So, I was recently figuring out whether it still makes sense to own a car in South Florida in a world where Uber & Lyft are so quick to give us a ride?
SPOILER ALERT: If you drive less than 9,000 miles per year, then sell your car. If you drive between 9,000-10,000 miles per year, then it is a wash. If you drive more than 10,000 miles a year, then keep it and use Dave Ramsey’s free car for life method.
For many of us who work from home or many seniors who live in the South Florida area, we may not drive as much as others who are driving to and from work. Many South Floridians lease their vehicles or grossly underuse their personal car. With car ownership comes many expenses; loan payment, oil changes, insurance, parking, tolls, repairs, new tires, etc.
But what if you ditched your car and put that money to work in the stock market or into a savings account which you used to pay for your Uber/Lyft rides? And once a month rent a car for a long weekend for your longer excursions.
So, let’s break it down. Keep in mind, these are general figures as sometimes traffic will be heavier or lighter, car prices are different for all and gas prices change often.
COSTS OF A LYFT AND CAR RENTAL
A rider in a Lyft going from Delray Beach to Fort Lauderdale Airport will pay around $40, including tip, for a regular Lyft ride (you can save more by choosing a “shared” ride). This comes to about 83 cents per mile for a 45-minute ride. The fare is heavily weighted toward the number of miles in a trip and the time is a small portion of the fare (about 26 cents a minute). There are potential other fees (platform fee, tolls, service fee, minimum fees, etc.) so, whereas the cost per mile and the time portion add up to about $1.09 per mile, the real figure will come in at around $1.14 per mile. At $1.14 per mile and driving of the course of a year to the tune of 9,000 miles, the total cost comes in at $10,260/year for your Lyft rides. Then, let’s say you want to travel once a month out of the area, so you want to rent a car. That will come in at around $120/month or $1,440/year. When added to your Lyft rides we come in at $11,700 total ground transportation costs. This is a high figure because if you are smart, you will use rewards programs offered by credit cards and internal company rewards; you will not pay as much because you will be getting dozens of free Lyft rides as well as several free days of car rentals. But that is a blog post for another day as I am a rewards junkie for which rehab is not needed.
So, how much does it cost to own and operate an average car in South Florida and is it less than the $11,700/year we found using Lyft and occasional car rentals?
COSTS OF OWNING AND OPERATING A CAR
As of this writing, the average cost per gallon of regular gas is $2.54. The average car gets 23.6 miles per gallon these days. The average car purchase would come in at around $30,000 and after 5 years will be worth approximately $20,000 ($167/month depreciation) — if you are fortunate. According to NerdWallet.com, the average person is spending $500/month on car loan payments. This seems excessive and in my example, I would say the monthly car payment would be around $350/month. Since we are assuming this is a new car, maintenance will be minimal for the first few years and will escalate over time; but let’s average it down to about $34/month over the full five years. Insurance in South Florida runs about $1,185 per year.
Many of these expenses can be mitigated or exaggerated depending upon one’s own personal circumstances. For example, one could buy a new Tesla and while the maintenance costs would be near zero and have no expense for gas and oil, it would have much higher acquisition costs. On the other side, one could buy a used car for $20,000, escaping some of the depreciation costs, but they will tend to have higher maintenance and fuel costs — especially if they purchase an SUV or truck. One may have perfect credit while another will have poor credit, greatly affecting their acquisition costs and insurance costs. The point of this exercise is to average things out.
The fuel costs come in at a little more than 39 cents per mile and over 9,000 miles during the year amounts to $3,543. Now we add in the monthly costs above (maintenance, depreciation, insurance, parking, tolls, cost of purchase, etc.) and we come to a final total of $11,340 per year.
If one is driving less than 9,000 miles per year, ditch the car, use Uber/Lyft and seek out the wide array of rewards programs available to drive down your costs even more. If you drive between 9,000-10,000 miles it is pretty much a wash financially. If you drive over 10,000 each year, then get a quality used fuel efficient, low maintenance car and pocket the savings over owning a gas guzzling, high maintenance truck. Use this link to get a free Lyft ride on me!
The question an ultra-low mileage per year car owner needs to ask themselves is do I want to get rid of the convenience and freedom car ownership provides by ditching the car to save money? Those savings could be put into an interest-bearing account or growing in a brokerage account, increasing one’s net worth while not having to deal with the hassles of car ownership. With a Lyft or Uber usually less than 5 minutes away, perhaps it may be a good idea to ditch the car or at least get rid of a second car which is being underutilized.
It’s still a tough decision as most of us saw buying our first car as a right of passage and gave us a strong sense of freedom. It may be hard emotionally to go without a car, but for many, it may be a great idea. If you are going to keep your car or are thinking of buying a new car, I strongly urge you to use Dave Ramsey’s free car for life method of car ownership.