Cars are not always bad for finance| Updated: |
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A common opinion in the personal finance blogosphere is that cars are bad! If you read many blogs, you will have seen that opinion, sometimes vehemently. Especially, buying a new car seems to be a terrible idea for most people. Today, I will argue that this is not as bad as people want to make you believe. I own a car, and I bought it new. And I will buy the next one new as well! I have already said that I am primarily using my car to go around.
I will compare using my car compared to using public transportation. Given where I live, it would be impossible to go to work by bike. But comparing a car against biking or other alternatives can be an interesting comparison if you can use other means of transportation.
There are several important factors when comparing two means of transportation. Money is important if you want to be frugal, but time is also important. And convenience can be essential to some people. Finally, we should not forget about the environment either. As to the weight of each of these factors, it would be highly subjective.
In this article, we will compare cars and public transportation for my situation. You need to make the same comparison to decide based on your situation!
Let’s start with the money part of things. The equivalent of my car for public transportation would be the GA Travel Card. This card allows you to use all public transportation in Switzerland. The card costs 3860 CHF per person.
My car cost 12’000 CHF new, which I paid cash. I have been driving it for five years, and I hope to be driving it for five more years. My car makes up for most of what I spend to work. That accounts for 1200 CHF per year for the car payment. On average, I spend 100 CHF per month on fuel. This is another 1200 CHF per year. I also have to pay insurance and taxes for my car, about 1000 CHF per year. Finally, on average, I have had to pay about 500 CHF per year for the repair and maintenance of my car.
Moreover, per year, I generally pay around 200 CHF for parking. You may think I have forgotten home and work parking. However, it is free at my work and included in my rent and cannot be removed. Overall, this is about 4100 CHF per year for my car. This is slightly more expensive than a public transportation card.
However, this is not over yet! Unfortunately, many people stop the comparison here. But they forget something fundamental! A car can hold several persons. I am driving Mrs. The Poor Swiss with my car around as well! This is not to say that the price of public transportation would be two travel cards
Indeed, for now, Mrs. The Poor Swiss does not work and does not go out a lot. For a year, I would think it would cost us 1000 CHF more for her to go around. This would push public transportation to 4860 CHF. And this is already accounted for in my car fees.
So overall, my car cost us about 4100 CHF per year whereas public transportation would cost us about 4860 CHF per year! And the winner is the car!
The second thing that is very important to consider is time. Time is incredibly valuable because we have such a short supply of it. Nobody wants to waste time in a vehicle, whether in a car or public transportation. Walking is another story since it will make you exercise and that is great! But that is a story for another time.
Depending on where you live and work, the time spent in public transportation and your car will significantly vary. In my case, I spend about 25 minutes on a single trip to my work in my car. Since I do it twice a day, I spend 50 minutes a day in my car to work. If I were to choose public transportation, I would need to take two buses. The best time with only three minutes of layover would take me 38 minutes. That 76 minutes per day.
So overall, driving my car takes me 50 minutes, against 76 minutes a day, at best, for public transportation. That is 50% more! And the winner is the car!
Usage of your time
There is another thing that we can consider when comparing the means of transportation. It is what you can do while you are commuting.
In a car, you can do nothing. The only thing you can do is listen to music or the radio. Some people also listen to an audiobook. I hate the radio. There is nothing even remotely interesting on the Swiss radio, and I really cannot bear popular music. So I only listen to my music on CDs and rarely to the news. I want to try to listen to audiobooks in the future.
You can do many more things on the bus (or the train). What I generally do on a bus is read a book. You can also play your phone and listen to music. You can even work if you want. If you have an easy sleep, you could even nap. You can do all you can do in a car and much more as well. You do not have to focus on the road.
Overall, you can do many more things with your time in public transportation. So the winner is the bus.
The impact on the environment is another thing you may want to consider when you compare taking public transportation or your car. I do not have access to the train, so I will compare taking my car or the bus.
It is very difficult to compare the impact on the environment between both. Indeed, it will highly depend on the number of people on the bus. For instance, an empty bus is much worse than a car with a single passenger. In my car, it is pretty easy. I am almost always alone in my car. For an average bus, you need around ten people on the bus to make it more efficient than a car with a single passenger.
At the time of my commute, buses are pretty full, so they are very efficient. I would say that there are about 30 to 40 people on the buses I would take. This means that it would be about 3 to 4 times more efficient to take the bus. However, the path taken by the bus is about 30% longer than the path I take in my car. So we have to reduce the efficiency of the bus by about 30%.
Overall, taking the bus would be two or three times more environment-friendly than taking my car. And the winner is the bus!
Another thing that is also worth comparing is convenience. This will highly depend on where you live and where you are going in your car or public transportation.
A car is extremely convenient in that you can leave whenever you want. There is no delay waiting for a starting time. However, you need to maintain your car. For instance, you need to make sure you have enough gas for your trip. You also need to make sure your car is in working order by making regular checkups with your car mechanic. And your vehicle is more likely to be out of order than public transportation.
On the other hand, public transportation depends on its availability. If you live in a densely populated area, public transportation will likely be available often. And you will be able to find several means of public transportation close to you. On the other hand, if you live, like me, in a small village, there will not be a lot of choices for public transportation. In my village, less than ten buses are coming each day. That means that you have to wait sometimes more than one hour to get a bus to go from there or arrive here.
Due to where I live, a car is much more convenient than public transportation. Even though it has more upkeep time, its high availability makes it much more convenient overall. For me, the winner is the car.
One other thing that we could compare is the comfort of each option. Of course, this will highly depend on your car, and the available public transportation means you can take. Public buses are not very comfortable. Even though my car is not a luxury car, it is still more comfortable than a bus. And it has the obvious advantage of not having many people inside. This is a huge comfort. I do not know about you, but I do not enjoy crowds.
Overall, driving a car is much more comfortable than riding a bus. Unless you take trains in the first class, public transportation is not comfortable. So, the winner is the car!
A few rules for cars
Even though cars are not necessarily bad for your finances, there are still a few things you should not do with cars. And these things can lead to evil in your finances!
First, there is no point in having a car you do not drive. And it is even worse if you have several cars you do not drive. A car that is very rarely driven should not have been bought in the first place. Or it should be sold once there is no more need for it.
A car in your parking that you do not drive is simply losing value. A lot of families have too many cars. There is no point in having more vehicles than drivers. And there is no point in having cars that are not used enough. If you do not drive it much, you should consider a service like Mobility. Indeed, Mobility can be cheaper if you drive little.
One of the biggest mistakes people make is having a very expensive car. If you spend many hours commuting daily, I can understand the need for some comfort. However, there is no point in driving a luxury car just for the sake of it. And there is no point in having an oversized car.
Do you need a car that can go from 0 to 100km/h in 10 seconds if you always drive in traffic? No! Not only are these cars more expensive to purchase, but they are also using more fuel per kilometer than cheaper cars. And even though they are generally very sturdy, their maintenance is more expensive. You should only purchase a vehicle that meets your needs and your financial goals. For most people, a little and cheap is more than enough.
The worst you can do with a car is to buy a new one each year. The first year is the year when you will lose most of the value of the car. They depreciate really fast. If you change your car every year, you are losing 40% of its value each time before you can sell it. I believe you should buy a car for a long time. If you are afraid of depreciation, you can, of course, buy a used car. But I have had such a bad car experience with my first used car that I do not want to try it again.
Finally, another reason many people consider cars the evil of personal finance is that people buy cars they cannot afford with loans. There are several ways to finance a car. You should choose the best way for each car purchase, and you will save money. But most importantly, you should only buy a car you can afford.
If you only buy a small car that you will use daily and pay in cash, I believe that there is no issue with having a car!
In my situation, cars win on almost all fronts except for the environment and the usage of your time. We save some money compared to public transportation. I also save a lot of time every day. And it is much more convenient since you can drive to work anytime, not only at fixed times. The first downside is that most of the time inside your car is mostly wasted. And finally, the car is the loser, given the environment.
Do not take me wrong. I am not advocating for everyone to have a car, either! I am just saying that there are many valid options. And driving a vehicle is often a better option than people would like to make you believe. If you prefer living in a small village, a car will likely be a better option than public transportation. It may even cost you less than public transportation, at least in Switzerland.
On the other hand, if you are living in the city, public transportation is probably better. Cars are not bad. They are just another choice. As for the environment, if you drive a small car and try to have always several people in it, the impact is not as bad as most people say!
Of course, my comparison only holds for my case. I do not drive much, and I do not like to go out a lot. Moreover, public transportation in Switzerland is incredibly expensive. The most important thing to remember is that cars are not bad for your budget. You need to compare yourself to find out which would suit your situation the best!
To learn about cars, you should start by learning about car insurance in Switzerland.
Enough about me, what do you prefer? Cars or public transportation?
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12 thoughts on “Cars are not always bad for finance”
I purchased a dealer vehicle (driven by one of the employees) with 5000 kms on the clock and chose to lease it even though I could pay cash.
Dealer vehicle meant almost 20% discount compared to new. It had one dent which the dealer compensated with a free bike rack. Full warranty.
Leasing for three reasons: 1st, it was actually cheaper, even when interest was included. Not sure how this works, but there was definitely some incentive for the dealer to sell me the leasing. 2nd, the insurance on a leased vehicle is much better than any I’d get privately. 3rd, opportunity cost: I could leave the money working on an investment account, not store it immediately in a piece of metal.
I’d recommend to ask about leasing and do the math, you might be surprised.
thanks for sharing
1) That’s generally correct, but you have to keep in mind that the car is not yours. So at the end of the leasing, if you want to keep the car, you need to pay an extra value.
2) It’s possible, but it also forces you to get full casco insurance. I usually only take it for the first 2-3 years of my car and then decrease it quickly to make it cheaper.
3) If you take everything into account, it’s indeed possible to make a good deal with leasing, but it’s harder than most people think.
My main problem with leasing is that people use leasing to buy cars they can’t afford without leasing. This is just bad. Leasing when you can afford the car is another story indeed.
Hello and thank you for this great post ! I like the idea to not only compare the price of the car versus the other transport mode. I totally agree with you when you say that time is limited and it makes no sense to take the bus or train to go to work if it takes 60 minutes per day instead of 30 by cars. When my opinion is not the same is about the sense to buy NEW car. The depreciation the first year is between 30 and 40% like you said so I think you can find really good used cars that have 1 year and for example 25 or 30K kilometers. I car that drived a lot is great and today, you can find good car makers like Toyota that offer guarantee of 10 years or up to 160K kilometers ! thank for your post !
It’s true that you can find very good second-hand cars that have not been driven much. And that way, you save on the first year of depreciation. The issue with that is that it’s very difficult to find since the offer is low and the demand is great. But yeah, if you can find something like this, it’s a great opportunity!
That’s a good point!
Thanks for your article. Concerning the costs of the car anualy, depreciation would have to be accounted for. That means that if your car goes from 12000 value to 10000 in one year, you lost 2000 worth of value. One would like to put 2000 aside everyyear so that he has 12000 available when it will be time to buy a new one…
Second thing, there are a lot of interesting programs on swiss radio in the french part (CQFD, on en parle, forum) where you can learn a lot and get inteduced to subjects you would not otherwise hear about
I already account for the entire value of the car for 10 years. I do not think it makes sense to add depreciation to that. When I buy my car, I do not count it as part of my net worth. I count it as a single expense of 12K.
Since I hope for it to last for 10 years, this is about 1200 CHF per month.
Maybe for the Swiss radio, it depends on when you drive. Generally, in the morning I can listen for about 10 minutes for the news (from 7 to 7:10) and then it starts to go all around without any point. And when I come back (between 5 and 6pm), there is absolutely nothing interesting. I have never found anything that would teach me anything.
As for forum, I cannot bear that. That’s two people just wanting to get their points across without listening to each other and boring hosts that keep interrupting them.
Now, I always listen to podcast in the car. I learn a lot and it is much distracting.
But I am glad some people have a better experience than me! At least one person for which we do not pay Serafe in vain.
Thanks for stopping
Freeing from the chains of automobile and has the biggest boost in my journey to FI
No capital expenditures listed. The tires will go. Brakes. Battery. Transmission. Someone will bump into it. Just stats.
Time – you have to store it, worry about it. Find parking. Find a gas station. Get an inspection sticker. Clean it. When it breaks. You deal with it. When the bus breaks down. The transit company deals with it.
Safety. The automobile is the deadliest mode of travel (and basically leading of death period) among healthy individuals.
Time – cars in a suburban city like yours are too easy. People make trips and go shopping when we would not even think to do so. Its like eating cause you are bored.
Time – you can safely work, write, scroll, text, eat while on transit.
Health – Every transit ride starts and ends with a walk. Oh yeah and cars love to crash into other cars…
Social interaction – car = solitude. I know a couple here in Boston who met on the subway… and then eventually got married. Another friend of mine found a new job while networking on the train.
Cars are the anti FI.
I agree that cars are not evil of personal finance, cars are really very helpful in our life. Great article, very interesting and very informative, you have really mentioned all the detailed information that how the car may or may not affect our personal finance. I really enjoyed reading it. Thank you for your great article. Keep Posting.
Thank you so much for deconstructing this FIRE myth.
No problem wth having no car, if you live in a Mega City and typical routes can be served by bike or public transport. The exercise aspect of walking and biking is also fine.
But it is easy to have a best of both worlds approach. Bike in sunny summer weather, take the train, if they offer cheap tickets (sometimes even 1st class is possible for not so much money, if you book in advance) and walk short distances.
But there are also advantages of having your own car.
The big mistake of many people is, that they by a car which is too expensive (most bang for the buck IMO is in 2nd hand models), and they finance it. That´s the stupidity which costs them a lot of money and where I agree with the classic MMM approach of the commnity. But apart from that they should not make a religion of it. Sometimes it feels like the car division of the Scientology on Fire :)
Hi Senior Crown,
Of course, there is no problem with having no car. It’s great to be able to have no car. But I really can’t live in a city. So I have to drive my car.
As you said, the biggest money problem with cars is to buy cars that are simply too expensive. I know many people who have debt for their car. Just because they do not want to settle for a car they can afford… I do not think it is a healthy habit.
Making a religion out of having no car does not make sense I think. Just like making a religion out of having a car does not make sense either. Extremes are never good!
Thanks for stopping by!
Interesting analysis. But you might want to rerun your calculations for renting within 5km of your work and cycling/walking. I find it disappointing that in the country with the highest density rail network, so many people still own cars. But to each, his or her own!
Yes, this comparison is entirely depending on my situation. I made a choice of living in a village.
If I were living 5km away from my work and had to take only one bus to go there, I would not have a car!
I do not understand either why a lot of people in cities have cars.
Thanks for stopping by :)