How Much is Your Car Really Costing You?

A simple question with a shocking answer! How much is your car really costing you?

Between auto loans, maintenance expenses, and roller coaster gas prices, owning a car can become an expensive burden!

I do not own a car (never have).

However, I live in New York City where we have a large robust public transportation system. In addition, I just walk pretty much everywhere anyway.

The option of being car-free may not feasible for everyone.  For example, if you have children, you may need your car to travel from place to place.

If you live in a rural area, or a place with poor public transportation, you may also need to have a vehicle.

Only you can decide based on your circumstance if getting a car is work the costs.

At the same time, there are plenty of people with cars that do have the option to eliminate the vehicle entirely.

Yet, for a variety of reasons they will not.

For some, owning a vehicle is a status symbol. Something to impress others with, no matter what the cost.

Some are just lazy and do not like to walk. I know one guy who called an Uber to drive him to his car that was parked 3 minutes away.

But there is also a huge hidden cost to having a car that hardly anyone realizes.

How Much Does a Car Cost You?

According to AAA, the average cost of car ownership as of August 2022 is $10,728 per year (or $894 per month).

So, you will spend on average almost $11,000 on car ownership for just one year.

Ignoring inflation, let us say you continued to own a vehicle for the next 10 years. How much would that cost in total?

After 10 years your car would have cost you $107,280 (more when you factor in inflation).

At 20 years, the cost becomes $214,560 and after 30 years, the total cost becomes $321,840.

Depending on your lifestyle, the cost could be much lower or much higher.

It will all cost much more when inflation is factored in, but basically you spent a small fortune on maintaining car ownership.

But worst of all, there is a hidden cost the car ownership that most people did not see.

And it is the most important and consequential cost of all.

The Hidden Cost of Owning a Car

What if you invested that money instead?

Suppose you opted not to own a car, even if you could afford it, and instead invested the money into assets such as stocks?

The stock market has returned an average of roughly 10% over the last century. I will use that mark for the following examples.

Imagine if, even for one year, you put the $10,728 (or $894 per month) into the S&P 500 and then forgot about it for the next 30 years.

After 30 years, that one-time investment would have grown to $187,197.19 without any additional contribution!

What if you invested $10,728 each year for the next 20 years?

In 20 years, that would have grown to $686,618.81 in wealth.

Better year, what if you invested $10,728 each year for the next 30 years?

After 30 years, that would have grown to an enormous $1,951,889.06 in wealth.

Did your car just cost you a potential $2 million in wealth?

Yes, it did. In fact, your potential wealth could be much more if you received dividends and reinvested them for 30 years.

Sure, there is no 100% guarantee on anything, but considering most new cars will lose up to 60% of their value in 5 years, on a balance of probability, the stock market is a better alternative to invest your money.

Conclusion

So, how much is your car really costing you?

Potentially millions of dollars that you could have otherwise used to fund retirement, work less, or enjoy doing other things.

Again, many need a car to get around.

However, if there is one lesson to take from all this it is that money invested has HUGE potential over time.

This potential disappears once the money is spent. Use that knowledge to your advantage.

So, what do you thing of this post? Let me know in the comments below!