Considering life without owning a car
Most baby boomers couldn’t envision their early adult years without a car. However, times are changing and younger commuters are leading the way.
According to an October study (http://uspirg.org/reports/usp/millennials-motion) by U.S. Public Interest Research Group (U.S. PIRG) and the Frontier Group, millennials – those born between 1983 and 2000 – are driving significantly less than older Americans. Many post-college drivers swimming in college debt are opting for urban living (http://time.com/72281/american-housing/) where walking, biking and mass transit tend to be easier options. Increasingly, those with a temporary need for four-wheel transportation can do so by smartphone.
Today, there are many options to conventional car ownership, but it’s important to match solutions and their specific costs to your needs. Here’s a road map for exploring what’s right for you.
Start with the cost of driving. If you already drive and budget carefully, you will have an idea of what driving costs you can incur each year in financing, fuel, fees, maintenance and insurance. For averages related to a range of vehicles, look to the American Automobile Association’s (AAA) latest "Your Driving Costs" statistics. Keep in mind that smart car ownership doesn’t always mean "new." Online references like Edmunds.com and Kelley Blue Book can help you spot used vehicles that hold their value and keep operating costs reasonable.
Would leasing be cheaper? The buy-versus-lease question has evolved over the years and many people have strong opinions about which option is better. The answer depends on your personal situation and how you plan to use the vehicle, so consider the pros and cons (http://www.practicalmoneyskills.com/buyorlease). Many people like leasing because they can often lease a more expensive car than they could afford to buy with no down payment. But failing to observe lease restrictions can cost plenty. Remember that all leases can be negotiated and it’s important to review the terms and fine print very closely.
Consider ride- or car-sharing. A decade ago, if you asked someone about ride-sharing or car-sharing, most would assume you were talking about carpooling. Two newer commercial options are accessible by smartphone: Ride-sharing matches car owners with passengers who need a ride at a moment’s notice, much like a taxi or private car service. Car-sharing is a new spin on the old daily and weekly car rental model. Car-sharers join a service that allows them to reserve and rent a vehicle in their neighborhood for a few hours or extended periods, such as over a weekend. However, keep in mind that some ride-sharing services may adjust fees at peak times and car-sharing companies charge steep penalties if you return rentals late or in less-than-desired condition.
Look to your employer. Commuter tax benefits allow you and your employer to save. If you plan to drive to work regularly, check out parking subsidies. If you combine driving and mass transit, check both parking and public bus or rail subsidies. Talk to your human resources department about these options and refer to Internal Revenue Service Publication 15-B for more information.
Telecommute. Many employers looking to reduce commercial rents and onsite employee costs are increasingly relying on telecommuting options for their workers. Telecommuting isn’t for everyone, but evaluate your employer’s program, talk to fellow workers about all the pluses and minuses and see if it’s a good fit for you in terms of time use and vehicle cost. A mix of telecommuting days and mass transit or ride- or car-sharing options may make car ownership less crucial.
Bottom line: Getting rid of a car is a big decision, particularly if you’re used to the convenience of having wheels at all times. But between newer forms of mass transit and new technology-driven, transport-on-demand services, now might be the easiest time to consider making it happen.
Jason Alderman directs Visa’s financial education programs. To Follow Jason Alderman on Twitter: www.twitter.com/PracticalMoney.