Menu Close

Car Ownership: The True Cost and Why I Sold My Car

car - black mercedes benz

Let’s face it: you probably need a car, but you probably don’t need your current car. If you commute to work, run errands, or do anything else, then a car makes your life significantly easier. But do you need a flashy, expensive car to accomplish those things? Having said that, do you really know how much your car is costing you? If you knew, would you still be driving it? Would you downgrade?

Look, I am not going to tell you to sell your car and only ride your bike everywhere. I am also not here to shame you for owning a car. Financial Independence is about creating the life you want to live. If cars are one area of your life you do not want to change, then that is ok! All I hope to do is expose you to some of the hidden costs to car ownership. This post aims to give you my perspective on car ownership, what it truly costs to own, through specific examples from my life. My hope for you, dear reader, is that my experience will help you evaluate your current car situation.

If I had to summarize this post in one little TL;DR blurb, it would be the following: your car’s hidden expenses are costing you much more than the obvious expenses. With that, let’s dive in!

Car Ownership Costs

When I got my first high-paying job in the middle of 2016, I immediately wanted to upgrade my car. I had always associated an individual’s car with their level of income. Clearly, higher earners own newer and more expensive cars, right? Isn’t that the American dream? It was not until I read The Millionaire Next Door that I realized this usually is not the case.

I was extremely proud of my decision to finance that 2013 Honda Fit for only $200 per month. I considered it a necessary purchase because my car was old (1999 Nissan Maxima), and couldn’t help but pat myself on the back for purchasing below my means. The funny thing is that at the time, I didn’t even know what my means were. While I could afford the car, it was detracting from my goal of FI.

I want to spend the next few sections really digging into the last sentence from the paragraph above. Throughout the remainder of the post, I am going to discuss the concepts of “obvious costs” and “hidden costs” as they pertain to car ownership. My 2013 Honda Fit will be the subject matter of this discussion.

Obvious Costs

I want to make sure that I am very clear in my usage of the term “obvious costs”. The word obvious is a bit subjective – what is clear to someone may not be clear to another. For example, depreciation might not be an obvious cost to you, despite the fact that it exists. Given the subjectivity of obvious costs, I will define it as I saw it through my naive eyes as:

A cost that can be immediately seen and calculated – it is usually budgeted for because of its consistent nature.

Let’s see the monthly breakdown of obvious costs of my 2013 Honda Fit.

  • Finance Costs: $200.28 (roughly $174.98 principal and $25.30 interest)
  • Insurance: $100 (Massachusetts auto insurance is outrageous)
  • Gas: $50
  • Taxes: $3.08 (roughly $37 annually – this does not include sales tax when purchased)
  • Total: $353.36

There is not much to say here. My monthly gas cost varied slightly from month to month based on my driving habits. The variance was not enough to consider this a hidden cost. It is very obvious to car owners that you will need to fuel up your car somewhat regularly in order to drive. ‘Nuff said.

Hidden Costs

Using the definition of obvious costs above, we can infer that hidden costs are the opposite of obvious costs. It looks a bit like this:

A cost that cannot be immediately seen or calculated – it is usually not budgeted for because of its inconsistent and varying nature.

Let’s see the monthly breakdown of hidden costs of my 2013 Honda Fit.

  • Maintenance: $160
  • Repairs: $33.33
  • Depreciation: $280
  • Total: $473.33

There is a lot to say here. As mentioned earlier, these hidden, varying costs are much higher than the obvious costs from the previous section. Maintenance and repairs were expected to be on the lower end of the spectrum since this was a 2013 Honda. Honda is known for its reliability and cost effective maintenance. The only repairs needed on this car were a couple of blown tires. Looking at edmunds true cost to own, I fell well below the estimated costs for year 4, which makes sense considering this car was driven only 9,000 miles per year.

The largest cost here is depreciation. Make no mistake, this is a real cost despite how invisible it may seem. This was calculated by taking the purchase price subtracted by the sale price and dividing it by the number of months that the car was owned. The final number was rounded. To be very clear here, depreciation is real whether or not you sell the car. Even though this expense is not realized until some arbitrary date in the future, it is very real. A car is lowering its owner’s net worth everyday it is owned.

Decision Time

Selling My Car

If you read my about me, you know that I work from home and I’m married. My wife owns a car that she purchased before we were living together. We can easily get by owning just her car. Because of this, we realized selling my car would not degrade our quality of life.

When it comes to costs in general, I like to imagine how much money I am losing by not investing in the stock market. On the surface, the total monthly cost of owning my car was around $826.69. This totals to about $9,920.28 per year. Putting that money into investments that average 7% returns per year yield the following results:

  • 10 years: $146,657.44
  • 20 years: $435,154.84
  • 30 years: $1,002,672.87

Numbers like these boggle my mind. These are not imaginary numbers – I did not make any of this up. However, I will admit that these numbers are overly simplified. For example, depreciation goes down as the car gets older. Financing costs will also disappear at some point. Keep in mind, though, that as a car ages it also incurs more maintenance and repair costs. It also becomes less fuel efficient over time, costing you more in gas. In short, these numbers tend to balance out over time.

Using the numbers above may have been a bit naive of me, but they illustrate the point well. Am I actually going to save over $1,000,000 over 30 years by not owning a car? Probably not. Am I going to at least save a hell of a lot of money? Most definitely.

Letting Go

I am not going to lie to you and say that selling my car was an easy decision. There exists societal pressure to maintain a certain status – the proverbial “keeping up with the Joneses”. This ties into the stigma around overall frugality – it feels socially unacceptable.

When was the last time you felt comfortable talking about your latest savings hack with your colleagues? What kind of response would you receive to “I saved close to a million dollars over the next 30 years by selling my car yesterday!”? Compare that to the response to “I got a raise last month and decided to lease a new car”. The latter seems more socially acceptable than the former.

When I sold my car, I did not tell anybody for a couple of months. I had no attachment to the car itself, but I was afraid of the judgement that would be passed on me by trying to better my financial situation. While this all may seem overdramatic, it is a truth that is being shared to empower you to make better financial decisions and not be afraid of judgement.

What This Means For You

Your particular situation most likely looks different than mine, particularly your car costs. A 1995 Toyota Corolla’s costs will look drastically different than a financed 2018 BMW 328’s costs. Both of these cars’ costs will look different than that of a leased car. Unfortunately, this means that I cannot advise you on your particular situation. I can, however, offer you a few tidbits of advice. I’ll break them down into two situations: those looking to evaluate their current position and those looking to buy a car.

Evaluate Your Position

My hope for you is that you have a better understanding of what it costs to own a car. You should be able to evaluate your position and break down your car into a set of obvious and hidden costs. From there, look for ways to improve. If you cannot live without a car, then selling outright might not be an option. In this case, you should really consider downgrading to a used, reliable make and model. If you have more cars than you need and are able to sell one, you should probably sell the one that will incur the most cost over the course of its lifetime.

Buying a Car

If you are in the market for a car, understanding all costs will better equip to shop. First and foremost, do not allow any salesperson tell you what you can and cannot afford. If your budget allows for $400 per month, this does not mean that you can finance a car for $400 per month. Salespeople do not care about your maintenance and depreciation costs, but you should.

I recommend establishing your budget ahead of time and doing your homework. Look at cars that have a total cost within your budget. Once you have a solid understanding of how these obvious and hidden costs fit into your budget, you are ready to actually shop around.


By now, you are probably telling me that it is impossible to find a decent car which has a monthly total cost within your budget. You are probably right. Writing this post opened up my eyes to the true cost to own as well as it did yours. I have accepted the harsh reality that I will be car-free for a long time, or possibly buying a clunker. Such is the sacrifice that needs to be made for Financial Independence!

In all seriousness, regardless of the decisions you make, I hope you have a better understanding of the true costs of car ownership. Let me know what you plan on doing in the comments below!

Posted in Financial Independence, Saving, Travel

1 Comment

Leave a Reply