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Is Keeping Your Car Worth the Cost?

Key Points
  • Becoming a one-car family could save you thousands of dollars a year, but there are trade-offs.

  • Make sure you do a thorough cost vs. convenience comparison and discuss in advance how you'll manage.

  • If you do trade in your car for the savings, figure out where that extra money could best supplement your budget.

Dear Carrie,

My husband and I each have a car. We're retired and our son keeps saying we could save a bundle by ditching one and using a ridesharing service instead. What do you think?

—A Reader
 

Dear Reader,

Your son has a point. As the world of transportation continues to change dramatically, the old ideal of the two-car family is meeting with some practical skepticism. With ridesharing services like Uber and Lyft becoming almost ubiquitous in many areas and car-sharing companies like Zipcar and Car2go becoming more available, do we all really need our own set of wheels?

As is often true, young people have been quicker to adopt new technologies than older generations, especially as they impact lifestyle options. According to a 2016 Pew Center for Research report, close to 50 percent of 18 to 49-year-olds have used a ridesharing service, while only 4 percent of Americans 65 and older have done so. I'm certainly not suggesting that everyone ditch their cars, yet the existence of these alternative services can be a starting point for evaluating just how important it is to each of you to have your own vehicle.

However, getting rid of a car isn't a quick decision. There's no doubt that being a one-car family could save you money, but you also have to balance the cost with convenience. Let's start with the cost.

Calculate how much you could save

Even if you're a good budgeter, chances are you've never calculated how much your cars cost you per year. Apart from a car payment, there's insurance, annual registration, maintenance, fuel costs and parking fees. Have you ever added it all up?

Here's a figure that may be eye opening: An August 2017 report by AAA estimates that the average annual cost of owning a new vehicle is nearly $8,500. Even if your car is paid off, the average consumer spends close to $5,000 a year just for gas, oil and other car expenses according to a 2016 report by the U.S. Bureau of Labor Statistics.  In fact, according to the Bureau of Labor Statistics, transportation is the second highest cost for individuals 65 years and older, only behind housing 

Of course, the figures above are just averages. A lot depends on where you live and the type of car you drive. So for starters, I'd suggest that you and your husband do the math. What does each car really cost you per year? Is one car more of an economic drain than the other? Then look at how many miles you put on each car annually. Does the usage warrant the cost?

Look at your transportation alternatives

The ability to get around with public transportation or ridesharing services depends on where you live. If you're in a city or close to an urban center, you probably have a lot of options even if you live in the suburbs. If you're in a more rural area, you may have to do a bit of research to discover your alternatives. So first determine what your options are. Is there convenient bus or train service in your community? Does a ridesharing service regularly operate in your area? Another interesting service is gogograndparent, which charges a concierge fee to manage your rides through Uber and Lyft.

After you discover your local options, you'll also want to compare the relative cost. Transit services often have cost estimators on their websites. Ridesharing companies also have cost estimators on their sites that let you input starting and ending points to determine the average cost of a ride. If you have a regular route you follow, you should be able to come up with a cost per trip estimate. You might find that you can get where you need to go for a lot less than your car is costing you.

Figure out how often you actually use your cars

Some couples go in very different directions in the course of an average week, others pretty much move in tandem. Especially when you're retired, you may find that you actually travel together more often than not. If you and your husband have different schedules and destinations, two cars may be warranted. But if you find that one car often stays in the garage, the savings may be well worth retiring it.

Come to an agreement with your spouse about who gets the car when

Also, let's be honest, there's an emotional side to having your own vehicle. The sense of freedom having your own car gave you at 16 doesn't necessarily change just because you're 60. If having your own car is central to your feeling of independence, that's an important consideration.

If you do decide to become a one-car family, the last thing you want is to tussle over who gets to use the car. Make sure you're each aware of any regularly scheduled trips so that there's no misunderstanding—and no missed appointments. As with any change, talk it through and agree on how you'll manage with one vehicle.

Put the extra money to good use

Going back to the national averages, getting rid of one car could save you several hundred dollars a month. So what will you do with it? Figure out where that extra money could best supplement your retirement budget. If you have the basics easily covered, maybe it goes into a travel or entertainment fund. Or maybe you decide to add to your emergency cushion. Whatever is best for you and your husband, giving up a car will seem less of a burden if you consciously use the savings to enhance some other area of your life. You might even treat your son in some way to thank him for his sage advice!
 

Have a personal finance question? Email us at askcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries,  contact Schwab.

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