Author Topic: Ditch A Second Car & Live Near Work  (Read 3155 times)

CBnCO

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Ditch A Second Car & Live Near Work
« on: May 28, 2014, 06:02:15 PM »
Let's say average car and average commute costs you $600 per month (TCO including fuel)...at today's interest rates that would pay $125K or so of mortgage payment.  So, buying a house near work, markets, amenities, etc. would seem to allow for a little more expensive house and possibly some significant savings.

In our case we've been getting sticker shock looking at houses in the city within walk/bike range of work and were thinking it might have to be the suburbs for us.  But, running through an analysis, it's amazing at how much a car costs to own and operate which makes housing cost difference between burbs and downtown not so bad. In essence, a $275K house in the burbs with second car equals a $400K house where the same car is not needed.  And, this doesn't account for the time saved in commuting and the side benefit of being a little more "green".   For perspective, we live and work in Denver, CO.

Anyone else gone through similar situation and come to the same conclusion?  Have a missed anything here?

Thanks,

CB

CarDude

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Re: Ditch A Second Car & Live Near Work
« Reply #1 on: May 28, 2014, 06:34:56 PM »
I'm all for using as few cars as you have to, but I'd be curious to see how you came to that figure ($600/mo to keep a car).

CBnCO

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Re: Ditch A Second Car & Live Near Work
« Reply #2 on: May 28, 2014, 06:49:01 PM »
Good question.  I've found it somewhat difficult to get to an exact number given the wide variances in types of vehicles.   We have one vehicle now and so estimating for a second is a less than exact science.  That said, we'd be looking at 40-50 miles per work day RT and then the cost of the vehicle, maintenance, insurance, and registration.   I found the $600 in an article online and it seemed like a reasonable average.  You think it's too high?  Or, too low?

darkadams00

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Re: Ditch A Second Car & Live Near Work
« Reply #3 on: May 28, 2014, 07:08:15 PM »
Just using average monthly figures, i.e. low for some folks, high for others--

$100.00   Purchase cost of car ($12k for 10-year car, $6k for 5-year car, etc)
    75.00   Insurance
    60.00   Long/short-term maintenance (tires/battery vs fluid changes), taxes, tag, etc
  143.00   Gas (45mi/day * 6 days/wk * 4 weeks--if your commute is 40-50*5 days, you will probably drive a bit extra each month; 28mpg car estimated; $3.70/gallon)
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$378.00  per month cost estimate....I would use $400/month in my budget if these figures were true for me until a year's worth of tracking told me otherwise. As soon as your car purchase price moves toward $20k, bringing higher insurance and taxes with it, and the average buyer also includes interest charges on a 6-year loan...yeah, average car cost for a new mid-priced sedan w/ debt instead of a slightly used one bought w/ cash could push much closer to $600/month.

CarDude

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Re: Ditch A Second Car & Live Near Work
« Reply #4 on: May 28, 2014, 07:47:23 PM »
Good question.  I've found it somewhat difficult to get to an exact number given the wide variances in types of vehicles.   We have one vehicle now and so estimating for a second is a less than exact science.  That said, we'd be looking at 40-50 miles per work day RT and then the cost of the vehicle, maintenance, insurance, and registration.   I found the $600 in an article online and it seemed like a reasonable average.  You think it's too high?  Or, too low?

It seems too high to me, but now that I see you found it online, I get it. However, just as you can optimize the work->retire flowchain and ER, you can optimize car expenses too. Off the top of my head, here are some rough numbers from a friend of mine...

$100 ($7.2k for a car kept for 6 years)
$20 (Minimum insurance at $240/yr)
$100 (Registration, maintenance, etc at $1200/yr)
$72 (24 mi / d = 120 mi /wk = 480 mi / mo, 24 mpg = 20 gallons * 3.60/g = $72/mo)
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That comes out to $292/mo, and to be honest, I could have decreased the number more. The biggest factor isn't gas (the commute length doesn't really matter except for the time, stress, and danger it adds), but the initial cost of the vehicle. If you buy something expensive, your monthly costs will be much higher unless you drive it into the ground. If you start with a cheaper vehicle, the numbers are much nicer.

alsoknownasDean

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Re: Ditch A Second Car & Live Near Work
« Reply #5 on: May 29, 2014, 05:28:39 AM »
Do it! If only because driving to work is the pits. :)

I did the maths on how much my last car cost to run (not even commuting to work), and it came to $450 a month (even though everything costs more down under), so I can believe it.

I know in my case that the car parking alone at work costs more than I would pay for a daily train ticket. Add to that that I get my train travel cheaper than the daily rate because I buy longer-term passes, and that it's faster door to door than driving (from my experience), and it's a no-brainer.

Once you consider fuel/registration/parking/insurance/servicing/depreciation/tyres/opportunity cost, it can get up there, especially if you're driving an expensive or thirsty car, doing a lot of k's/miles.

That is assuming you're staying in the same job for a long period of time.

Alternatively, what about something near public transport? Let someone else drive you to work :)
« Last Edit: May 29, 2014, 08:26:11 AM by alsoknownasDean »

Ottawa

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Re: Ditch A Second Car & Live Near Work
« Reply #6 on: May 29, 2014, 06:01:43 AM »
Our 11 year old Jetta (owned wholly) cost us $3600* over the last 12 months (average $266 per month).  That is with usage of approx 5000km of 'local' travel (<100km one way), 2000km of family visiting travel (i.e. 1,000km round trip) and 3,000km of vacation travel.  That is a cost to us of 36 cents per km travelled.

Of that $3,600:

The insurance per year is $705 (liability only)
Maintenance the last 12 months = $2212
Licencing = $160 (2 drivers)
Parking = $24
Parking fine = $25 (facepunch)
Gas = $565 (+300 gas cards) - approx 700liters = ~7L/100km mileage

The thing that stands out to me here is the $2200 in Repair costs.  You need to weigh that up against the premium paid for a newer more 'reliable' car...

* this does not include the approximate $300 in gas gift cards received for credit card sign-ups...(therefore more like 40 cents per km)

MayDay

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Re: Ditch A Second Car & Live Near Work
« Reply #7 on: May 29, 2014, 09:09:18 AM »
We sold our second car when H got a job close to home that he took the bus or biked to.

Then he got laid off and had to find a new job, and ex had to acquire a car quickly.  Worked out fine as my brother gave us his old car (a very old corolla with multiple issues, but good fuel economy).  But if we hadn't had that gift, we would have had to go out and buy a new car pretty quickly, which would have sucked. 

I am not saying don't do it (we are hoping to move closer and sell a car again in the next year or so) just make sure you think through possible scenarios.  If you foresee changing jobs, or the possibility being laid off, it might not be worth the hassle of buying and selling a vehicle.

Ottawa

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Re: Ditch A Second Car & Live Near Work
« Reply #8 on: May 29, 2014, 09:57:19 AM »
Our 11 year old Jetta (owned wholly) cost us $3600* over the last 12 months (average $266 per month).  That is with usage of approx 5000km of 'local' travel (<100km one way), 2000km of family visiting travel (i.e. 1,000km round trip) and 3,000km of vacation travel.  That is a cost to us of 36 cents per km travelled.

Of that $3,600:

The insurance per year is $705 (liability only)
Maintenance the last 12 months = $2212
Licencing = $160 (2 drivers)
Parking = $24
Parking fine = $25 (facepunch)
Gas = $565 (+300 gas cards) - approx 700liters = ~7L/100km mileage

The thing that stands out to me here is the $2200 in Repair costs.  You need to weigh that up against the premium paid for a newer more 'reliable' car...

* this does not include the approximate $300 in gas gift cards received for credit card sign-ups...(therefore more like 40 cents per km)

And so...this is a vehicle that isn't used all that much and it still costs a whack of cash.  We had two cars when we arrived in Ottawa 9 years ago.  We purchased a house within biking distance of both work locations so that we could immediately ditch one of the cars.  At that time, the second car was only 4 years old.  We got 15,000 cash from selling it.  Had we not sold it...we would have 'lost' that money and an additional $4000 per year in upkeep/parking etc.  So, likely we have $51,000 in our pocket not including investment gains.  At the time we purchased our house it seemed a lot of cash (190K) and that was a townhouse. 

So, yes I think it is worth it to reduce cars/eliminate them at the expense of a pricier house.  Bear in mind, you should really consider how much house you need.  People often fall into the trap of "I can get a much nicer/bigger/fancier house if I move out to the burbs for the same money".  So, by analyzing the car expense variable...you are already doing what 75%* of people buying don't do.  Thinking long term!

*Totally fabricated...

frugaliknowit

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Re: Ditch A Second Car & Live Near Work
« Reply #9 on: May 29, 2014, 01:56:45 PM »
The replies thus far are very good and cover most points.

Mine are the savings on ditching the second car depend on how many miles it was being used and also what the mileage change (if any) there will be on the car you keep.  The newer the vehicle you ditch, the more you are saving as the depreciated cost stops.  A rule of thumb is $.50 per mile.

The other point is that generally when one moves from the suburbs to downtown, one tends to use less square footage.  In the case of big cities, this generally means from house to condo or townhome.  You might want to look at that.