What’s car ownership really costing you?

Photo: iStockphoto

What’s the best financial decision you’ve ever made? I’ve been thinking about mine. Actually —no surprise— it was my wife’s.

Late summer, 1999. My wife, Laurie, was fresh out of grad school and we were both looking for work. We had gone to see a man about a car. It was a used Mazda 323, blue, manual transmission. It was fun to drive, and it reminded me of my first car, a 1980 Mazda GLC, which I bought for $950 in high school. We drove it to a garage and had it checked out. Good as new, said the mechanic. And the price, $5000, was quite reasonable. Let’s buy it, I said.

“We don’t have $5000,” said Laurie.

I was annoyed—I’d already visualized myself driving around town in a shiny, blue Mazda. But Laurie suggested we wait and buy a car after we had some actual income. Crazy, I know.

That was almost twelve years ago. We haven’t gotten around to buying that car yet, and the price of gas and a new report from AAA got me wondering how much money we’ve saved.

AAA to the rescue

To answer my question, I turned to the latest edition of AAA’s Your Driving Costs, which came out last week. Since 1950, AAA has calculated the five-year total cost of ownership for various types of new cars. Here are a couple of 2011 highlights to give you a sense of the numbers:

Medium sedan (e.g., Toyota Camry or Chevy Impala) driven 15,000 miles/year: 57.3 cents/mile, or $716/month.

4WD SUV (e.g., Jeep Grand Cherokee or Nissan Pathfinder) driven 20,000 miles/year:63 cents/mile or $1050/month.

These are total cost of ownership or TCO calculations, which take into account depreciation, financing, insurance, gas, maintenance, and license fees. And the report was put together before the most recent spike in gas prices.

Of course, I’m a cheapskate and have never bought a new car. The last car we bought was a used Nissan Sentra which we named Don Carlos (and which promptly needed a $1000 engine rebuild). To calculate how much we’d save by buying one of these instead of a new sedan, I turned to Edmunds.com. I specified a base-model 2005 Sentra. Over five years, it would cost us about $24,632, or $411/month.

Let’s be conservative and call it $400. If we’d owned a car, we would have spent less on bus fare but more on parking, so let’s call that a wash. How would our lives have been different if we’d been driving around in a metallic blue Mazda all these years instead of a Metro bus?

Three ways of looking at the motorized money sink

I pulled out my calculator and came up with three answers to the question: “What happened to that car money?”

1. It went into our retirement savings. We have about as much in liquid retirement savings as we would have spent on owning a used car. Why don’t people have enough retirement savings? It all went into their cars.

2. It took us around the world. Since deciding not to buy the Mazda, we’ve visited England, France, Thailand, Laos, Canada, and Japan. The total cost of these vacations was much less than we would have spent on a car. Having an extra $400/month expense would have put most of these trips out of reach.

3. It made us wealthy. Now I’m going to cheat, but only slightly.

We know plenty of couples who own two cars. Owning two cars is slightly less expensive, on a per-car basis, than owning one, mainly because insuring the second car is cheaper. But the overall cost is way higher. Let’s call it $750 (not much more than a single new Chevy Impala, after all).

We are fortunate enough to make slightly more than the median income for a Seattle family. Subtracting $750/month, however, would knock us down below the median. It would drop our standard of living from middle class to lower middle class. But at least we’d be able to sing along with the car radio, right?

You lucky bastard

Sure, I’m a lucky guy. My wife rides her bike or takes the bus to work; I walk, and our daughter walks to school. You’re already objecting, I’m sure, that your situation makes it impossible to get rid of your car, and I’m an urban elitist who just doesn’t get it.

For some people, some family situations, some neighborhoods and jobs, no doubt a car is necessary. But there are plenty of people who believe they need a car but would be just as happy—and much wealthier—if they didn’t have one.

Our home (on Capitol Hill, Seattle) gets a Walk Score of 97: “Walker’s Paradise.” Only 9 percent of Seattle residents have a higher rating. Yet we know a few of those people and they still own a couple of cars. Something’s wrong with this picture.

Not long after we turned down the blue Mazda, Laurie spent two years working as a substitute teacher. In the evening—or sometimes at 5am—she’d get a call telling her which of Seattle’s dozens of public schools she’d be reporting to. It would have been an obvious time to break down and buy a car, and we’d probably never have gotten rid of it. Instead, she drew up a master list of how to get to every Seattle school on the bus. Yes, it was a pain in the ass. You know what else is a pain in the ass? Taking a $400/month pay cut so you can get to work 30 minutes faster.

A couple of years after that, we were expecting a baby. “You’re going to have to get a car now,” everyone told us. We didn’t. When Laurie went into labor, we took the bus to the hospital. (Admittedly, my parents gave us a ride home.) That baby is seven now, and we’ve never even considered adding a four-wheeled member of the family.

In other words, we’re your typical one-child family, and there are plenty of families just like us who think they just have to own a car or their kid will never go on a playdate or learn to change a flat tire, or something.

Save for retirement. Become debt-free. Buy a house. For many people, becoming car-free belongs on this list of financial goals. It means getting rid of a ruinous ongoing cost and having more money to spend on things that don’t break down and don’t need to be fueled up at $4/gallon. (If driving a nice car is what makes you happy, that’s fine, as long as you understand the total cost.)

Not owning a car doesn’t mean you can never drive one. Aside from car rental (Enterprise has the most locations and often lets you drop the car at a different office for a small fee), Zipcar, which had a gangbusters IPO last week, has cars in over fifty cities. Car sharing seems expensive on a per-hour basis, but all of those different costs from the AAA report are included in the price.

Hmm. Maybe I was wrong. My best financial decision wasn’t saying no to the Mazda. It was marrying the woman who told me not to buy the Mazda.

Matthew Amster-Burton is a personal finance columnist at Mint.com. Find him on Twitter @Mint_Mamster.