February transport challenge: do you really need that car?

Where has this year gone?  Yep, one moment I was watching fireworks on New Year’s Eve while my fiance was in the hospital, the next it is February already.  And before I knew it we are well into February already.

These last few two weeks have been especially busy.  I started a new job (well, a new OLD job really as I transitioned back after a year-long secondment).  At work, I’m still grappling with IT connectivity issues and learning new names.  Plus going through the crazy admin associated with changing my surname back to my maiden name.  At home, my kids started school with my youngest (little A) starting ‘big school’. Awww, he is so cute. I’m also buying investment properties with Neil and dealing with a whole heap of admin with that.  Busy times, but exciting times.  I feel really positive about the changes that 2018 are bringing.

And then there is the transport issue.

Now that I am in a stable long-term relationship, the issue of transport is coming up. It’s not really a problem, but more a topic of conversation.  This in part because we are both rebuilding after divorce, and also because, well, we now have more cars in my apartment building to park.

Prior to meeting me, Neil lived in the country. So he has a large, handy, Isuzu D-Max ute, a post-separation mid-life crisis motorbike, and a caravan. Meanwhile, I have a 17-year-old Toyota RAV-4 that is somehow still going, and a collection of bicycles.

Owning a car isn’t terribly important to me. I’m not really into cars in a major way and never have been. I didn’t get my car license until I was 31, and even after then I rarely drove my car as I was much happier being a passenger. For years my ex-husband and I only had one car.  I wasn’t even that into my ex-boyfriend (aka Mr Red Sport’s Car)’s shiny new red BMW.

Now that I live inner city, with my kids walking distance from school and my work a 6.5km cycle away, arguably  I don’t even need a car anymore.  Well, except that sometimes (e.g. church on Sunday or to meet friends) I do in fact drive.  And I can’t really cycle with the kids out to visit Neil’s family in the country; as part of it is unsealed dirt road, we also need a solid car to drive there.  Nor do I (yet) know how to drive his manual ute.

So we are having the discussion about cars and vehicles and money. It isn’t really resolved yet, but it is throwing up some interesting issues.

In Australia, we often think of our car as a necessity.  We are accustomed to believing that we ‘need’ that vehicle.  ‘It’s not a car, it’s a CHARIOT,’ my Dad once told me when I mentioned that my ex-husband desperately wanted to buy a car when we were in Taiwan.

This is in part because many of us live in far strung suburbs rather than dirty, smelly city centres. That used to be my reality, too. And more than that, a car represents freedom and independence.  Obtaining your license, then getting your first car, is a rite of passage for many young people.

But things are changing.  Public transport is improving, there are more options to work from home and as fossil fuels reduce, petrol (or even diesel) prices will go up.  And people (like me) are moving back into urban city centres as the areas embrace urban renewal. Uber and other rideshare programs are making short term chauffered rides more affordable.  Then there are driverless cars, with predictions that people will share cars rather than own one by themselves.

So what does this all mean for car ownership?

Well, a big thing to consider is that it costs a lot just to own a car, whether you drive it out of your garage or not.  Here is a brief snapshot of how much it costs for you to have a car before you even drive it anywhere:

• Registration.  This varies in each state and territory, but on average it costs around $1,000 per year. Which includes compulsory third party insurance. This covers the injury you might cause to a person in another car.
• Insurance.  There are three levels of car insurance.  Firstly, there is third party insurance.  This covers the damage to another car, caused by you. Then there is insurance for fire and theft.  Most modern cars are hard to steal, but you never know.  Finally, there is full comprehensive insurance.  It is a good idea to have all three insurances as driving accidents do occur and not necessarily through your fault.  Depending on your car, your personal circumstances (no claim bonus, your age etc) it costs around $1,000. [Note from Neil: some insurance companies have better claims histories than others, so it pays to shop around.]
• Servicing and repairs.  This varies depending on your car – older cars usually require more.  My 17-year old Toyota required $1,500 last year; it is a reliable car but it is getting old and needs a bit of TLC.  If you need new parts (and that happens) allow several thousand more.  My Dad’s (second hand) Mercedes required $5,000 for suspension airbags last year – often European models cost more.  [Neil found this out the hard way when he accidentally backed into a BMW and damaged the plastic grille – it cost $1,500 to have the full thing replaced.  No, he did not slam into my ex-boyfriend’s Beamer LOL.]  On average I would say to allow at least $1,000 a year for service.
• Car repayments.  Once again this varies on the model of your car.  I am always amazed that people take out dodgy, high-priced car finance products.  The best way is to wait a bit and save up for your car.  The second best way is to withdraw from your mortgage (and then make higher repayments).  Based on a $20,000 car loan, expect to pay $4,680.

Total:  $3,000 a year without a car loan, $7,680 with a car loan.

This equates to $8.20 PER DAY or $21 PER DAY (if you are paying a car loan).  And these costs assume a modest vehicle.

Then there are other costs associated with a car:

• Petrol.  Assuming a tank a week, this would be around $70.
• Parking.  You can spend up to $14 a day on many carparks. We used to have free parking at work, but not anymore.
• Depreciation.  A new car loses up to 30% the moment you drive it out the door.  It depreciates quickest in the first two years.  This once again varies from model to model, but unless you have a rare vintage or collectable vehicle, the price is going down, down, down.
• Accidents.  It happens.  It might just be little dents, a ding with a shopping trolley or a bad parking job in your garage. It will happen.  This might require an insurance claim (and dipping into a new claims bonus), or it might mean you live with it and it affects the value of your car.

The big question now is whether your second car is worth it.  Or if you live near public transport, whether you even need a car at all.  These are discussions we are having at the moment in our household – not yet resolved but up for debate.

Your challenge for today is to consider your car situation. Do you need that second (or third) car?  How much could you save by using other transport to get to work, university, school or wherever you need to be?