Want to Reduce Driving Costs? Sell Your Car!

submitted: Aug 27th 2008 | by: RobViglione | Total views: 2 | Word Count: 307 | PDF View | Print Article

With fuel prices rising there's lots of advice going around about how to lower transportation costs. I hear everything from "hypermilling" to making sure your tires are always full. The biggest consideration on cutting back on driving costs is to determine whether you can get rid of your car entirely.

For most, this would be too large an inconvenience to make a reality; however, what's more realistic is downgrading from multiple vehicles. If you are one of the countless Americans with more than one car, consider selling one. Whether or not you drive them, cars cost money.

The real cost of driving goes beyond the gas pump. Insurance is mandatory, recurring, and expensive. Depending on where you live insurance premiums can exceed $100 per month (mine do!), and let's not forget maintenance costs that have a way of creeping up at the worst times! Going a step further, we have to consider the opportunity cost of capital involved with owning the depreciating asset.

Opportunity cost is something we don't often consider when holding assets or buying things we don't really need. For instance, say that you have $15K in credit card debt with a 15% APR and just so happen to own a car that costs that much. Opportunity cost is the concept that if you hold the car you are stuck paying interest on that other debt, whereas if you sold it you could pay off the balance. In this case, it means you're paying roughly $185 per month on pure interest expense!

Totalling the obvious and more subtle costs can easily bring monthly vehicle expenses to $500. Remember that this is after-tax dollars going to what is often a luxury. We should all give it some serious consideration on whether or not we can downgrade to a single car per family, car pool with friends, or take public transportation.

About the Author

Rob Viglione is a writer, hedge fund manager, and property broker. If you like this article check out The Freedom Factory where Rob and his team discuss everything from personal finance, economics, investing, to current events.


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