With fuel prices rising there's lots of advice going around about how to lower transportation costs. I hear everything from "hypermilling" to making sure your tires are always full. The biggest consideration on cutting back on driving costs is to determine whether you can get rid of your car entirely.
For most, this would be too large an inconvenience to make a reality; however, what's more realistic is downgrading from multiple vehicles. If you are one of the countless Americans with more than one car, consider selling one. Whether or not you drive them, cars cost money.
The real cost of driving goes beyond the gas pump. Insurance is mandatory, recurring, and expensive. Depending on where you live insurance premiums can exceed $100 per month (mine do!), and let's not forget maintenance costs that have a way of creeping up at the worst times! Going a step further, we have to consider the opportunity cost of capital involved with owning the depreciating asset.
Opportunity cost is something we don't often consider when holding assets or buying things we don't really need. For instance, say that you have $15K in credit card debt with a 15% APR and just so happen to own a car that costs that much. Opportunity cost is the concept that if you hold the car you are stuck paying interest on that other debt, whereas if you sold it you could pay off the balance. In this case, it means you're paying roughly $185 per month on pure interest expense!
Adding insurance, gas, amortized maintenance costs, and opportunity cost of capital, the monthly cost of driving can easily reach $500 per vehicle. Selling a car could easily mean the difference between being under the water on your bills or financially solvent.
About the Author:
Rob Viglione is a writer, hedge fund manager, and property broker. If you like this article visit The Freedom Factory where Rob and his colleagues write about everything from financial to political freedom.
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