“Whether you drive a hybrid or an SUV, your car is a cash-guzzler. Families trying to save real money should consider going without.”
It may be a true sign of change when the Wall Street Journal suggests that giving up your car could be good for your personal finances and the economy as a whole.
In his December 22 column, A real auto bailout: Escape your car, WSJ staff columnist Brett Arends wrote:
Last week, the auto industry finally got its bailout.
But is it time for Americans to rescue their own finances from their cars?
…Forget lattes and store-brand cereal. If you really want to see where your money is going, take a closer look at your car. Foreign or domestic, it doesn’t matter. It’s a cash guzzler, and it is probably costing you more than anything else except your home.
The column goes on to cite the cost of car ownership (per the AAA): $7800 per car per year on average. That figure is from 2007, before gas prices surged and then dropped again; Arends estimates that amount would drop $400 with current low gas prices.
Is it time for Americans to rescue their own finances from their cars?
It’s surprising to see this perspective represented in the conservative Wall Street Journal, but even more surprising is what Arends suggests next (emphasis mine):
Residents of inner-ring and upscale suburbs, as well as everyone in car-dependent cities like Dallas and Atlanta, are in the worst of all possible worlds on this. They’re paying plenty for real estate – and then paying even more on top of that to run a car for each adult in the home.
Surely they’d be better off moving out to the country, where they would still need their cars but at least real estate is cheap, or into a downtown where they could lose the cars.
The Wall Street Journal has a notoriously conservative editorial board, but its non-news sections, in which this column appears, have been far more in line with the times, promoting the environmentally friendly products and choices which are increasingly driving (and being driven by) the market and government policies.
“Life without a car may seem inconceivable,” Arends writes. But his tough love advice is to start imagining it, for the sake of your bank account.
It’s good to see the mainstream press start to question the absolute necessity of car ownership. I hope we’ll soon see a more widespread acknowledgment in this quarter of the effects of cars on more than just personal finances, and deeper exploration of how we can make that choice a more realistic one for the millions of Americans who may not be free to either give up their car or move away from car dependent areas.
Thanks for reading.
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Another fact that I found kind of telling is that people are willing to spend around $7000.00 per year on their car whereas health insurance is considered “too expensive” by many!
Cash guzzler. That is fantastic.
If you’re serious about cycling, there is a financial barrier to entry in perhaps the $500 range. That’s for a bike shop bike with fenders, lights, and a cargo rack along with some basic weather gear. For someone whose money is tight, that might indeed seem inconceivable. Rather than ultimately spending even more money (and frustration!) on a succession of department store bikes I would suggest waiting until that auto insurance premium comes due and then using that money to make the switch. Even at that, going car free (or in my case, “car minimal” as my wife still needs one for her work) needs to be viewed as an investment as the first couple of months of what used to be gas money may still be going for accessories and upgrades.
Having taken our family down to a single car, I’m not looking back. And the benefits are much more than financial.
What a nice surprise to see this story in the Wall Street Journal. Speaking as someone who never could have afforded my inner SE Portland home without having sold my car two years earlier and pocketed the resulting savings, I can attest to the impact of a carless bank account.
The tough part is finding a place close enough in where having your bike as your primary mode of transportation becomes pratical. (That, and not having kids probably helps). Hopefully our current trend of building livable neighborhoods will continue, and more people will have this possibility.
I have been car minimal in Klamath Falls for over 3 years ALL year long. I think i drove only 20 times to work and that was because it was too dangerous to ride, and walk my daughter in the streets, and there were limited plowing, etc.
The common question when we live the house from daughter is “are we riding the bike or driving the car”….granted she wishes we drove the car everywhere….but the older and the more temperant the conditions, the more she understands my commitment to commuting by bike.
I agree with the commitment of financial investment on cycling supplies. A good set of studded tires for the winter cost the same for two studded tires for my CAR!
However, i save a ton on gas, insurance, sometimes time, etc.
The irony i am faced is that i drive to the majority of the miles in my car to drive to races in S.Oregon, Eugene, and Portland, and N.Cal!!! Otherwise, i would have only about 2000 miles on my 2year car.
Just heard it on NPR: Guy who ate in all existing 3-star restaurants said that he financed his hobby partly through not having a car ; )
mabsf- Your insensitive comment is such an affront to the thousands upon thousands of Americans who can no longer afford health insurance. Try getting a pre-exisitng condition of any kind, and you’re done. We’re talking thousands of dollars a month, if you can find any coverage what so ever. You should go find out how much medication for a disease like MS costs per month without prescription coverage. Add in a spouse and two children. I don’t mean to flame, but your comment is ignorant and ridiculous. If you have coverage count yourself lucky.
Went carfree 4 years ago and began using a bike for primary transportation for almost 3 of those years. My consumer debt was gone by March 2008 and I’m very pleased with my progress in getting rid of my student loans. I know I couldn’t have done all that and own a car.
Whyat:
I don’t know your situation, but you’re missing the point of mabsf’s post by a mile. The point — as I read it — is that there are people who feel that the driving is more essential than good health care. He/she does not share that opinion, but merely comments on it as a case of misplaced priorities. Of course, if you’re looking to be insulted or offended, I can’t stop you.
buglas (#3) – great idea, but in many states, the insurance premium still needs to be paid, even if you’re not driving the car.
Whyat (#7) – how is the comment insensitive? It’s completely true, many people who wouldn’t blink at spending $7,000 a year on a car can’t imagine spending $3,600 a year on health insurance – is it insensitive to think that their priorities might be misplaced? You’re certainly correct that those with pre-existing conditions can’t get insurance at those rates, but I don’t think mabsf was referring to them.
If mabsf’s comment had been worded “some people” instead of “people”, would you still consider it insensitive?
Peejay- mabsf’s post as I read it was: “people are willing to spend around $7000.00 per year on their car whereas health insurance is considered “too expensive” by many!”. If you have a family, live a significant distance from work, don’t live in a commuter friendly city like PDX, I don’t see owning a car as ‘willing’ but ‘needing’. I read mabsf’s comment as I read it, and I still think it’s totally insensitive. There are families struggling to pay any bills right now, let alone their health care bills, and selling their car isn’t going to fix their financial issues in many cases. mabsf’s deduction between spending money on a car or not having health care has no basis in reality. It’s an assumption with no statistical merit whatsoever. Maybe I’m misreading what mabsf said, but as someone with many sick friends with no health care, I assure you 100% that selling their car is not going to fix the issue. mabsf did not distinguish between ‘irresponsible people’ and ‘people’. I’m not trying to upset people, but I was offended by mabsf’s post as it is written. Re-reading it has not changed my initial interpretation.
Matt (#10), you are absolutely correct. My suggestion would also be useless to Lillypad (#5) and others who need to maintain a car for the occasional necessity. It would be helpful, however, to someone who is ready to make the wholehearted jump from a car to a bicycle. (It occurred to me after posting that if you’re doing that, you might as well sell the bloody car and raise even more money. That just reveals the mindset of someone who was driving a beater with $0 resale value that, but for the good folks at junkmycar.com, was looking like an additional expense just to haul out of the driveway.)
For people to leave their cars behind, they need to see it as a real possibility for someone to go to work and appointments, do their shopping and errands, day or night in all sorts of weather by walking or bike or mass transit or whatever. Most of us reading here already see that possiblilty. Then you will find a fair number of people who get stuck looking at reasons why it might not work for them. Since the article is couched in financial terms, the financial barrier to entry will likely be among the first objections raised. I know, because I was stuck there myself. It took the generosity of my adult children buying me a nice Trek last Father’s Day to get me past that one (only one weather based day since then when I didn’t bicycle commute).
To varying degrees, we’re all ambassadors for cycling. I just wanted to throw out an idea so once our friends and neighbors have seen the possibility they can begin to see practical ways to make it work in their own lives. I look forward to other ideas and suggestions as well.
It would certainly make your life less expensive if you got rid of your car in NYC. I can’t even imagine what it costs to rent a space in a garage, and insure a car there.
and people like ’em. The time saved alone from driving vs. biking can easily make up the yearly ownership cost (which, for most people, is less than 7.6k). And there are many other reasons that cars are very cost-effective. Gasoline is only about 20-25 percent of the average yearly cost of a car, according to AAA.
How much is one additional year of life worth? I would venture that a life with regular bicycle use could be conservatively expected to better one without by at least one year…and more likely to age more gracefully.
It would be interesting to quantify and add the costs of health care and lifespan opportunity cost to the ~$7,000/yr cost of car ownership estimate.
The opportunity for good health outweighs convenience and practicality. As long as I am physically able to ride a bike, I will. For this, I am thankful and fortunate.
I always consider that figure of 7.6k specific to those with a car payment or they trade into another car every 5 years or so.
I cannot say I have ever exceeded $3000, and that was when I had some major repairs, drove far more, and might have had a some odd ball amount of parking tickets (an exception to the rule, as it is usually WAY less).
That is the benefit of maintaining a 1987 car for over 15 years that I purchased for 2 grand in 1992, and another 1992 car I purchased for 5 grand in 2000.
Now I find myself not even exceeding 2500 miles a year between BOTH of them. They sit quite a bit.
The last 3 years I have bike commuting, taking the bus, and the very last means of getting around has been driving…”maybe” 1 day every week, sometimes less.
It took a LONG time to find insurance that is representative of how much risk a person is driving 2-3k a year. I used to only get a $60 discount for minimal driving over someone who is drives 10k a year (thought that was robbery) through State Farm. Next month I switch to Progressive and will spend 1/4 of what I have with State Farm AND have more coverage too boot!
One issue people bring up to me is that transit is expensive. When gas prices are artificially lower many I speak with cannot fathom spending $2.30 on Trimet when they already own a car and it will cost them the same in gas for similar trips.
They figure “I already own the car, need it at times, already pay insurance and other costs relating to car ownership…so why take the bus sometimes?”
Biking works for me, but many others just simply live in less than ideal locations.
“One issue people bring up to me is that transit is expensive. When gas prices are artificially lower many I speak with cannot fathom spending $2.30 on Trimet when they already own a car and it will cost them the same in gas for similar trips.” djkenny
I’m kind of in that situation. Tri-met could could count on more fare income if they’d figure out a way to adjust for this. Even at $4.00+/gal gas, driving a motor vehicle in to Portland and back from Beaverton, where I live, was cheaper than the fare for Max. More comfortable too. I’d be happy to give Tri-Met a couple bucks to get in and out of town from where I’m located, but under the circumstances, $4.60 isn’t a very compelling price.
A lot more people than do now, would likely be glad to give up their motor vehicles if there were non-motorized vehicle roadways specifically designed to enable them to attend their day to day responsibilities. The hill between Portland and Beav, and difficulties associated with using mass transit to ascend it probably discourage a lot of people too.
It is interesting that the WSJ explores the potential saving opportunity offered by passing up possession and use of a personal motor vehicle. Getting that readership to beg off dependence on cars and could make some difference.
The problem in comparing the costs of auto ownership with the costs of transit use is that many, if not most, of the costs of auto ownership are externalized. That is, they are not paid directly by the owner, but pushed off onto future generations or shared with others. As a result, tey are not calculated as part of the cost, even though they are. For example, take the need for a large military to secure the flow of sufficient amounts of oil from overseas to the US. This cost is shared primarily by current and future taxpayers. People don’t consider it part of the cost of owning an auto, but really it is. When you look at how much money the US spends on defense, you see that the cost of auto ownership is actually substantially larger than the “direct” cost estimated by the WSJ. Still, given that one has to pay taxes no matter what, it’s up to our political leaders to create a policy that rewards wise transit choices, i.e., choices that lower transportation costs for all of us.
Wyatt #7,
I understand your anger as you’ve experienced the pain of no health insurance directly. The point I think mabsf is trying to make (and I’m chiming in because I agree) is that when confronted with too many expenses, those expenses are prioritized. Personally, when I prioritize, I’ll separate expenses into non-negotiable expenses like mortgage and utilities and variable controllable expenses like dinner out and new bike accessories into the optional expense column.
My guess is that some people, when forced to choose between auto costs and insurance will roll the dice by skipping insurance because they consider auto expenses as solidly in the non-negotiable expenses category.
For some people… probably most people, in their current situation, auto costs ARE non-negotiable. Where they live and work and run errands can only be reasonably done via car. I’m well aware of that. It has taken me over a decade plus a fair bit of good luck to position myself where I could eliminate the car with almost no impact.
For those that must drive, mabsf’s comment would come across as harsh because some are forced to roll the dice OR pay both and float debt or cut costs somewhere else in such things like food or heat.
But there are others that can go without a car but choose to keep it. At its core the article is about questioning that decision. mabsf adds to this by suggesting that insurance goes into the non-negotiable expense while the car goes into the other column.
This topic is amazingly complex when one looks into the causes. It touches on social norms, urban design, car culture, psychology, US health care policy, and more.
I’m pleased to see the WSJ article has the nerve to question our car-centric culture with a pragmatic, “you could save money” story.
Regarding comment #7,
Oregon residents who are denied health insurance coverage because of medical conditions (or age) are guaranteed acceptance into the Oregon Medical Insurance Pool. It is administered through Regence Blue Cross Blue Shield of Oregon and has several different plans to choose from (with varying deductibles affecting premium rates).
It’s not cheap but it’s not “thousands of dollars a month.” In talking to uninsured people over the past few years I am surprised how many do not know of this medical insurance option.
It’s very good coverage and brings prescription costs down to a manageable amount ($10 to $20).
The existence of this insurance pool is one of the things that makes me proud of Oregon.
http://www.omip.state.or.us/DCBS/OMIP/benefit_plan.shtml#2009_Benefit_plan_information
Dear Whyat,
What I wanted to express in the post above is that “we” (generalized) are conditioned to accept the ownership of a car as a given, taking up (as an example) $7000.00 of our yearly disposable income. That can shift priorities to the point where some people forgo health insurance in order to finance a car.
As an example, think of the car as a budget item that could be eliminated. So
$7000.00 per year is $583.00 dollars per month.
Just think what somebody can do with that amount of money:
Somebody could pay $583.00 additional rent for a space closer to their job where they don’t need a car
Somebody could accept a pay cut of $583.00 for a job closer to home, again making being car free possible
Somebody could get a bike, monthly transport pass and a zip car membership to cover different transportation needs.
On the other side:
Is the lower rent in the suburbs really still that low, if you have to add $583.00 to it because one needs a car to commute?
I don’t dispute that some people need their cars, but be aware of the impact it has on all aspects of one’s life.
I think a lot of people do understand that externalized costs outside of the immediate expense to them represented by ownership and operation of motor vehicles does exist. Those externalized costs though, are a result of or part of the ‘grand scheme’ of competition between nations, that on an immediate level, most people struggle to understand, and feel a very limited ability to affect the course of.
Freeways, streets and roads that invite the use of single occupancy vehicles as a basic transportation mode are expensive to build and maintain. As a GNP building adaptation developed in the early part of the 20th century and still, for the most part, thriving today, it’s proving to be very difficult to change away from it to something more energy efficient and practical for the kind of society we have in this age.
Change in small degrees to the ‘grand scheme’ seems to be happening though. At least, in terms of how ordinary citizens are able to live their day to day lives as part of it. If a WSJ writer is seen to be making a serious suggestion to that mag’s readers to the effect that giving up one of the nation’s most significant products, the personal car, is a beneficial decision, the door is opened wider to, other, probably better ways to get around in taking care of day to day responsibilities.
I’d like to see some of the people from the WSJ readership really take the plunge and try this writer’s idea. Just let them see the present transportation infrastructure from outside their car. They might then be far more inclined to support infrastructure that doesn’t obligate a person to use a personal car to get around where its practical to use other means to do that. If they realized a monetary savings to boot, maybe they’d feel more comfortable about putting some of it into a more fair health hcare system.
More views to the subject: http://blog.oregonlive.com/commuting/2009/01/will_the_new_recession_lead_us.html#more
wsbob
I actually take the bus and or max to work in Beaverton from downtown Portland. I bike to downtown from SE Woodstock in about 30 minutes and take the bus to Beaverton within 12 minutes. If I drove it would be only 25 minutes, but that is no biggy. It is not too bad. Cost wise…ehh. I do it for environment and the bike ride more than anything else. Probably gas is the same price. I never need to sit in traffic taking the bus or max to downtown…that is worth skipping driving in itself!
I timed my return home as equal whether I drove and dealt with traffic or I took transit and my bike.
I went car-free a year ago. I didn’t use my car that much anyway, except on the weekends, as I bike to work everyday. I opened up a savings account, and every month I put in the amount of money that I would have spent on gas and car insurance. I’ve got a couple thousand saved up right now so far. 🙂 My family and friends thought I was crazy when I gave up my car….but then gas prices went soaring, and they said, “Boy, you picked a good time to go car-free!”. 🙂 Timing is everything! 🙂 Anyway, Washington, DC is a decent city to get around by bike, as it has many bike paths, good subway system, buses, etc. So that helps a lot. I also have a membership to Zip Car, whenever I occasionally need to have a car. So living car-free works good for me. I think a lot of people could go car-lite, car-free, or reduce the cars in their household by 1, and could get along good….if they were open to the idea.