Guest Post by Keane Gruending
Freedom 59: How carsharing could be one of the best financial decisions of your life
What’s the secret to a low-carbon, high-savings lifestyle?
If you said, “Not taking up smoking,” you’d be correct, but there’s another answer on the table, and it involves personal mobility.
If instead you said, “Getting onboard with a multi-modal lifestyle, including a mix of walking, cycling, transit, and carsharing, instead of relying on a personal automobile to get around”, then you’d have cracked the code towards economical and more environmentally-conscious transport.
But just how much can you save by making a big switch on your transportation style? About a million dollars, if you get in early.
Personal car ownership is expensive, everyone knows that. Gas, parking, loans and leases, new tires—it all adds up! But the actual average cost of vehicle ownership is often higher than many people realize. Depreciation costs (the difference between the car’s purchase and current sale price) can be the largest single expense in the total cost of vehicle ownership.
It’s an “invisible” but very real expense that must be considered.
Let’s take the Canadian Automobile Association’s numbers, which are dialed right in on the costs of driving. The average costs for owning and driving a mid-size car (like a humble Nissan Altima for example) over a year are as follows: gas—$2,107; insurance—$1,529; licence and registration—$42; depreciation and maintenance—$6,729.
Add it up and that’s over $10,000 per year in driving costs. Not to mention, about 1,700 kg in greenhouse gas emissions for an average amount of driving.
Don’t worry because there’s a better way to move. It’s a personal mobility and life plan that I’m going to call Freedom 59™, and it could be worth a million dollars.
To start with take a pass on the right of passage of buying your very first car after graduating college. Instead, pick up a carsharing membership, so you still have access to a car (or trucks or vans for that matter) when you need to. But you’ll probably find you won’t need to use it as much as you first thought.
You’re going to be getting around by walking (free), cycling ($20/month in maintenance, etc.), and transit (up to $91/month) when you need it. Throw in $40/month in carsharing expenses to cover three short trips, such as picking up groceries.
Under this multi-modal plan, it’s going to cost you a total of about $151/month or $1,812/year to get around. Not bad.
Remember what the annual costs of driving for that Nissan Altima were? $10,365/year.
If you choose the walking, cycling, transit, and carsharing plan, you’re going to be saving $8,553 each year over owning and driving your own car.
Stick those savings into a balanced stock portfolio on a monthly basis and in just 37 years you’ll have over a million bucks. (Given an annual interest rate of 5.4%, which is the historical after-inflation return of the S&P 500.)
So there you have it, Freedom 59—a million dollars by age 59, provided you begin the plan at age 22.
Millionaires don’t just drive Jaguars and Aston-Martins, they drive shared cars too.
Starting late, no problem
Maybe you’re a bit older than your early twenties and didn’t get this advice in time. That’s OK – you can start the plan anytime. Sell your car. It’s never too late. Over a 15-year period, you could be in store for $197,964 in savings and investment returns over owning that new Altima.
What if you have an older car – what’s the business case for ditching it? While it’s true that newer vehicles depreciate much more rapidly, don’t forget the maintenance costs for aged vehicles climb drastically over time. You can run the depreciation numbers for your ride at the Canadian Black Book to get the best information on your costs of ownership.
The long and short of it is that you can stand to save big over personal car ownership if you choose the multi-modal lifestyle, no matter your age.
Even if you don’t invest the proceeds from the switch, I’m sure an extra $8,553 per year could come in handy, don’t you think? What would you do with an extra eight grand per year?
Written by Keane Gruending, Modo Ambassador