10 DAY CHALLENGE
Starting point. Basic strategy meant for those starting near rock bottom.
DAY 2 - VEHICLES
The costs associated with owning, operating, and maintaining a car are often overlooked. From monthly payments and insurance to fuel and repairs, the financial burden of vehicle ownership can be substantial. However, reducing vehicle dependency or going completely vehicle-free can accelerate the journey toward your end goal. It is entirely possible for Individuals and families to save significant money by embracing alternative transportation options.
I myself did this step in phases because I had several months left on my truck lease. When the lease was up on the truck (and I moved out of it), I downsized to a tiny car because the area was not walkable for my obligations. Several years later when I retired with a bank full of dough, I doubled down and went car free when I could afford just about any vehicle I want. I haven't looked back. A personal choice.
The High Cost of Vehicle Ownership
Before diving into the benefits of reducing vehicle dependency, it’s essential to understand the financial toll of owning a car. According to the American Automobile Association (AAA), the average annual cost of owning a vehicle in 2023 was approximately $10,728 (or $894 per month) for a new car, factoring in:
Depreciation: New cars lose 20-30% of their value in the first year and continue to depreciate over time.
Loan Payments: The average car loan payment in the U.S. is around $500-$700 per month, depending on the loan term and interest rate.
Insurance: Full-coverage insurance costs an average of $1,500-$2,000 annually, depending on the driver’s age, location, and vehicle type.
Fuel: With gas prices fluctuating, the average driver spends $1,500-$2,000 per year on fuel, assuming 15,000 miles driven annually.
Maintenance and Repairs: Routine maintenance (oil changes, tire rotations) and unexpected repairs (brake replacements, transmission issues) can cost $1,000-$2,000 per year.
Parking and Toleting: Urban dwellers often pay $50-$200 per month for parking, while parking tickets and tolls add to the expense.
Taxes and Registration: Annual registration fees and taxes can range from $100 to $500, depending on the state and vehicle value.
For many households, these costs consume a significant portion of their income, especially when multiple vehicles are involved. Reducing or eliminating vehicle dependency can redirect these funds toward savings, investments, or other essential expenses.
Financial Benefits of Reducing Vehicle Dependency
1. Eliminating or Reducing Car Payments
For those who go vehicle-free, the most immediate financial relief comes from eliminating car payments. The average new car loan in 2023 was $40,000, with monthly payments stretching over 5-7 years. By selling a car and paying off the loan, individuals can save hundreds of dollars monthly. Even reducing dependency by downsizing to one vehicle in a multi-car household can free up significant cash flow.
Savings Example: Eliminating a $600 monthly car payment saves $7,200 annually, which can be redirected toward an emergency fund, retirement savings, or debt repayment.
2. Lower Insurance Costs
Going vehicle-free eliminates the need for auto insurance entirely, saving $1,500-$2,000 per year. For those reducing dependency, switching to a smaller, older, or less expensive vehicle can lower premiums. Additionally, some insurance providers offer discounts for low-mileage drivers.
Savings Example: Switching from full-coverage insurance ($1,800/year) to liability-only coverage ($600/year) for an older car saves $1,200 annually.
3. Reduced Fuel Expenses
By walking, biking, or using public transportation, individuals can drastically reduce or eliminate fuel costs. Even partial reductions in driving—such as carpooling, working from home, or combining trips—can lower expenses.
Savings Example: Cutting fuel use from $150/month to $50/month by biking to work three days a week saves $1,200 per year.
4. Lower Maintenance and Repair Costs
Cars require regular maintenance, and older vehicles often need costly repairs. Reducing vehicle use extends the life of tires, brakes, and other components, while going vehicle-free eliminates these expenses entirely.
Savings Example: Maintenance and repair costs adds up to $10,000 over a decade.
5. Savings on Parking and Tolls
Urban residents often pay steep parking fees, whether at home, work, or public spaces. Going vehicle-free eliminates these costs. Additionally, fewer miles driven reduces risk of parking tickets and toll fees.
Savings Example: Eliminating a $100 monthly parking fee saves $1,200 per year.
6. Avoiding Depreciation
Cars are depreciating liabilities, losing value immediately and more over time. By selling a vehicle or avoiding a new car purchase, individuals can avoid the financial loss associated with depreciation.
Savings Example: Selling a car worth $20,000 instead of letting it depreciate to $10,000 over five years preserves $10,000 in value.
7. Opportunity to Invest Savings
The money saved by reducing vehicle dependency can be invested in high-yield savings accounts, retirement funds, Bitcoin, or other financial investments. Over time, you can significantly grow these savings.
Savings Example: Investing just $5,000 annually (saved from reduced car expenses) at a 5% annual return grows to over $60,000 in 10 years.
Practical Ways to Reduce Vehicle Dependency
Transitioning to a vehicle-free or low-vehicle lifestyle requires planning, but the financial rewards are worth it. Here are practical strategies to reduce reliance on personal vehicles:
Walk or Bike: For short trips, walking or biking is free, healthy, and environmentally friendly. Investing in a quality bike ($300-$500) pays for itself within months compared to car expenses.
Carpool or Rideshare: Sharing rides with coworkers or using services like Uber or Lyft for occasional trips can be more cost-effective than owning a second car.
Public Transportation: Buses, trains, and subways are often cheaper than driving, especially in urban areas. Monthly transit passes typically cost $50-$150, far less than the cost of owning a car.
Work from Home: Remote work eliminates commuting costs entirely, saving thousands of dollars annually.
Downsize to One Vehicle: Multi-car households can sell an extra vehicle and share one car for essential trips, cutting costs in half.
Rent or Use Car-Sharing Services: For occasional trips, renting a car or using services like Zipcar is cheaper than owning a vehicle full-time.
Live in Walkable Communities: Moving to a neighborhood with easy access to grocery, work, and public transit reduces the need for a car.
Long-Term Financial Impact
The financial benefits of reducing vehicle dependency extend beyond immediate savings. Over time, these savings can:
Build Wealth: Redirecting car-related expenses into investments or debt repayment accelerates financial independence.
Reduce Stress: Eliminating car payments and maintenance costs reduces financial stress and provides peace of mind.
Enable Flexibility: With lower fixed expenses, individuals have more freedom to pursue career changes, travel, or early retirement.
For example, a household that saves $10,000 annually by going vehicle-free and invests the money at a measly 6% return could accumulate over $130,000 in 10 years. Combined with investing the savings from reduced housing and other areas we'll talk about in the next challenge days, it adds up rather quickly.
Challenges and Considerations
While the financial benefits are clear, reducing vehicle dependency isn’t without challenges. Rural residents may have limited access to public transit, and some jobs require a car. However, even partial reductions in vehicle use (e.g., biking to work, carpooling) can yield significant savings. Planning ahead, such as choosing a walkable neighborhood or negotiating remote work, can mitigate these challenges.
Conclusion
Reducing vehicle dependency or going vehicle-free offers substantial financial benefits, from eliminating car payments and insurance costs to saving on fuel and maintenance. By embracing alternative transportation options like walking, biking, or public transit, individuals and families can redirect thousands of dollars annually toward savings, investments, or debt repayment. While the transition requires planning and lifestyle adjustments, the long-term financial rewards—combined with environmental and health benefits—make it a compelling choice. In a world where every dollar counts, reducing reliance on personal vehicles is not just a practical decision but a transformative step toward financial freedom.
10 day challenge