Subscribe in a reader

Are you a web programmer familiar with LAMP stack and want to work from home? Please fill out an application here! Full time job, salaries range from around $1,000-$6,000/month.

These days, practically everyone has a car. In fact, people buy a car when they’re 16 and don’t have the money for it, which is extremely reckless since you should save money while you’re young. In general, people seem to expect you to have a car (especially in California) as soon as you can afford it. However, this seems like an extremely bad idea to me.

First and foremost, the car is a depreciating asset. If you spend $10,000 for a car, not only are you spending $10,000, you also lost the opportunity cost that $10k would have brought you. That $10k invested in the stock market, would appreciate at 10% a year on average. That’s $26k in 10 years, $67k in 20 years, $175k in 30 years, $1.17 million in 50 years, not inflation adjusted of course. Taking an average inflation rate of 2.5%, that’s $20k in 10 years, $42k in 20 years, $87.5k in 30 years, or $370k in 50 years. Would you rather have one car now or 37 cars in 50 years?

In addition to a pure [[opportunity cost of money]], there is also an opportunity cost associated with the time spent driving. It take concentration and time to figure out where to go and drive there without crashing. This is time that can’t be used for anyting else. Even if you try to do something like listen to an e-book while driving, part of your concentration must be on the road so hence, your e-book reading experience would be slightly less than if you’d just sat around and listened to it. Since it’s also kind of not safe to do other stuff while driving, we can assume that people don’t do anything else while driving. However, this is a large amount of time. Some people drive upwards of an hour a day.

Let’s say on average, you drive 40 minutes a day. If instead, you took public transportation, it takes you 10 minutes total to walk to and from the public transportation service, and an hour on the bus or train. However, if you can use that hour effectively, performing tasks you would otherwise have performed anyway, then that hour essentially doesn’t matter! For example, when I go to work in the morning, it takes me 2 minutes to walk to the train station, 40 minutes to work, and 3 minutes to walk to my work place from the train station. Hoewever, on the train, I simply open my laptop and start doing the work I would’ve done at work anyway. I then go to work 40 minutes later, and leave 40 minutes earlier (which is just fine with my boss). In effect, my transportation time has been reduced to just 10 minutes. That’s a savings of 30 minutes per day!

30 minutes a day, times 50 work weeks a year, times 5 days a week – that’s 125 hours. If my hours are worth $50 each pre-tax (so about $35 post tax), that’s an additional $4375/year of value. So that $10k car, now essentially costs you $10k (the car value) + $4.375k(the opportunity cost of using the car) = $14.375k. So the opportunity cost of this lost out money, if invested in the stock market, is $534k in 50 years (inflation adjusted). Additionally, there is a decent chance that you might actually think of some sort of business opportunity or investment and return more than 10%/year.

Obviously there are other considerations such public transportation fares and the “freedom” of having a car, but looking at the numbers, that is one damn expensive thing to get!

If you feel that this post has been of value to you, please leave a donation to show your appreciation and allow me to bring this value to other people as well!

Ask a question or discuss this post in the personal development forum.

Email This Post Email This Post

Related Posts

Always Run
The Cab Company That Gets My Business
A Long Drive And A Chance Meeting With God
How To Come Up With Good Business Ideas
What Seems Closed Isn’t Quite Closed
The Value Of Our Parents
The Changing You
The Somewhat Incongruent Cabbing Incentives
How To Learn To Make A Good Investment
Some Thoughts About Purpose

Free Personal Development Email Updates

Not sure when the next article will appear?
Why not subscribe to email updates and get articles delivered to you instead?

Enter your email address:


8 Responses to “Why Not To Drive”

  1. Always Run : Personal Development for INTJs on June 23rd, 2007 5:10 am

    [...] Why Not To Drive [...]

  2. Lin on June 23rd, 2007 10:56 am

    “it takes you 10 minutes total to walk to and from the public transportation service”

    It will only take half the time if you run. ;-)

  3. sunny on June 25th, 2007 3:19 pm

    I think that not having a car is a great idea, but one thing to consider is that friends often get tired of someone who is constantly bumming a ride. Just be careful that by investing money you are not making withdrawls from relationships.

  4. Warren on June 25th, 2007 3:31 pm

    That’s a very good point Sunny. That’s why it’s important to count each trip with your friends as you would a taxi fare. When doing this, I oftentimes either pay my friends directly, or indirectly through like an expensive dinner, etc. This should factor into your public transportation costs when doing the calculations above.

  5. The Cab Company That Gets My Business on August 24th, 2007 11:36 am

    [...] you may know, I don’t currently own a car – See Why Not To Drive despite having more than adequate funds to purchase one. As such, I am a frequent user of taxis, [...]

  6. Doing it Differently Blog Carnival, 6th Edition : Today Is That Day on March 26th, 2009 3:44 am

    [...] Warren Wong at INTJ Personal Develop puts up a pretty convincing financial argument about Why Not To Drive. Hmmm…what to do with all of that [...]

  7. June 28 2007 Edition of the Carnival of Financial Planning | Personal Investment Management and Financial Planning Blog Directory on August 4th, 2010 12:14 pm

    [...] Wong presents Why Not To Drive posted at Personal Development for [...]

  8. Festival of under 30 finances...June 29th edition | How I Save Money.netHow I Save on September 23rd, 2012 7:43 pm

    [...] / Whatever Else They Want To Call It… posted at Grad Money Matters. Warren Wong presents Why Not To Drive posted at Personal Development for INTJs, saying, “These days, everyone expect you to have a [...]