When planning for retirement, many envision downsizing by moving to a smaller home to reduce costs. However, another viable money-saving approach is scaling down to one vehicle. According to a 2024 AAA study, the average annual cost of owning and operating a new car stands at $12,297.
This figure includes expenses many may find irrelevant such as depreciation ($4,680 annually) and finance charges ($1,332 annually). For those who aren't concerned about resale value or have paid off their vehicle, these costs may not apply. AAA estimates predictable costs like annual insurance premiums at $1,715, in addition to license, registration fees, and taxes averaging $815.
However, fuel and maintenance, repair, and tire costs are areas to concentrate on. Average fuel costs are estimated at 14.9 cents a mile, while maintenance, repair, and tire expenses are about 10.13 cents a mile. The type of vehicle and the mileage are crucial determinants of these costs.
If you cover 10,000 miles in a year, the lower limit of expenses for gas and maintenance adds up to approximately $2,503. Adding an insurance premium brings the annual cost to around $4,218, excluding any additional parking or storage costs.
Downsizing to a single car also has non-monetary benefits such as freeing up garage space, reducing stress on your budget, and aligning with a less travel-intensive lifestyle. One can opt for rental cars or ride services like Lyft or Uber when simultaneous car use is necessary.
Finally, downsizing to one vehicle can bring significant savings and ease financial worries in retirement. However, if the need for multiple cars is non-negotiable, alternative cost-cutting strategies may be necessary.