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Become Rich as a One Car Family by Jordan at Investing Blog

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If there was anything Ross Perot ever got right in his campaign for president in the 1990s, it’s that the United States is certainly a car economy. That is, we spend more on our cars and produce (at the time) more cars than anyone else. Most families have one car per person, or even more. How could you benefit by becoming a one family?

Defeating an Expensive “Transportation” Budget Allotment

Very few families attack the three essentials: transportation, clothing and shelter in their line item family budgets. But what if they did? What if families could knock off half of their transportation budget and save even more for retirement?

I did a little research and found that most families tend to buy cars in the $15-25,000 range. That price is for new models, not used, though the used cars sitting on lots had to be purchased new before they became used. ;)

How Long Are New Cars Kept?

The average car, when purchased “new” is kept for anywhere between 3-5 years before it is then resold or traded in for a newer model. This in itself is very poor personal finance, since most of the depreciation on new cars happens in the first three years and after that the depreciation falls to a trickle compared to year one and year two. However, for the sake of discussion, we’ll assume the average person keeps a new car for 10 years and readers can then add or subtract losses based on their car buying habits. Obviously, these numbers won’t work for everyone.

Costs of a New Car

First we have the sticker price minus the value at the time it is sold. If a new car is purchased for $25,000 and held for ten years, the net loss comes to plus or minus $21,000 assuming the car is worth $4,000 after ten years. For most cars that still drive well, have good records, and are well maintained, $4,000 is reasonable in a private party transaction.

Depreciation: $21,000

Licenses and Insurance are next, and these can be very expensive and are commonly overlooked. Depending on the car and the state, registration and licensing fees will set you back as much as $300 per year. Insurance is another big one. Two drivers on one car is significantly less expensive than two drivers on two cars, so figure as much as $700 per year for insurance on just one car.

Licenses and Insurance: $7,000

Next we have maintenance. The average maintenance and repair cost comes to roughly $650 per year per car including oil changes, tire rotation, new tires, new occasional fluids and repairs. This is well in the range for most people at just over $54 per month. For cars with synthetic oils or complex nonsense under the hood, this figure is far higher.

Maintenance: $6,500

Next we have a monster…gasoline! With prices settling around $2.60 per gallon, some families may spend as much as $100-$150 per month per car depending on the daily commute. We’ll be conservative here and say $80 per month. Keep in mind, with two people sharing one car you may have only modest savings in this department though some savings can be realized with carpooling.

Gasoline: $9,600

There you have it. Excluding gasoline, a new car purchased today for $25,000 will cost as much as $34,500 over 10 years. EXCLUDING gasoline. Throw in gas costs and you’re quickly losing as much as $400 every month in that “necessity” you call a car.

Every wonder why your retirement account isn’t getting the attention it deserves? You might be investing in the fastest depreciating asset anyone as ever known: transportation.

About Jordan

Jordan is the web master of www.investingblog.org, a site dedicated to skillful investing, news and recent trends. You can read the original article here.

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