these 9 years, roughly €35 per month as well.
All these costs, the depreciation, taxes, and insurance are a total of €114 per month, and we haven’t even moved yet.
Fuel consumption of this car is about 20 km/liter of fuel. And with a fuel price of on average €1.70 over the last 9 years, it would have cost me 8000/20×1.70 = €680 per year or, €57 per month.
Maintenance and repairs are another part of the budget we should not forget. After all, you just bought a new car, and you want to take good care of it, no? So, in the 9 years that I owned that car, I spent about €2.850 (actually more, but I also drove more kilometers, so I try to discount that). That is, 2850/9/12 = €27 per month on maintenance.
Now we know the total cost of a new, tiny and cheap car per month:
Price: €51
Taxes: €28
Insurance: €35
Fuel: €57
Maintenance: €27.
Total: €198 per month or €2.376 per year.
If you are wondering how I know what something cost more than a decade ago (I’ve sold this car two years ago), it’s because I logged every expense in a very neat app called “Road Trip.” I think it is worth the $7 that Darren asks for it.
situation 2: Buying a big gas guzzling used car
As I mentioned already, I sold my Aygo two years ago. But basically, I just swapped it for another car, a Toyota RAV4 this time.
It cost me €5000 in early 2021. I’ve been driving it for two and a half years now. So, if we divide the purchasing price by 30 months, it cost me €167 per month. Assuming that I will drive this car for 4 more years, that would be €65 per month. I know that is a big if. The car is old already, but on the other side, it’s a Toyota, so it will never really break down, just grow more boring to me until I want to get rid of it.
Taxes are now €52 per month because this car is bigger and heavier.
Insurance is cheaper because it’s an old car and I only insure it for damage to others. If I wreck it, then I’ll get €0 from the insurance company. It now costs €31 per month.
All these costs, the depreciation, taxes, and insurance are a total of €148 per month, and again, I haven’t even moved yet.
Fuel consumption of this car is about 10 km/liter of fuel. And with a fuel price of on average €1.90 over the previous 2 years and with 4 more to come, it will cost me 8000/10×1.90 = €1520 per year or, €126 per month.
Maintenance and repairs are a bit tricky on an old car. I spent another €2.500 after buying this old car because apparently the previous owners hadn’t made these expenses. I can’t project these costs forward because I’ve got no idea what will break down tomorrow. Let’s assume the next 4 years will be another conservative €250 a year. So, a total of 6,5 years of driving this car will have cost €3.500 or 3500/78 = €44 per month.
Now we know the total cost of an old, big and gas guzzling car per month:
Price: €65
Taxes: €52
Insurance: €31
Fuel: €126
Maintenance: €44.
Total: €318 per month or €3.816 per year.
Now what?
Seeing that a car costs anywhere between €200-€315 per month means that if I didn’t drive this car, I could work a few days per month less.
But is that really so? A car is more than a stupid status symbol. For me, it’s also a way to get places. Will I lose the will and, don’t pardon me this pun, the drive, to go places and do stuff?
Transportation that is further away than what’s reasonably doable by foot or on bike will always cost you some money (I’ve bought a bike 9 years ago for €50 and had zero costs since). Taking the bus or metro in a city will most likely be quite cheap, taking the train or plane to go further will be pricier.
So, being honest to ourselves and admitting that anything bigger than a Toyota Aygo, a Kia Picanto or a Suzuki Alto is a luxury, is our first step to financial nirvana. How much does that luxury costs? Well, in the ✨math✨ that we just did, we saw that 315-200 = €115 per month.
€115 per month, for driving a 4×4 big car that fits almost my entire ego inside. That’s not such a bad deal, is it?