Lifestyle

Can We Reduce Our Transportation Expenses?

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reduce transportation expenses

Do you think life is getting more expensive? We just had the highest inflation rate in almost 40 years. Everything seems to be getting more expensive this year. In particular, gasoline and used cars. Over the last 12 months, the price of used cars increased 31% and gasoline became 58% more expensive. Yikes! Fortunately, we don’t drive much so we avoided the worst of this inflationary period so far. Oh, our 2010 Mazda is still going strong. We won’t need to shop for a vehicle anytime soon, but I’m wondering if we can reduce our transportation expenses even more.

The top 3 expenses for American families are housing, transportation, and food. According to the Bureau of Labor Statistics, these 3 expenses make up more than 60% of the average household’s spending. If you want to reduce your spending start with the Big 3.

RB40 household’s transportation expense

I keep track of our cash flow every month and post it here on Retire by 40. That record comes in handy when I need to see how much we spend in a category. In 2020, we spent way less on transportation than the average American household. According to the BLS, the average household spent $9,826 on transportation in 2020. That’s down from the previous year. 2020 was the year of Covid so transportation spending was lower than usual. A lot of people transitioned to working from home and they drove less. Gasoline was cheaper back then as well. Also, vehicles were cheaper. New and used vehicle prices increased significantly since then due to various factors. It seems transportation expenses will go way up for the average family in 2021.

In contrast, the RB40 family spent $1,519 on transportation in 2020. Wow, that’s much lower than average. How did we do it?

  • Share one car – We only have one vehicle so the overall spending is already lower than most families. If you have more vehicles, you’ll pay more for gasoline, repairs, maintenance, licenses, registration, and insurance. They all add up.
  • Low mileage – We put about 6,000 miles on our car in 2020. That’s less than half of the average miles driven per car in the U.S. (about 13,500 miles).
  • No car loan – I paid cash for our Mazda 5 in 2010. The price was around $17,500. It was just more convenient to pay cash. I didn’t want to deal with a car loan.

I guess we should factor the price of our Mazda into the equation. The price was around $17,500 and we drove it for 11 years so far. Oh, the car was hit twice and we received about $6,500 from the other parties’ insurance. Those payments reduced the total price further because I kept the money and didn’t bother fixing the dents. Every year we keep this vehicle, the price per year will decrease.

  • Cost per year our Mazda 5 = (price of the vehicle – insurance recovery) / years used
  • ($17,500 – $6,500)/11 = $1,000/year

We will factor in $1,000 to our annual transportation expense. Even if we add the cost of the vehicle, we still spent way less on transportation than the average U.S. household. In 2020, we spent $2,519 on transportation. The average household spent $9,826.

A bike rear-ended our car. We got $4,800 to repair the damage, but I pocketed it and DIY.

Can we be more frugal?

Lately, I’ve been thinking about what we’ll do after our Mada 5 breaks down. I’m a bit worried because the price of new and used vehicles increased tremendously since 2010. Unfortunately, Mazda no longer makes this car, but Ford makes something similar. The Ford Transit Connect starts at $29,315. That’s about a 68% price increase if we want a similar vehicle… The Mazda CX-5 looks good too. A nicely equipped CX-5 costs around $30,000. That’s a lot of money to spend on a car that will get dinged up on the street. Maybe I can find a cheaper car when the time comes.

Fortunately, our car is still very reliable. The odometer has about 63,000 miles on it. The car drives well and never experiences any mechanical or electrical problem. The exterior is another story. It was in 2 low-speed accidents and it has numerous dents and dings from parking on the street. At this point, I really don’t care how the exterior looks because it’s over 11 years old already. As long as it runs well, I’m happy with it.

Low usage

Here is how we use the vehicle.

  • I drive RB40Jr to school every morning. The school bus comes at 6:45 am. That’s way too early. He is barely waking up at 6:45 am.
  • I go grocery shopping in the suburbs about twice per month. The price is better so I go once in a while to stock up. I also go to the Asian grocery stores when I’m in the burbs. Unfortunately, there are zero Asian grocery stores within walking distance of our home.
  • Occasionally, I go to Home Depot, Target, or Wal-Mart.
  • A few times per year, we drive out of town for a vacation or a hike.

This is very low usage and it will drop next year. RB40Jr will start middle school and the bus comes by at a more reasonable hour, 8:45 am. I won’t have to drive him to school anymore. At that point, I think it might make more sense to go with a combination of car sharing, public transportation, and ride-hailing. I don’t really need to go shopping in the suburbs. If I really need something, I can always order online.

Pet peeves

Truthfully, reducing transportation expenses isn’t my biggest motivator. Our transportation expense is already low. It probably won’t go down much even if we don’t have a vehicle. I just think life will be easier without worrying about a car. Here is the list of my pet peeves about owning a car.

  • Street parking. We live in a busy urban neighborhood. Usually, I can park the car near our house. Occasionally, I have to park a few streets away if it’s really busy. That’s annoying because I want to keep an eye on the car. Also, Mrs. RB40 isn’t very good at parallel parking so that’s an issue. We don’t have a garage or a driveway. Oh, the street parking permit cost $195/year. What a rip off.  
  • Insurance. I don’t like paying car insurance. Once our son is old enough, the price will increase. That will make it even more annoying.
  • Dents and dings. I don’t really mind the dents and dings, but it is annoying to keep noticing new ones. People bang around when they park and our bumpers are beaten up.  
  • Maintenance. Fortunately, our car is very reliable and doesn’t need a lot of repairs and maintenance. However, it is getting older and probably will need more upkeep soon.
  • Inefficiency. It seems so inefficient to have the car just parked there most of the time. It’s a wasted resource.
  • Vacation. We usually leave our car on the street when we take a long international trip. This is not good because the city frequently puts up no-parking signs on our street. If you’re not there to move the car, it’ll be towed.

Anyway, I think day-to-day life would be a bit easier without a car. Then we won’t have to worry about it. The only thing I’d miss our car for is when we go on road trips. We could rent a car for those occasions.

Life without a personal vehicle

I’m not sure how much we’d save if we don’t have a car. Let’s do a quick estimate

  • Public transportation: $20/month. Mrs. RB40 takes public transportation to work, but it’s subsidized. I rarely take public transportation, but probably would take it occasionally if I don’t have a car. Let’s just allocate $20/month here.
  • Car-sharing: $100/month. Let’s pencil in a few trips around town per month with Zipcar.
  • Ride-hailing: $30/month. We’ll also pencil in a trip per month with Uber or Lyft. Although, we probably can take public transportation almost everywhere we want to go in Portland.
  • Road trips: $50/month. I’ll budget $600/year for car rental. This is for getting out of town.

Okay, it looks like we’ll spend around $200/month for transportation even if we don’t have a car. That’s not much saving from our current situation. In 2020, we spent $2,519 on transportation. Going carless would save just $119. That’s not worth it as long as our Mazda 5 is still running well. It would be much cheaper than buying a new vehicle. Luckily, we don’t have to make this decision yet.

When our Mazda 5 stops working, we’ll try going carless for a while. If it doesn’t work, we’ll look for another vehicle. It’s good to have more choices. For now, this is just an interesting analysis to do.

What about you? How much do you spend on transportation? Would you consider going carless?

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.

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