Would You Ditch A Car For $1,000,000 (One Million Dollars)?

A study found that households with 3 or more cars are the single largest group among American car owners. The national average is 2.28 vehicles per household. Obviously, Americans are very much in love with the automobile.

According to the AAA, the average American spends $9,369, excluding loan payments, to drive ONE medium sedan 15,000 a year. In arriving at this estimate, AAA figures in fuel, routine maintenance, tires, insurance, license and registration, loan finance charges and depreciation costs.

22 years ago, my husband and I sold one of our cars to pay for our wedding and honeymoon. We intended to replace the sold vehicle eventually — after we built up our credit score so we could get a car loan — but as time went by, we discovered that sharing one car between the two of us was no big deal. We learned to carpool, drop one another off, take turns, group errands, walk, bike, take the bus, work from an in-home office, go places together. Surprisingly, 22 years later, we still share just one car.

It would be difficult to figure out exactly how much my husband and I have saved over the past 22 years (with the effects of inflation), but it is easy to calculate how much more we can save if we continue to share one vehicle:

If we continue to share one car instead of owning two for the the next 29 years, invest our compounded annual savings and earn an 8%* annual rate of return, we could save an additional one million dollars**.

Would you be willing to ditch a car for a cool million? Let us know in the comments.

*The actual rate of return is largely dependent on the type of investments you select. From January 1970 to December 2008, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 9.7% (source: www.standardandpoors.com).

**actual value with annual investments adjusted for inflation @ 3.1%*** annually.

***A common measure of inflation in the U.S. is the Consumer Price Index (CPI), which has a long-term average of 3.1% annually, from 1925 through 2008.

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Millionaire Mommy Next Door

A self-made millionaire shares her recipe for success, happiness and financial freedom.

48 thoughts on “Would You Ditch A Car For $1,000,000 (One Million Dollars)?”

  1. We did this thirteen years ago and while it is occasionally annoying to be a one-car family (particularly when he’s working opposite shifts across town in a snowstorm), the savings are real.

    Family members tell us to get a second car but we just can’t justify the added expense. Especially with a teenager who’s closing in on driving age in a few years. That’ll bump up our premiums enough on one car, let alone for two!

  2. A car is a huge expense. It’s even bigger in places like Hong Kong and Singapore which try to limit the number of cars on the road by imposing punitive taxes on new car sales. Happily, here in Hong Kong a car is completely unnecessary – its one of the few major cities where the distances are short enough and the public transport good enough and cheap enough to render private car ownership a luxury rather than a necessity. I have never done the calculation on how much I have saved by not having a car for most of my adult life, but it will be a lot.

  3. The hard part is investing the difference! We were a “no car” family for 2 years when we lived in Chicago, then bought one car when we moved to Atlanta. It works well for us as long as we are near (good) public transportation.

  4. Funny stumbling upon this very subject this morning! As I took my morning walk, I was mulling in my mind the effect of having sold our second car three months ago. We bought that car 9 years ago for $22,000, including sales taxes, and sold it for $3,500. Not counting in attendant expenses, merely the cost of the car amortizes to about $2,000 a year. So in figuring out our savings, we can count $2,000, $500 insurance, $300 maintenance (I’m being VERY conservative) for a subtotal so far of $2,800 a year. I have not figured in fuel because we rarely drive both cars simultaneously, hence the sale of one of them, but also the fuel costs really can’t be figured on a car that’s not driven. Still, let’s put in a very conservative estimate of $400. We now have a savings of $3,200 a year. The tag is a negligible cost. Am I missing something? Still, since I work at home and almost never need my own ride, a savings of $3,200 a year is significant.

    The part that “bothers” me is that I don’t have another 29 years to accumulate that million dollars, no matter what the return in the stock market!!!!!

  5. Once we pay off our car note this year, that will be the absolute LAST time we ever take out a loan to buy a car. We’re going to save, scrimp and scrounge to come up with the money to buy our next car – and 2-3 year old one, that is. Besides, new cars lose 25% of their value as soon as you drive them off the car lot, and rougly 70% of their value is gone in the first four years of owning it.

  6. When we got married, we had two cars. We moved to another country and subsequently downsized to one car (there was so much bureaucracy to owning a car that it wasn’t worth having 2). When we returned to the U.S. we had not only become used to one car, we preferred it (less cost, more togetherness).

    Now we live in a huge metropolis and have zero cars (only possible because of excellent public transportation). It’s nice to have more time and money, and when we absolutely need a car there are taxis and rentals.

  7. It would be nice to be in a community which has good public transportation OR even good bike paths. It would also be good to have no kids who don’t need to go to different places. It would also be good to have spouses who work near each other and don’t take night courses. One car would NEVER work in our family. We buy them and drive them into the dirt. I think when people say they walk/take bus/whatever they don’t seem to take in the cost of thier time.

  8. We’ve never owned a car. . .we’ve actually not even gotten our driver’s licenses yet and are in our early 30s with a toddler. We make sure that no matter where we live it’s in a very walkable area with lots of transit options. We only take cabs once or twice a year and take advantage of delivery options, which is easier than ever with online shopping, when we want to buy a lot or something too large to carry. It’s worked out fine for us though I think we’ll have to get a driver’s license one of these days and then join one of those autoshare programs.

  9. My husband and I downsized to one car after we married.

    We live in L.A. and in a great location for public transportation. When we have to go downtown for work stuff we take the bus. Parking fees and parking tickets were terrible so I love the bus. When I have to go into suburbs I drive because there is more parking and the public transportation is lacking.

    One car works well for us.

  10. Yikes, my full name accidentally went into my last comment. . could you please delete it? Thanks and sorry for the inconvenience!

    I changed it to 1001 petals. MMND

  11. I would but I am single and need the vehicle I have to get to work, however I could move closer to the train line, and then would not need a car. When the train line comes closer I will definitely think about getting rid of my car. But then again it would be paid for by the time that happens so I should probably keep it parked for emergencies and use the train regularly.

    Very good topic to think about. Thanks :)

  12. We recently moved to SE Europe and ditched both of our cars. It is working out pretty well, although there are times that we wish we had a vehicle for certain trips, etc. If our city had a little bit better (more modern, cleaner, and reliable) public transport this would lead to less of an issue. We have liked the fact that we don’t have to pay for car insurance or gas or repairs any more!

  13. Me and my boyfriend have one car. Of course the fact that we live together and work together helps lol. But other then that we really don’t go anywhere without each other and if we do it’s not at the same time. But I digress… having one car is definitely a huge money saver. Since I was renting before, I saved about $450 a month by getting rid of my car (Including gas and insurance) not bad…

  14. This is an interesting topic, and I think our society encourages greed. People always seem to want more cars and other possessions — even if they cannot afford it.

    However, I’m in a two-car household, which I think is necessary in case there’s an emergency. With the two of us, it actually increases the efficiency of time, which is priceless. Also, there’s a lot to be said about purchasing used cars, thus saving money. My current one is used, and that’s the route I plan to take from now on.

    My point is that owning a car can be a frugal investment. People are all in love with SUVs, but purchasing a small, gas-efficient used car is the smarter move.

  15. Wow! I’ve been trying to convince my husband to go down to one car for years. We live in a very walkable community, but the ‘what if I have to run one of the kids to the Doctor” scenarios keep us from consolidating.

  16. @ Mrs. Smith (and Beth L. Gainer): If you have an emergency (or the need to run your kid to the doctor), you would save significantly by hiring an ambulance or taxi to transport you if needed– rather than pay for that second car “just in case”.

    @ Beth, yes, we adopted our daughter from China. Congrats on your recent adoption!

  17. I sure would ditch a car for a million dollars and that’s exactly what I did about 6 months ago. I changed my office location to a better location right next to my condo so I can walk to work. This all started when the recession started because my boyfriend and I wanted stay on as low of a budget as possible to take advantage of all the low stock prices. We have an emergency fund and savings set aside and we are now investing nearly half our incomes. I don’t even miss having my own car! It is way easier than I thought it would be to get by with just his car.

    As always, a great post :)

  18. As a grad student in an urban area, I don’t have a car (nor could I afford one) and I use public transit. It’s great that the savings are so large from not having a car, but would only be noticeable at higher income levels. I wish there was a “big ticket” item like that that I could easily cut out of my life, but there just isn’t. Instead I try to cut back on small things and aggressively invest for cashflow.

  19. @Patrick: Sorry if you felt mislead. I referenced only two stats (quotes) from the article about the study, so like I always do, I linked directly to the article so readers (such as yourself) could explore them in greater detail. I agree with you — the stat you referenced in your second comment is a telling one. Do you think the households who earn $250k plus and own just one car tend to have a higher net worth than those with similar earnings who have multiple cars? If I had to guess, I would say yes. And this is really the main point of my post.

  20. Careful with your stats there. The study you quoted only included households with more than one vehicle. Out of THIS GROUP, the average is 2.28 vehicles per household, but that is not the average for the whole country.

    Furthermore, it is highly misleading to say that households with three or more cars are the largest group. I could just as easily say that households with two or fewer cars are the largest group (65% versus 35% according to this study). What the study actually says is that roughly the same number of households have 1 car, 2 cars, and 3+ cars. It says nothing about households with no cars.

  21. Here’s a much more interesting stat from the same article:

    “The percentage of one-vehicle households for those earning $250,000 or more annually is 35 percent — about the same as households with incomes of $25,000 to $34,999.”

  22. This is a comment directed at Patrick, the Statistician: Who cares? You ARE quoting those stats tongue in cheek, right? I hardly think that was the basis of the message initially. Whether we are a society with 1.2 kids in the driveway or 3 cars in the living room is irrelevant to the story: That we could save a lot of money if we trimmed down our excesses.

    Oh, here’s an interesting stat: Most people in the States are fat! That is, most (over 85%) weight more than they’re “supposed to.” Have fun.

  23. Oh, yes, I’m still grappling with how to squeeze in another 29 years to let my savings from having only one car accumulate to over $1 million — 60 at next birthday. Add to that 29 years, and I’ll have no more juice left to enjoy those millions!

  24. @MMND: My post looks more accusatory than I meant it to be. I intended to criticize the original study, not your handling of it, though I do believe a bit more skepticism on the part of bloggers everywhere would not go awry. Any study about automobile usage from a group called “Experian Automotive” ought to be a bit suspect a priori, I think.

    @Yael: I’m not sure what your complaint is. I agree that owning fewer cars saves a ton of money. I agree that was the central point of this article, and that MMND is doing a good deed by highlighting that fact. If you’re saying I should refrain from pointing out the fallacies in misleading “studies” then I must respectfully disagree with that. Please let me know if I have missed your point.

  25. @Patrick: No, indeed, you did not miss my point, and given my rant, I’m almost surprised. It was not exactly grammatically correct. As for your exercise in pointing out the fallacies in misleading studies, I’m not saying you should “refrain” from doing so — I am suggesting that it’s a waste of time, given that that’s not the point. I repeat: Who cares? Those studies have all kinds of spins on them, and unless we are writing a dissertation where statistics are important, I highly doubt that they are relevant in this forum. What do you think?

  26. @Yael: Thanks for your reply. I just think quotes like “The national average is 2.28 vehicles per household” and “households with 3 or more cars are the single largest group among American car owners” get bounced around the blogs with little or no critical thought, which feeds into the interests of obviously biased parties like this “Experian Automotive”. I didn’t mean to derail the conversation. But I would propose that if, as you say, the study is both irrelevant and inaccurate, the fault for derailing the conversation is not mine for exposing its inaccuracies, but the blogger’s for quoting it in the first place. (No offense intended, MMND.)

  27. Ah, Patrick, I’m afraid I was not as far-reaching in my thought processes about this blog as perhaps I should have been. It hasn’t occurred to me that organizations such as “Experian Automotive” might take off with such stat declarations. I interpreted the blog as an invitation for the common man/woman to take a good, hard look at their fiscal habits, and see where a bit of forebearance might lead them (see, also, “…million dollars while eating lunch.”). I am generally a very, VERY deep thinker (too much so for my own good), and when I come across these jolly blogs, I just enjoy them without taking them too seriously. Perhaps I should mend my ways. Then again, I have so many soap boxes, I don’t know which one to choose.

    BTW, I’ve been doing my own soap-box blogging on Bukisa/Associated Content and Helium for the past week. Have even earned the goodly sum of $7.57 for my efforts! So, MMND, a word to the wise! That might be another source of income that in your extremely inventive ways, you might teach us to parlay into a fortune. I’m certainly a devotee, and am still waiting for the creative ways in which I might enjoy my million dollars before my 89th birthday! In fact, I think I’ve got it — I’ve got it! Here it is: Borrow the million, and proceed to spend the next 29 years spending it. I’ll have to do the calculations, and will have to figure out who will lend it to me in this economy, but it seems to make sense (I think) — Spend it forward?

  28. @Yael: It’s hard to tell whether you’re being sarcastic in this medium. If you want to abstract MMND’s posts to “spend less and you’ll save money”, and pooh-pooh everything else in the article with a “who cares”, then while I might wonder why you need a blog to tell you this, I heartily encourage you do continue doing whatever makes you happy, and I will do the same.

    To answer your original question, “who cares?”, the answer is “me”. I am interested in what MMND has to say. I’m interested in her reasoning. That’s why I bothered to leave a comment. If you don’t care, I invite you to ignore my comment and leave me to wallow in my my own bean counting.

  29. Ouch! Didn’t mean to offend. This post is one of only two I follow, so in fact, I DO appreciate what MMND has to say. And yours is the only comment I bothered sparring with — obviously you took it as sparring. Sorry.

  30. @Yael: No sweat. I spent my formative years on usenet, so perhaps I leap into sparring mode more readily than I should. :-)

  31. Thanks, Patrick. Again, sorry if I stepped on your toes. You seemed like someone who might be fun to joke around with in writing (you’re erudite, speak well and can spell — something sorely missing in a lot of writing these days). Yes, I was being a bit sarcastic earlier, but I’m not belittling anything MMND puts forth. She is prescient and inventive, extremely creative, and I’m downright jealous! (It’s a joke!). I love to joke around, and one needs to get to know me a bit to appreciate my humor. Again, sorry. I’ll try to give advance notice in the future.

  32. I like the packing the lunch idea and I do this, we have a freezer at work and I keep a bag or two of frozen fruit there, on Mondays I buy a bunch of bananas and have smoothies at work for breakfast and lunch all week, then go home and make dinner as well. I should be socking the savings away and that is where my downfall is.

    What would you recommend for someone that is not in the 20s but in their 40s and has only a 401k from work, a few hundreds dollars in an IRA and poor credit. Ahem- besides burying my head in the sand and hope for the best.

  33. When there are bicycles, why would anyone need to own a car? You could get an electric bike, travel 30 miles an hour, not have to pay for insurance or gas, and arrive at your destination without being sweaty.

    cars are not worth it for me and I will avoid owning one as long as I can.

  34. @Michelle: “why would anyone need to own a car?” If that’s a serious question, I can answer it for you, but I don’t really think you’re unable imagine why anyone would choose to own a car.

  35. I would and I am. I’m graduating this May and my parents have offered to match my savings for the first 3-4 years because they aren’t funding grad school like they did for my sis. I’m going to use my local food coop to get cheap food, live close to public transportation and spend my fun money extremely deliberately. My goal is to save 50% and get the parents match and after a while, get the comp match up to $6 grand. If I cut $200 off my rent figures then i can cut fixed expenses down to 30% of income ($35,000 after tax)

    My savings goal in 3 years is $150,000 and if I stick to my plan, I will only need to make $7,000 in outside income, get the match and i’ll be there! I’ll be foregoing cars to cut on costs and foregoing TV to start side income streams.

  36. I have a van this one cost me 500 [plus lots of gas,I run all the people in my family plus my mom and brother all have no cars.I sure could use the money for better stuff.It has 1 year left on loan and hopefully it will stay good 2006 town and country.I lost alot of money on lessing for 10 years,live and learn.

  37. Cars can be expensive however, we own three, all bought used, that are actually going UP in value. The last car that I bought that went up was a 1969 VW camper van. I bought for $900, drove for eight years, and sold for $5,500 (the prices on these vehicles continue to climb). Obviously, I did put some money into it, but the mechanics were quite simple and inexpensive (a whole engine was 1k), probably one of the most expensive items was the paint job. My husband did a majority of the interior work on himself. Overall, I think I probably broke even on the car and the costs of owning it were negligible, it brought many, many happy memories with late afternoon trips to the beach and snowy mountains. Now, we have three cars, all used and paid for, and I feel confident that not only will I get back the purchase price but also make money when I sell them too. My registration and insurance and even gas (4 cylinders) are relatively inexpensive. They are all 20+ years old but well-made and “classics”. The trick is to “buy low” and purchase the type of vehicle that is going to hold its value. We also live in an area that is close to all the essentials so we walk to a lot of errands but I take my one car to work, our newer vw van (a 1984, which for a time was our only vehicle) mostly stays at home except when we need the seven seats for family trips or moving big items that we have bought or found FREE on Craigslist, and we purchased a small, self-contained Toyota Dolphin RV last year which has already brought us many FREE camping trips (lakes, rivers, beaches,Grand Canyon). Looking at the big picture, I think I’m saving money.

  38. I promise you that many of you spend lots of money on things I never would unless my life depended on it. I choose to have 2 cars and ***Gasp*** I bought a brand new one. I take very good care of my cars and I enjoy having a nicer car. Please, people try to keep some perspective here. You are not better or worse based on one discrete view of your finances. I agree, we could all save a little more for the future…but at some point you are sacrificing TODAY for TOMORROW. You may think that my post indicates that I am a spendthrift with an upside down mortgage and credit cards maxed out…Not the case. Bottom line…save, but not at the expense of missing out on life in your youth.

  39. If I got rid of my car i would be 550 a month richer but all the people I drive places would have to find other help,I also would be trapped home 90% of the time .I realy could use that money ,but it would be a big loss.

  40. Great if you can live with one car. We did for a few years, but then had a baby and then mommy needs to go to doctor appts, baby yoga, etc……and daddy has to work outside home.

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