Higher auto insurance costs: keep car or switch to public transit?

Question

In the next couple months, my personal situation will change leaving me with an important decision to make vis-a-vis my vehicle and modes of transportation.

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My current situation: living in the suburbs, driving to work

• Monthly insurance premium: $150
• Access to public transit: No
• Commute to work: 40 km one way
• Parking costs: nil

My expected situation in a couple months: living down town

• Monthly insurance premium: approx. $400
• Access to public transit: Yes
• Commute to work: 8 km one way
• Parking costs: $200/month at residence

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The way I see it, I have three options:

1. Keep my car and continue driving to work: my insurance premium is significantly higher because I am living in a more congested down town area. I now also have to pay to park in the building. My costs of operating a vehicle are really high but I have a high level of mobility to go anywhere there isn't public transit.

2. Keep my car in storage, use public transit: keeping my car in storage allows me to reduce insurance coverage to just theft/fire. I will still be paying for parking/storage costs. However, I get to own a car and if my circumstances change again, I can change my coverage to reflect this. It also saves me the hassle of having to sell the car, and buy another one in the future.

3. Sell my car, use public transit, rent a car when needed: it will be nice to not have to pay for fuel, maintenance, parking and insurance. Using public transit costs a fraction of owning a car. On the other hand, I might need a car in the future and there is the overhead of having to search for a car with a good record, pay sales tax, etc. The way insurance is calculated, I lose points for not being continually insured during the time I didn't have a car.

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Other details:

• Approx. blue book value of car: $6,000
• Approx. mileage on the car: 110,000 km
• Reason for significant increase in insurance: I am moving from the suburbs of a small city to the down town core of a large city. I recently got a speeding ticket. I am a single, 24 year old male.
• Car utilization: apart from my commute to work, I expect to walk everywhere while living in down town, especially during the week. I could see myself using the car maybe every other weekend to visit friends who live in the suburbs- however, this kind of use is infrequent and I could see the merit in renting a car for the day and using it for all my errands that need me to have a car.

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Which of the three options is most cost effective and why? Are there any factors apart from convenience, time, and money I have overlooked?

Answer 1

Looking at your numbers, I would definitively consider selling the car, and use the public transportation instead. You could easily save $450 month, plus gas and maintenance. As you mentioned, public transportation will be only a fraction of this amount, so you might end up saving around $400 monthly.

If you decide to keep the car, the amount that you will spent monthly is easily a payment for a brand-new car. What if, God forbid, for any kind of reason, you get a traffic ticket that can increase your insurance premium? What if the engine stops working, and you will need to spent thousands of dollars fixing the car? With this, and all of the other expenses pilled up, you might be unable to afford all this at some point.

If you decide to sell the car, the money that you will save monthly can be put in a savings account (or in any other sort of "safe" investment instrument). In this way, if your situation changes where you need a car again, you will be able to easily afford a new car. Regarding your need to visit your friends on the suburbs every other weekend, I think you can just talk with them, and meet on places where public transportation is available, or ask them to pick you up in the nearest station to the suburbs.

In conclusion, based on what you said, I do not think the "little" convenience that you get in owning the car outweighs the big savings that you get monthly, if you decide to sell the car.

Answer 2

I've lived this decision, and from my "anecdata": do #3

I have been car-free since 2011 in a large United States city. I was one month into a new job on a rail line out in the suburbs, and facing a $3000 bill to pass state inspection (the brakes plus the emissions system). I live downtown. I use a combination of transit, a carshare service, and 1-2 day rentals from full service car rental businesses (who have desks at several downtown hotels walking distance from my house). I have not had a car insurance policy since 2011; the carshare includes this and I pay $15 per day for SLI from full service rentals.

I routinely ask insurance salesmen to run a quote for a "named non-owner" policy, and would pull the trigger if the premium cost was $300/6 months, to replace the $15/day SLI. It's always quoted higher.

In general, our trips have a marginal cost of $40-100. Sure, this can be somewhat discouraging. But we do it for shopping at a warehouse club, visiting parents and friends in the suburbs. Not every weekend, but pretty close.

But with use of the various services ~1/weekend, it's come out to $2600 per year. I was in at least $3200 per year operating the car and often more, so there is room for unexpected trips or the occasional taxi ride in cash flow, not to mention the capital cost: I ground the blue book value of the car from $19000 down to $3600 in 11 years.

Summary:

1. Fuel cost is death by papercuts.
2. Repairs can stack up in the second 100K of mileage.
3. Commuting by car and looking for parking was a sense of my mortality shifting away like sands through the hourglass, so are the days of our lives.

Pull the trigger, do it :D

Answer 3

So you will be saving $450 + price of commuting gas - cost of transportation + cost of commuting maintenance - the cost of recreational car rentals if decide to go without a car. For some people that cost is not enough to forego the convenience of owning a car.

One factor you have not alluded too is your current financial goals. Are you attempting to live a spartan lifestyle in order to dramatically change your net worth? Give up the car.

There really is more then the math you are presenting so the decision is very much based upon your behavior and your goals in life. It is very likely that owning the car will be more expensive, but it will also be less convenient. Is that cost great enough to forego the convenience? Only you can decide.

Answer 4

I'm guessing Toronto? Sell the car! Use public transit. Save a ton of money.

You can always rent a car for the day or weekend (or use a service like Uber) when necessary at a fraction of the cost of car ownership, and feel good about it!