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The Pros and Cons of Living Without a Car

The automobile is an iconic piece of American culture. From the first Model T Fords to roll off of the assembly lines in the early 1900s, to the artful mid-century modern designs that cruised U.S. highways and byways in the 50s, to the generations of families who grew up around the factories and warehouses of the industrial Midwest, the nation’s very growth into an industrial powerhouse revolved around the automobile.

And of course, on a practical level, the car is simply ingrained in the American way of life. We are a nation of work commuters, truckers, and road trippers. According to Zebra, American motorists put an average of more than 14,000 miles in behind the wheel per year. Together, we drive more than 3.2 trillion miles every single year.

That distance, says Zebra, would be equivalent to roughly 5000 trips to the moon and back, which would obviously require a really well constructed car. So it goes without saying that driving is not just a part of our lives, but it’s also a part of our personal finances. Cars cost money, but they’re also used to make money. For many Americans, the two things are inseparable.

Indeed, car ownership is more expensive than ever, as are the costs of using, maintaining and insuring them. So is car ownership worth it? And if you’re on the fence, what are the pros and cons of owning a car?

We’ll answer both questions here below. But first, let’s take a closer look at a few key numbers.

How Many Cars Are There in the U.S.?

There’s no question that we’re a bit car crazy in this country. According to statistics sourced from Bankrate, there are more than 305 million cars on the road in the U.S. today. Only China, with roughly 417 million cars, has more automobiles on the road than the U.S. 

Of course, there are about four times as many people living in China as in the United Statres. So in fact, while there are only 296 cars per 1000 people in China, there are 908 cars per 1000 people living in the U.S.!

So yeah, it goes without saying that the car is kind of a big deal in the U.S. Whether you live in the big city or the countryside, whether you commute to work everyday or you are a teenager just getting a driver’s license for the very first time, there’s a good chance car ownership is an important facet of your life.

Outside of the costs of home ownership or rental, car ownership is one of the biggest expenses most everyday Americans will take on. This is true whether you’re leasing or financing a car. And with sky high interest rates and a general spike in the cost of cars (and pretty much everything else) over the last three years, the cost to keep one or two cars in your driveway has never been higher.

And because so many American homes are two income households, many American families do require two cars. According to Bankrate’s statistics, “The majority of Americans own at least one car, with 37.1 percent owning two vehicles and 21.9 percent owning three or more vehicles.”

While car ownership is commonplace in the U.S., it isn’t necessarily universal. In fact, says Bankrate, your region and location can play a major role in whether you are likely to have, or even need, a car. Indeed, many city dwellers enjoy a car free lifestyle both out of convenience and some measure of necessity.

According to Bankrate’s figures, “Some of America’s biggest metropolitan areas have the lowest vehicle ownership in the U.S., which is most likely primarily due to ready access to public transportation and the high cost of parking your car in these cities. New York, Newark and Jersey City metro areas have the lowest percentage of households with a vehicle, with Philadelphia, San Francisco and Boston  metro areas coming in second, third and fourth places.”

So it is true that whether or not you can realistically live without a car will depend to some degree on your living and working circumstances. Of course, if you do have the option of telecommuting, it may make the decision to live car free a bit more manageable no matter where you live.

So if working from home is an option for you, check out our list of reasons that this could be a great financial move for you, even beyond the saved cost of travel.

Otherwise, read on for a closer look at some of the financial Pros and Cons of Owning a Car.

The Financial Pros of Owning a Car:

It goes without saying that there are tons of financial benefits to owning a car. After all, there’s a pretty good reason that most American households have at least one. From the advantages of being able to secure your own transportation to anywhere at a moment’s notice to the general value of an item that can support your efforts to generate an income, it may simply make good sound financial sense for many households to invest in car ownership. Many of the following financial benefits reinforce the value of this investment:

1. Convenience and Efficiency

If time is money (and there’s a good case that it is), then owning a car is a financial no-brainer for a lot of people. That’s because the upfront expenses can ultimately pay for themselves over the long run. It goes without saying that having a car offers the convenience of going where you want when you want, and this type of flexibility translates to some pretty clear savings over time.

And certainly, anybody who has ever relied upon a public transportation schedule to get places on time can tell you that it’s not always up to you. With a car, at least you get to choose when you depart from your destination, what route you take, and what strategies you use to skirt traffic. You’ll obviously get none of that flexibility when it comes to using public transportation. Nor will you get the protection that a car gives you from inclement weather.

But there are also clear and tangible benefits in the amount of time you’ll gain control over and the degree to which you’ll improve your own productivity. According to an article from Smart Motorists, “the time you spend waiting for public transportation and rideshare services represents a significant opportunity cost. Opportunity cost is the cost of choosing one alternative over another, involving the loss of the potential benefits when you select another option. In this case, owning a car can save valuable time, which can be utilized for work, leisure, or other productive activities.”

Speaking of productive activities, shopping is genuinely easier with a car. Ever try to lug a bunch of bulk items home from Costco in an Uber, or worse yet, on foot?

The point is, if you have a car, you can buy in bulk and save money per unit on your groceries. Or you can hit a few different stops on your shopping trip in order to capture the best deals. Indeed, you have a number of different options when it comes to getting your groceries home, which means you have greater flexibility when it comes to shopping for savings. And of course, if you’re relying on a ride sharing or taxi service to get to and from the grocery store, you’ll need to tack on an additional $10 to $20 on what you spend every single time you go shopping!

From running errands and going to medical appointments to visiting friends and transporting items, every time you need a ride somewhere, having a car pays for itself just a little bit at a time.

2. Saving on the Cost of Your Daily Commute

Depending on the nature of your work commute, public transportation options may be more costly than ownership of a reliable and affordable car. Perhaps even more to the point, public transportation may not even be fully available to facilitate each person’s commute.

This is perhaps one reason that the vast majority of America’s work commuters choose to make their way to their respective jobs by car rather than public transport options like buses, light rail and train. According to a 2021 article from the Journal of Nature Sustainability, “People in the United States depend on cars—91% of adults commute to work using personal vehicles, and cars provide a level of convenience that is often unmatched by other transportation modes.”

An article from Pennsylvania State Employees Credit Union (PSECU) offers an informal breakdown in cost, and demonstrates that it is entirely possible for those who have the option of commuting by bus or subway to save tens of thousands of dollars every year by going car free. By contrast, those who rely on train transportation may pay up to $1200 per month for commuter travel. That amounts to the cost of purchasing a new car in a single year without the considerable peripheral, non-financial benefits of car ownership such as convenience and flexibility.

Even more important, the article from PSECU notes that roughly 45% of Americans live in areas which provide no access to public transportation at all. In this case, the investment in car ownership is somewhat non-negotiable.

3. Carpooling and Other Cost Sharing Options

There is another way that having a car can actually save money, even if you do have affordable public transportation options at your fingertips. One thing you can’t do on a bus, subway, or train is share tickets. If four people travel on the train, all four must buy a ticket, of course.

That’s what makes carpooling and ride sharing such great options for your daily commute. If you commute to work or drive your kids to school, owning a car can make it much easier for you to join a neighborhood carpool. Join together with a few of your co-workers who live close by and take turns driving to work. This way, you can split any parking, tolls, fuel, and maintenance costs with the others in your car pool.

An article from Capital One notes that more Americans are considering carpooling as an option for offsetting the generally high prices around transportation. According to Capital One, “In a March 2022 survey conducted by AAA, 29% of Americans aged 18 to 34 will consider carpooling and modify the way they commute because of high gas prices. In addition to saving money, there are also plenty of mental and social benefits to carpooling, since it allows you to relax and enjoy the company of your fellow passengers, or peacefully catch up on your favorite podcast–rather than worrying about traffic and road rage.”

As an added bonus, carpooling gives you and your co-workers a way to collectively reduce your carbon footprint, which is better for all of us.

4. Opportunity Creation

Having the freedom, access, and ability to travel anywhere at any time carries a variety of implicit opportunities, some of which may have short- or long-term financial benefits. According to the article from the Journal of Nature Sustainability, “For many US households, access to a car unlocks economic opportunities such as jobs and education and time with family and friends. In addition to the value that comes from the mobility it provides, researchers have found that consumers frequently attribute social status and pride to car ownership and use. Even when a car is sitting idle, owning it provides the option value of driving at any time. If the value of car ownership and use exceeds the cost, consumers may continue to want privately owned cars even if lower-cost on-demand mobility solutions are available.”

Indeed, that immediate access to transportation, convenience, and even social cachet comes with a tangible value, one that you transform into opportunity, productivity, and engagement.

5. Emergency Transportation

If life was simple and predictable, you could plan all of your travel with the same rigid precision of a public transportation schedule. But life is never simple and predictable. Emergencies happen. Whether your sink springs a leak and you need to hit the hardware store without delay, or your kid wakes up with a fever and you need to get to the doctor’s office, or your best friend calls you in desperate need of a shoulder to cry on, taking a taxi or relying on a rideshare service like Uber or Lyft costs both time and money.

Having your own car can save precious seconds when they matter most, without adding on the extra dollars that come with procuring a ride.

6. Lower Transportation Costs in Rural Areas

As we pointed out earlier in this account, nearly half of all Americans do not live close to public transportation options. This is especially true for those living in rural parts of the U.S. In areas with limited or nonexistent public transportation options, it may simply make financial sense to own a car.

As the study from the Journal of Nature Sustainability reports, population density is inversely correlated with the value of owning a car. In other words, the less densely populated your region is, the more valuable it will be to have a car. 

As the article explains, “the built environment where a person lives meaningfully impacts their valuation of owning and using a car. Living in an urban zip code is positively correlated with being more willing to give up one’s car as compared with living in a rural or suburban zip code. Each increase in the built environment category, which aggregates many elements of the built environment that may have varying significance individually (for example, density, mix of uses, supply of parking, density of street network, biking infrastructure and public transit infrastructure), reduced the median value of owning and using a car by nearly $4,000.”

So naturally, the reverse is true where rural dwellers and even many suburban dwellers are concerned. With long distances between homes and businesses, those living outside of cities are likely to yield greater value from their investment. And once again, for those living in areas where mass transit is not an option, the value of this investment is actually secondary to its sheer necessity.

7. Asset Value

That said, the value of the investment itself is also pretty clear. In spite of the array of car costs that you’ll absorb both initially and throughout the life of the car, financing a car will ultimately lead to ownership of an asset that ultimately creates far more value than expenses. 

Of course it’s true that cars depreciate in value over time. Still, any well maintained car will carry some resale value. These days, the demand for used cars is generally higher than the supply. So again, as long as you do your due diligence to keep the car running well and looking good, you’ll always have an asset with clear monetary value.

But if you select a reliable car from a maker with a reputation for longevity, the resale value may be secondary to the value the car offers you as a commodity with little to no monthly costs. As an article from the Auto Group points out, “Most people purchase a vehicle by financing through a bank or credit union.  If you finance for say a 5 or 6-year loan, the financial institution “owns” that vehicle for that amount of time.  But as soon as you pay that loan off, that vehicle is YOURS; no monthly payments.  As long as you do the routine maintenance on that vehicle, you can have reliable transportation for years and years to come.”

Historically, financial advisors might have recommended against financing a car for long-term ownership. It’s true that the value of the car drops significantly from the sticker price almost as soon as the ink dries on your auto loan contract. But recent trends in both interest rates and the base costs of car ownership have stimulated the used car market and heightened incentives to hold on to your old car for as long as it runs.

And a car that lasts well past the duration of your financing agreement is with an inestimable amount in terms of the added opportunity, productivity, flexibility and convenience.

8. Tax Deductions

While a car may continue to cost you money over time, it can also help reduce your annual tax burden depending on how you use it. There are a number of ways that you may be able to deduct expenses related to use of your car such as business mileage, interest payments on your auto loan, and even your spending on tolls, parking, and fuel where these might qualify as unreimbursed business expenses.

As an article from Lending Tree explains, “Buying a car for personal or business use may have tax-deductible benefits. The IRS allows taxpayers to deduct either local and state sales taxes or local and state income taxes, but not both. If you use your vehicle for business, charity, medical or moving expenses, you could deduct the costs of operating it. Some vehicles even come with federal and/or state tax credits.”

If you are a car owner, be sure that you maximize the tax benefits, credits, or deductions for which you are eligible. It could help to offset the expenses that come with car ownership, which can ultimately enhance the value of owning a car.

Financial Cons of Owning a Car

Now that we’ve examined the financial benefits, it’s time to take a look at the other side of the equation. Cars are expensive and they come with continuing costs. So before you can decide that investing in a car is totally worth it for you, make sure you consider some of the economic drawbacks.

1. High Initial Cost

By far the biggest financial drawback to purchasing a car is the upfront cost, especially if you plan to finance ownership of a new car. First of all, the cost of both used and new cars has risen sharply in just the last three years.

According to an article from Bankrate, “The cost of buying a new or used car has increased substantially in recent years due to inflation and supply chain issues. As of March 2023, the average cost of a used car was $26,213, according to Kelley Blue Book. For a new car, the average cost was $48,008.”

If you’re purchasing a new car, you can generally expect the standard down payment to come in at about 20% of your overall purchase. That means that for a new car at just the average base price, you can expect to shell out $10,000 right away.

Don’t forget that the initial cost will also include expenses for sales tax, registration, and insurance.
 So as you run the numbers, obviously this is going to be the biggest one.

2. Interest on Your Loan Repayment

Of course, there’s also the monthly expense that comes with paying for your car. Whether you’re leasing or financing your car, you will typically take out an auto loan. Each month, you’ll pay a predetermined sum to the bank that holds your loan. These monthly increments will go toward repaying the principal amount of your loan.

But that’s not all. As you repay that loan in monthly increments, you’ll also be paying interest rates on the initial loan. Naturally, that’s how that bank makes money on your auto purchase.

As you’ve probably heard, interest rates are historically high today, which is driving up the cost for car ownership. According to Marketwatch, “Experian’s most recent State of the Automotive Finance Market report [says that] the average auto loan interest rates across all credit scores are 6.63% for new cars and 11.38% for used cars. Creditors group people into categories — sometimes called credit bands — based on credit-scoring models like FICO® and VantageScore. While other factors affect the auto loan interest rates you’re offered, the credit band your score falls into is among the most influential.”

In other words, how much you’ll end up paying for a car in the long run will depend on your credit score. Today, interest rates start pretty high for buyers with excellent credit scores (6.5%) and go up from there as your credit score goes down. Those with Fair to Poor credit may pay as much as 14% or more in interest every month. 

So if you finance your car with a loan–and most people do–you’ll incur this additional cost over the life of the loan, increasing the overall cost of the vehicle.
 And these days, that increased cost is more than just a few bucks. That cost is something you’ll have to factor into your decision.

3. Operating Expenses

Of course, the upfront cost and the monthly cost of car ownership are only part of the picture. The operating expenses of a single automobile are considerable over the cost of a year. In addition to whatever you’ll be paying monthly to lease or finance your car, you will also need to build a budget for ongoing expenses. These include maintenance, repairs, and fuel.

And like everything else in the world, this cost has risen sharply in the last several years for all of these things. According to the research from Bankrate, “The annual cost of car ownership in 2022 was $10,728, up from 2021’s yearly cost of $9,666, according to AAA’s Your Driving Costs study. This increase is in line with the most recent Consumer Price Index report from the Bureau of Labor Statistics.”

The cost above does include the rising cost of monthly repayment as well (which comes in at a little over $4000 over the course of a year for the average consumer). But putting this number aside, and excluding the constantly fluctuating price of fuel, overall transportation costs have risen more than 8% just between the summer of 2022 and 2023.

4. Insurance Costs

That number above doesn’t even include the cost for car insurance, which is a legal requirement for car owners. Insurance costs may vary widely depending on factors like the population density of your residential area, your intended uses for the car, your personal driving record and even the initial value and safety rating of the car itself.

Such is to say that the more expensive or valuable your car is, the higher your insurance is likely to be. Putting aside individual factors, the research from Bankrate indicates that “The average cost of full coverage car insurance in 2023 is $2,014 per year, although your premium may vary based on where you live, the type of vehicle you drive, your driving history, the insurance company you choose and the types and levels of coverage you purchase. Comparing quotes from different carriers and choosing the appropriate amount of coverage for your needs may help you avoid unnecessary expenses. Speaking with an insurance expert may help you maximize your car insurance coverage value.”

5. Depreciation

It’s extremely commonplace for cars to lose a significant amount of their value over time. There’s an old cliche that says a new car loses half of its value the second you drive it off the lot. That’s a bit of an exaggeration. But the point is still sort of accurate, at least from a resale value standpoint.

It’s true that your car will shed a significant portion of its sticker price value in the first year, and will continue to decline in value at a statistically significant rate over time. An article from Progressive Insurance notes that “There’s no pre-determined rate at which a vehicle will depreciate. Within the first year, many cars will lose up to 20% of their value. After that, they may lose about 15% more per year until the four-or five-year mark.”

From this perspective, your vehicle is an asset that only loses value over time. So if you are buying a car with the intention of selling it at some point down the line, it is a given that you will make far less on the sale than what you paid for the car in the first place. Of course, it goes without saying that much of the value in your vehicle is locked up in how you use it, how it contributes to your productivity, and how it creates opportunities over time.

But just be aware these are the very same activities that inevitably diminish the resale value of your vehicle. Individual factors like the make, model and quality of the car as well as the way you use it, how much mileage you put on it, and how well you maintain it, can impact the long term dollar value of your car. Simply stated, expect normal depreciation.

6. Parking Costs

There’s a good reason that a lot of city dwellers opt for the car free life. If you’re looking for your very own parking space, you may or may not have several options. You can either pay a couple hundred thousand dollars more to rent or own a home with a driveway or garage, or you can pay a few hundred dollars a month for a reserved parking place in a garage.

Either way, owning a designated parking space does not come cheap in most cities. 

Many cities do have free street parking in residential areas. But depending on the area, you may spend half of your life cruising circles around your own street trying to find parking. Once again, if time is money, this is one area in which having a car can sometimes be time consuming. 

It’s also why so many city folks prefer to get around by bike, electric bike, or their own two feet.


Of course, we understand that the car free lifestyle is not for everybody. If, after reading the pros and cons of living without a car, you still can’t picture life without it, we would at least encourage you to picture life with cheaper trips to the gas station. For the car owners out there, check out our tips for how using the right credit card can save money every time you fuel up.