How to Stop Your Car from Stealing Your Future
The American Transportation Trap
After housing, transportation is typically your second-largest expense. The average American household spends about $10,000 per year on transportation, but I've seen people spending anywhere from $500 to $25,000+ annually.
Here's the shocking part: most people have no idea how much their transportation actually costs.
Almost no one, myself included, drives down the road and counts $0.55 every mile. We just get in the car and do what we need to do. Car expenses are hidden (unlike restaurants) because we don’t pay as we use them!
Sometimes people know their car payment ($400/month), but they forget about insurance ($150/month), gas ($200/month), maintenance ($100/month), registration ($50/month), and depreciation (often $300+/month for newer cars). Suddenly that "$400 car payment" is actually costing $1,200/month or $14,400/year. These numbers will vary by state and type of vehicle, but you get the idea.
Using our 25x rule, that means you need an extra $360,000 to support that transportation lifestyle in retirement.
Today we're going to explore every way to optimize transportation costs, from quick wins to complete lifestyle changes.
Why Cars Are Wealth Destroyers
Cars are my favorite topic for financial independence! I firmly believe that cars are the number one way people harm their financial selves. Housing is big and “in your face” every month. Cars secretly drain you with hidden costs.
Before we dive into solutions, let's understand why transportation costs matter so much for FI:
Cars depreciate rapidly. The average new car is $50,000. It might be worth $20,000 after 5 years. That's $6,000/year just disappearing, before you even factor in payments, insurance, or gas.
Financing amplifies the damage. That $50,000 car financed at 6% for 5 years costs $57,998 total. You're paying $7,998 in interest to buy a depreciating asset.
Lifestyle inflation follows car upgrades. People who drive expensive cars tend to live in expensive neighborhoods, eat at expensive restaurants, and make expensive choices across the board.
Opportunity cost is massive. Cars are really expensive, and money spent on car payments and insurance can't be invested. A $500/month car payment invested at 7% for 30 years becomes $612,000.
Category 1: Optimize What You Have (Easy)
Shop Your Auto Insurance (Annually)
You’re probably not surprised. Just like housing, it pays to shop around every year for car insurance. If you are like me, your rate probably goes up every year, so contact three different insurance companies every year and get quotes. No excuses, no exceptions. This is little work for potentially hundreds of dollars of upside.
Bonus: If you are a safer than average driver, increase your deductibles. Yes, you'll pay more if you have an accident, but you'll save hundreds per year in premiums. If you drive aggressively and think you are likely to be in an accident, don’t increase your deductibles, but know that spending money on collision repair is not great progress towards financial independence!
Maintain Your Car Properly
Regular oil changes extend engine life dramatically
Keep tires properly inflated (improves gas mileage by 3-5%)
Replace air filter when dirty (another 5-10% MPG improvement)
Fix small problems immediately before they become expensive problems
Drive More Efficiently
Combine trips instead of making multiple separate runs
Remove extra weight from your car (better MPG)
Use cruise control on extended highway driving (better MPG)
Accelerate gradually and anticipate stops (better MPG)
Skip the premium gas unless your car specifically requires it
Reduce Insurance Costs
Bundle with home/renters insurance for discounts (but check separate pricing too!)
Ask about low-mileage discounts if you drive less than 10,000 miles/year
Take a defensive driving course for additional discounts
Remove comprehensive coverage on low value cars
Category 2: Moderate Changes
Buy Used Instead of New
This is the single biggest transportation money-saver for most people. Let someone else eat the massive depreciation hit.
A 2-3 year old car gets you 90% of the benefits of a new car at 60-70% of the cost. A 5-7 year old reliable car gets you 80% of the benefits at 40-50% of the cost.
Let’s explain that a bit more. A car is designed primarily to transport you from A to B. That is its core function. It can also play music and store equipment, but this is secondary. The new car might have a better touchscreen and fewer scratches, but it is likely no better at actually transporting you.
If you’re financially independent and flush with cash, go buy a new car. For anyone working their way to FI, BUY USED. Modern cars are very reliable. I still drive a 2008 Toyota and have no plans to replace it.
Pay Cash Instead of Financing
Car loans are expensive and force you to carry full insurance coverage. When you pay cash:
No monthly payments
No interest charges
You can reduce insurance to liability-only (only if you can afford to replace it)
You own the car outright
"But Max, I don't have $20,000 cash!" Then buy a $10,000 car. It's better to own a reliable $10,000 car than to finance a $20,000 car.
Buy More Reliable, Less Fancy
Focus on reliability over features. A 10-year-old Toyota Camry or Honda Civic will cost less to maintain than a 3-year-old luxury car.
Research reliability ratings before buying. Some cars are money pits, others run for 200,000+ miles with basic maintenance. Generally Toyota/Lexus, Honda/Acura, Subaru, and Mazda are your best bets for reliability. On the flip side, Chrysler/Jeep/Dodge tend to be the least reliable. It can differ by model, so research specifics.
Reduce Your Mileage
Don’t take scenic drives
Work from home (if possible)
Move closer to work (calculate whether higher housing costs are offset by transportation savings)
Combine errands into single trips
Walk or bike for short trips (Controversy! We’ll talk lots about this later.)
Consider One Car Instead of Two If you're married or living with a partner, can you get by with one car? This eliminates:
One car payment
One insurance policy
One registration fee
Half the maintenance costs
Growing up in the 1990s, many families on my street only had one car. My wife and I have shared a single car for most of our married life! Yes, you have to coordinate, but you can cut ~50% off your transportation expenses.
Category 3: Bigger Changes
Move to Reduce Transportation Needs
Often the best transportation optimization is eliminating transportation entirely.
Live within walking distance of work
Choose a location with good public transit
Move to a more walkable neighborhood
“Wait! Max, didn’t you say earlier I could move further away to save on housing costs? Now you’re saying I should move closer? What gives?”
Yes, this might increase housing costs, but the total cost (housing + transportation) often decreases. Sometimes moving away is the right answer because transportation is cheap relative to housing. Other times moving closer is better because housing is cheap relative to transportation. It’s different for every location and you’ll have to do the math for your city.
Embrace Alternative Transportation
Right away, let me say that these ideas work much better in large cities than rural areas. However, most of the country lives in an urban area, so these ideas will apply to quite a few readers. If this isn’t possible for you, I understand.
Public Transportation
In many cities, monthly public transit passes cost $50-150/month. Compare that to $1,000+/month for car ownership.
Yes, it often takes longer. Yes, it's probably less convenient. But it could save you $10,000+ per year, which might be worth 2-3 years of earlier retirement.
I’ll share details of my own public transportation in future posts.
Biking
A good bike costs $300-800 and lasts for years with minimal maintenance. For trips under 5 miles, bikes are often faster than cars in urban areas (no parking, no traffic).
I biked to work for years to save money. No, biking in the snow wasn’t ideal, but I saved a fortune!
Car Sharing Services
In some cities, services like Zipcar cost less than ownership. Alternatively, you can combine them with public transit. Check and see if your area has a carshare program.
Rideshare/Uber/Lyft
Sometimes it makes sense to bike locally and use rideshare for longer trips. Together, this can be less expensive than car ownership. Run the numbers for your specific situation.
Category 4: Extreme Strategies
Motorcycle/Scooter
Much cheaper to buy, insure, and maintain than cars. Obviously comes with safety trade-offs that aren't right for everyone.
I am a former motorcycle owner and I wouldn’t dare commute alongside modern drivers in some large cities. That said, if you live in a small town with great weather, this could be ideal.
Car-Free Living Some people eliminate cars entirely, using a combination of biking, public transit, walking, and occasional rideshare/rentals.
This isn't feasible everywhere, but in walkable cities with good public transit, it can save more than $10,000 annually.
Car Pool
Only need a car to get to work? Pay a coworker to take you.
Seasonal Car Ownership
You can rent cars monthly for discounted rates. If you can get by during the summer without a car, look into renting during the winter. This works in some climates and situations.
Work Vehicle Double-Duty If your job provides a vehicle, maximize personal use within policy limits. If possible, drive on your employer’s dime!
The Psychology of Car Decisions
Like housing, car choices are often more about emotion and status than practical transportation needs.
Status Signaling: Cars are highly visible status symbols. People often buy cars to project an image rather than meet transportation needs. This is why you see $150k Mercedes G-Class SUVs at the mall.
Identity: "I'm a BMW person" or "I need a truck because I'm tough." Car choices become part of identity.
Safety Paranoia: People convince themselves they need a huge SUV for safety, when modern compact cars are extremely safe. (Check for yourself)
Convenience Addiction: Americans have become addicted to the convenience of personal vehicles and overestimate how much they actually need that convenience.
The key is separating genuine needs from wants and social pressure.
My Personal Transportation Evolution
2008: Two-year-old Honda S2000 for $23,000 (awesome car but a ludicrous financial decision since I had a negative net worth!)
2009: Purchased 1993 Civic Del Sol for $3,000 to avoid putting so many miles on the S2000 (now I own two cars for one person! Why?!)
2009: Buy $10k motorcycle because they’re fast. (If you’re still counting, I now own and insure three vehicles.)
2012: Get married! New wife quickly totals Civic Del Sol and purchases brand new $24k Honda Civic. (Lovely car. Lovely wife. Horrific financial decision.)
2012: Sell all vehicles for massive losses and move to New York City. *DING DING* This was a major lesson.
2014: Discover FIRE! Move to New Jersey, live car-free. Not easy, but I had great muscle tone after hauling targets bags for miles during grocery shopping.
2015: Move to Texas. Purchase 2003 Acura RSX in cash for $4,500 and share a single car.
2016: Move to California. Live car free! (RSX went to storage.)
2017: Move to Colorado. Bike to work! (Wife commuted in RSX.)
2018: Purchase 2008 Toyota Land Cruiser ($25k) for winter in the mountains. (RSX wasn’t safe in the snow.)
2019: Move to Texas. Sell 2003 Acura RSX and share Toyota Land Cruiser.
2020-2025: Share Toyota Land Cruiser. (Currently worth ~$22k)
Do you see the major change in 2014? We went from wasting money on fancy cars to living car-free or sharing a single *very* used car. This was the single largest change I made in my spending. This is where most of my savings came from.
Common Transportation Mistakes
Buying Too Much Car Most people buy cars based on edge cases. "I need a pickup truck because I might need to haul something once a year." For occasional needs, renting makes more sense.
Financing Toys Cars are tools, not toys. If you want a fun car as a hobby, buy it with cash after you're financially secure. (No S2000 until you’re financially free!)
Ignoring Total Cost of Ownership People focus on monthly payments and ignore insurance, maintenance, gas, and depreciation. Always calculate total cost.
Emotional Decisions Buying cars when emotional (after a breakup, job change, midlife crisis) leads to expensive mistakes.
Action Steps By Comfort Level
This Week:
Get three auto insurance quotes
Calculate your true monthly transportation costs
Check your tire pressure and replace air filter if needed
This Month:
Research the reliability and value of your current car
Calculate whether paying off your car loan early makes sense
Consider whether you could reduce your driving by 20%
This Quarter:
If you're financing, consider selling and buying something cheaper with cash
Explore alternative transportation options in your area
Calculate whether moving closer to work would save money overall
This Year:
Make a major transportation optimization if the numbers support it
The Bottom Line
Transportation is your second-biggest lever for reaching FI faster. Most Americans spend 2-3x more than necessary on transportation because they make emotional rather than mathematical decisions.
The goal isn't to have the worst car possible. It's to have reliable, safe, affordable transportation that serves your needs without destroying your financial future.
Remember: every $100/month you save on transportation reduces your FI number by $30,000. That reliable used car might not impress your neighbors, but it could help you retire years earlier.
Next time, we'll tackle food expenses, the third major category where small changes create big results, and an area where optimization often improves your health as well as your wallet.
Until then, your homework: Calculate your true monthly transportation costs (payment + insurance + gas + maintenance + depreciation). If it's over 15% of your gross income, you have a major optimization opportunity.
Here's to getting where you're going without going broke,
Max
Loved this!