Car or Carless: Minimum Wage Challenge
The fact that I really dislike driving would seem to make the choice here rather easy. If I had my choice, I would not drive at all (and quite frankly, it’s ironic the amount that I do drive with this attitude). I really miss the days when I lived in Japan where the public transportation was so efficient and widespread that there really wasn’t a reason to own a car no matter where you lived. I used to commute to work there by train and bus, and I did a whole lot more walking around (which I like) than I am able to do in the US. Unfortunately, the reality is that public transportation in the US is a shadow of what it is in Japan and that for most travel (unless you live in a big city), you’re going to need a car. So while I know that I will need to use a car next year, that doesn’t necessarily mean that I actually have to own one. I could simply rent one when I needed it as I have done in the past.
With the decision to be purposely homeless for the beginning of this minimum wage challenge, the next big budget question that needed to be analyzed was whether or not I should go carless. While this would be a big convenience issue for most people, the convenience aspect really wasn’t an issue for me. I have been carless for long periods of time in the past and even with the inconvenience, I have no problem making it work. While it does entail a lot of sacrifice, the financial rewards are pretty darn impressive.
For most people, getting rid of the car and getting around by other methods will save them thousands of dollars a year. The question was whether or not I would see these savings with my unique situation. The first assumption that most people would make is that going carless would be the least expensive option for everyone. While in the vast majority of cases going carless would be less expensive, in my case it looks like things turnout to be less decisive than they do for most. Here are a number of areas I considered when making the decision:
Car Payment
If I needed to make a car payment to own a car, then that would be the end of the discussion and going carless would be the best course of action. This, however, isn’t an issue since I already own a car which has been fully paid. I have a 2008 Nissan Versa with approximately 85,000 on it. I don’t have any monthly financing payments, so this cost isn’t something that I will need to worry about either way. When it comes to this part of owning a car, there is no difference between having a car or going carless.
Repairs and Maintenance
This is an area of concern. If I go carless and simply rent in instances where I absolutely need a car, I don’t need to worry about the cost of maintenance and repair to my car. I took a look and I spent $589 last year in this category on my car. It included a new set of tires, replacement of a license plate light, replacement of a back tail-light, oil changes, tire rotations, and other small odds and ends. In the 1.5 years that I have owned it, I haven’t had any major problems with it and as of today, it’s still running fine.
The question becomes what can I expect to pay in this area next year. If everything goes perfectly, it wouldn’t be much at all. I won’t be needing a new set of tires which was the major expense last year. If I have absolutely no problems with the car, I would pay less than $100 in this area for the year. Reality says that everything working out perfectly isn’t likely to be the case and that there will be additional costs along the way. The problem is that what these costs will be is anyone’s guess, but I do have the option to reevaluate whether I need a car if a major expense arises. With this in mind, there really isn’t much of a difference for me to keep a car or not have one, at least until i’m faced with the decision of having to pay a lot to keep the car running.
Gas
I know from experience that having a car will mean spending more on gas than not having one. When I have a car, I’m much more likely to use it to do everyday errands rather than alternatives like walking or biking simply for the convenience. I have little doubt that if I keep the car, I will end up spending more on gas. That being said, I also have control over how much I spend so the only one to blame in this situation would be me. If I put my mind to it, I certainly could rarely use the car and use alternative forms of transportation the vast majority of the time. While it’s likely I will end up spending a bit more in this area with a car, the fact is that it’s not mandatory that I do.
Insurance
This is one area where it seems obvious that I would save money not having a car, but the truth is that my insurance costs would be only a bit more if I chose to rent when needed rather than keep my current car. I know that it’s possible to get a rental car for about $20 a day with a little bit of work online, but that is with the assumption that I have my own insurance. If I have to pay what the rental car agencies charge for their insurance, the daily rate will more than double in most cases making driving my own car much more reasonable.
While purchasing insurance from the rental car agency is outrageously expensive, it’s possible to get liability insurance from regular car insurance providers for these instances. Purchasing this type of rental car insurance would be less expensive than insurance on my own car, but using self bought and credit card rental insurance comes with some inherent risks.
The major risk is that there will be some damage to the rental car. By using my credit card in conjunction with buying a liability insurance policy, I would have a $250 deductible for any damage done to the rental car. In this instance, it isn’t a major accident which is of concern, but a minor one which is much more likely to happen, and for which I have little control over. With a rental car, I can’t decide whether or not to fix the cosmetic damage, and will have to pay no matter what.
Take, for example, if a rock hits the window of the car (which did happen this year to my car) and leaves a crack in the window. For my car, I simply left it to see if the crack would spread. It didn’t, so I have a small chip in my windshield, but it does absolutely no harm and is not an issue. If, on the other hand, this was done to a rental car, I would automatically have to pay for the windshield repair.
Another example is a small dent I have in the rear of my car that also happened this past year. I’m pretty sure I know what happened. A kid likely swung the door open quickly and it hit the back of my car leaving a dent (it’s exactly what it looks like) and then the car left without leaving a note. With my own car, since I have a high deductible, I simply decided not to get it repaired. If it had been a rental car, however, I would have had to pay for the deductible to make the repair. Both these situations show that I have much more flexibility in deciding how to handle small repairs if I keep my own car rather than opt for using a rental car.
The difference in insurance costs is about $200 for the year which is a significant amount, especially on a minimum wage budget. I need to decide is the flexibility and risks that come with using a rental car outweigh the savings I would get with insurance.
Registration and Taxes
Another area of consideration is the cost of registration and taxes for the car which ends up being several hundred dollars. This includes getting a smog certificate which I think my car would pass without an issue (so there wouldn’t be any additional repair costs), but still adds to the overall cost. Add this cost to the extra cost for insurance and the possible maintenance and repair costs that could appear and going carless is definitely the less expensive option of the two.
With all this in mind, it might be a surprise that I’ve decided to keep the car on a trial basis much like I’m going to try traveling on a trial basis for the first few months. The registration on the car comes up in April of 2013, which will mean I won’t have to pay the renewal, licensing and registration fees for this until then. This should give me a good indication of whether it makes sense for me to keep up the car, or to see that it’s simply too expensive to keep and to find alternative ways to get around.
The main reason for me making this trial decision is because I have decided to travel full-time. If I had a place of my own in a set place, I would go carless. In that situation, I would only need to rent a car maybe once every several months. Being on the road, along with the new rule that I can’t stay with friends or relatives for more than a week, means that I will have to travel a lot more often which would require me to rent a car (or pay for other types of transportation) at least several times each month. This tells me that keeping my current car will actually be less expensive with this lifestyle.
There is only one way to really find out. Over the next three months I will track the costs of the car and compare them with what I would have had to pay without it. That should put me in a good place to make a judgement as to whether I made the right decision or not toward the end of March. At that point I can reevaluate the situation and make another decision from there.
What do you think? Have I forgotten expenses in either scenario that I should be considering? Am I not searching for less expensive alternatives that can get me around more effectively at less cost rather than a car even while traveling full-time? In a similar situation, what choice would you make given the thought process I have outlined above? I’m not sure that this is the correct decision, but it certainly will make things interesting for the first few months of this challenge…
Next entry: Preparation
(Photo courtesy of hoshner447)
Maybe I’m the only one, but it seems to me that you have gone so far outside the realm of the average minimum wage earner that this exercise is nearly pointless. The average minimum wage earner is not self employed, does not have the option of traveling around and staying with friends and family while earning money, and does not have the sort of flexibility that you have because you aren’t REALLY earning minimum wage, you’re only playing at it.