High gasoline prices fuel car-free dreams

However, when you hand over your automobile, you’ll face restrictions and recent costs.

Car-free living still has its price

Mark Lotocky, owner and financial planner at The Dixon Davis Group, a fee-based financial planning firm in Victoria, lived car-free from the ages of 19 to 35. “Basically, I lived in a transit- and bike-friendly space throughout my 20s and into my mid-30s,” Lotocky said. “It’s possible and it’s a great thing. I loved it.”

The costs crop up each time you permit that transportation network, he said: taxis, rideshares, rental vehicles, rideshares and co-ops. He likened owning a automobile to an “experience prize” because you’ll be able to exit of town, visit family or friends, go on day trips or road trips. Replicating this lifestyle without owning a automobile will create recent costs.

Depending on how often you would like to leave town, Lotocky says it’s still value not using the automobile. He used a car-sharing company to go to a friend who lived an hour outside of Victoria, but only just a few times a yr. “For me, the overnight trip probably cost $85 to $90, which is expensive but also a lot cheaper than a car,” Lotocky said. He added you can also borrow cars from family and friends and provides them some money in return.

Negative equity can trap automobile owners

Is your automobile paid off? That’s the primary query Janet Gray, a financial planner who makes a speciality of advice only, would ask at Money Coaches Canada. If it’s not paid off and also you owe greater than the vehicle is value, selling the vehicle means you are still paying off the debt on a automobile you not have.

Gray recently had a consultation with a young woman who couldn’t afford her automobile payments after 15 months – but a brand new automobile depreciates quickly and her remaining loan was greater than she could sell it for.

Depending in your financing terms, it may possibly take two to 4 years for a brand new automobile to succeed in positive equity so you’ll be able to sell the automobile without losing money.

Next, Gray would ask in regards to the commute. Gray lives in Ottawa and said living outside the overall urban core can involve excessively long commutes on public transit. Care and work requirements are also essential aspects.

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“You’ve seen parents having trouble transporting strollers and … that wouldn’t work for everyone,” Gray said. “Depends on your job too, right? If your job requires you to be on the road or if you’re caring for a parent or child, then a car would be absolutely helpful.”

But without these needs, the worth of keeping a automobile diminishes if you add up maintenance, repairs, parking, insurance and, most significantly, gas. “A paid-off car is nice until you suddenly need to repair the brakes. Have you ever repaired the brakes on your car? It’s easily $2,000,” Gray said. “As the car gets older, you may no longer have to make payments, but now you have more repairs to make.”

Try going car-free before committing to it

Try car-free living, Lotocky said. Park the automobile somewhere and use alternative routes to get to work and run errands. Add up the prices for other kinds of transportation. Give yourself six months and compare the numbers to what it costs to maintain a automobile.

“What really matters is the experience,” Lotocky said. “What are the experiences you have with the car and what experiences do you have without having a car and asking yourself, ‘Is this price worth it for me?'”

Even if having children is a component of the five-year plan, Lotocky said it still is smart to sell the automobile now and buy it again in the long run. Transportation costs over these years, especially for paid parking or storage, put a strain in your funds.

Keeping the automobile just in case could also turn into a self-fulfilling prophecy, Gray emphasized. There is a “behavioral drift” that leads you to make use of a automobile simply because you’ve gotten it.

Avoid post-sale lifestyle creep

If you choose to present up the vehicle, watch out for the temptation of more money in your monthly budget – probably a whole bunch of dollars. For younger people, Gray said those savings should go into an emergency fund and a tax-free savings account. She’s not keen on RRSPs at this stage of life because income is more likely to be lower and it makes more sense to max out RRSPs later if you earn more.

Wherever you invest the more money, make certain you give it a purpose and keep on with it.