According to AAA, the average American spends 20 percent of their income on vehicles. That’s a lot. What if you could cut that number in half? If you downsize from two cars to one, that’s exactly what you’d be doing.

Car? What about a bike?

Well look who’s here, Tommy Two Toes. Welcome back.

Yeah, whatever. I wanna know what you got against bikes.

Nothing, nothing at all. In fact, we’ve got a couple of beach cruisers at the house, they’re great.

I’m talking Harleys, bean-head. Jeez.

Oh. Well, I think motorcycles are dangerous, but that’s up to you.

That’s right. Okay, we gonna do this or what? Get on with it.

If it’s alright with you, I’m going to use ‘cars’ in today’s discussion to mean any type of vehicle.

Yeah, whatever. Bikes would be better.

Downsizing to One Car in Retirement

Retirement brings many changes, and for those of us who work outside the home it means no more daily commute. Goodbye traffic jams, see ya tailgaters, so long lousy drivers!

That’s why I’m here, I’m sick of my job.

Well, you came to the right place. Retirement means no more commute which means you don’t have to own two cars anymore – or, uh, bikes as the case may be.

For some households, downsizing to one car in retirement may be a nonstarter. For example, if you and your spouse or partner need a big truck to tow your enormous boat but you also need a fuel-efficient sedan to go on road trips, you should not pare down to one vehicle because no one vehicle can do all that.

Another example would be an active couple that’s involved in a lot of separate activities, or a couple who has children or grandchildren who need to be chauffeured around. One car is not going to cut it with that level of activity. There are bound to be overlapping commitments.

Decisions, Decisions

In life we make many decisions, some big and some small. 

Yeah, some good and some bad…like coming to this snooze-fest.

You are free to leave, Mr. Toes.

In every decision there is a cost and a reward. The cost is what you pay in terms of money, time, effort or other assets. The reward is what you get in return. For example, the reward for buying a movie ticket is you get to watch a movie on the big screen. The cost is ten bucks. 

Yeah, that’s too much.

It’s up to you to decide if the reward is worth the cost.

Yeah, I’m telling you, it ain’t.

Downsizing to one car in retirement is a big decision, but it’s not irreversible. It’s not like jumping off a cliff, there is an undo button. If you try it and it doesn’t work out, you can just buy another car.

The Cost

What is the cost of downsizing to one car in retirement? For one thing, convenience. If you only own one car, you and your spouse or partner will have to coordinate your schedules. Obviously if you are doing something together, having one car is not an issue. But as pointed out in Retirement-Proof your Marriage, couples need to do some things separately and have time apart to pursue their own interests.

Tell me about it, my old lady drives me nuts.

I’m sorry to hear that. If you are already retired, the convenience part is pretty simple, just look out the window. If there is always at least one car sitting in the driveway, becoming a single car household shouldn’t be an inconvenience. However, if the driveway is often empty, you need to evaluate your schedules. Are your individual commitments flexible? These are the kinds of questions you need to ask yourself in order to determine if downsizing to one car in retirement is right for you.

To a lesser degree, another cost in terms of convenience is when you have to take your car in for repairs or maintenance. With two cars, you can have your spouse or partner follow you to the shop and bring you back home, or the two of you can go out together while the car is being serviced. With only one car, one of you is going to have to sit in the waiting room until the mechanics are finished.

All them bratty kids running around screaming their heads off? No thanks.

There are other ways to address the situation. Family or friends could give you a ride or you could use public transportation or call an Uber.

Did you just say ‘call an Uber’? Nobody calls Uber, it’s an app!

Alright, well, I just got my first iPhone a while back, so I’m still learning. I bought it new and got a good deal on it because it was one or two generations behind the latest model. What are they up to now, 7?

Try 10, bean-brain. Check it out, this thing is so freakin' huge it barely fits in my pocket.

Nice. The other cost of downsizing to one car in retirement is freedom. As Americans, we love our freedom.

You got that right.

When you own two cars, you’re free to go anywhere anytime you want. If you get a text from a friend asking you to meet them or whatever, you’re there. If you get a mid-afternoon craving for McDonald’s, you’re in the drive-thru in a matter of minutes. On the other hand, if you only have one car and your significant other has it, you won’t be able to do things like that.

Yeah, I’m not liking this so much. Let’s hear the reward part.

The Reward

The other half of the equation is the reward. If you slim down to one car, what do you get in return? Let’s talk about the concept of cost for a moment. A car costs you money the entire time you own it. You have to pay for gas, insurance, maintenance, repairs, and license fees. In addition, you are still paying for the price of the car even after you’ve made the last payment.

How’s that?

The true cost of a car in terms of its price is known as net cost. Net cost is the difference between the purchase price and what you get for it when you sell it or trade it in. Based on that definition, even after you’ve made the last payment a car is still costing you money because it’s continually going down in value. The older a car is, the less it’s worth.

Let’s look at an example. You buy a new car and the dealer gives you a great deal, you get it for only $20,000. 

I always gets good deals, you know what I’m sayin?

Yes. Anyway, the dealer talks you into a short-term loan and the monthly payments are high by car payment standards: $500. You keep the car for one year and then you sell it for $17,000. Mr. Toes, how about whipping out that fancy phone of yours and telling us what the total cost is?

$500 a month for a year? 500 times 12….$6,000.

Wrong.

Huh?

You should have taken the money you spent on that phone and used it to go back to school. 

Hey, don’t forget who you’re talking to here, bean-boy. How many toes you got?

Uh, all of them.

You wanna keep it that way?

Um…

You should see your face! I’m just messing with you, man.

Okay. Anyway, you bought the car for $20,000 and you sold it for $17,000, so it cost you $3,000.

What about the six Gs I paid?

It’s true that you made $6,000 in monthly payments, but you got some of that back when you sold the car for $17,000. The true cost of a car in terms of its price is the net cost: purchase price minus selling price.

What’s next? Two trains leave a station, one is going 50 miles an hour…?

No, that’s it for the math today.

Good.

Let’s get back to the reward. By downsizing to one car in retirement, you avoid the cost of owning a second car. The total cost of ownership for a car is somewhere between $3,000 to $15,000 per year. That includes fuel, insurance, maintenance, repairs, taxes, fees, loan interest, and the net cost as we discussed. $3,000 to $15,000 is a pretty broad range.

Speakin of pretty broads, you should’ve seen this one at the Rooster last night. She had a set of—

Mr. Toes!

Hey, we’re friends, call me Tommy.

Alright Tommy, would you please stop interrupting?

Yeah, sure. I was just trying to, you know…participate.

Great. Thank you. As I was saying, the range for the total cost of ownership is $3,000 to $15,000 per year, but on average it’s $7,000. It depends on the purchase price, age of the car, fuel efficiency, gas prices, miles driven, and length of ownership.

The cost of ownership for someone who owns an older model car that isn’t driven very much will tend toward the lower number of $3,000 per year. On the other hand, a person with a long commute who trades in last year’s model for a new Escalade every year is going to be closer to $15,000 per year.

Hey, I got a question. What is it for bikes?

I don’t know offhand, let me get back to you on that.

Final Word

If you are thinking of downsizing to one car in retirement, this is what you need to ask yourself: am I willing to put up with the inconvenience and the loss of freedom in exchange for about $7,000 per year?

We ain’t retired yet. What would you do?

We’re not retired yet, either. I think it comes down to how busy you are in retirement. I mean, if you are only doing a couple of things a week individually where you need your own wheels, you can probably adjust your schedules and make it work. For example, maybe you like to fish. So, go fishing when your significant other doesn’t have anything planned.

My parents only have one car, but they’re in their 80s. So, it’s also an age thing. The older we get, the less active we tend to be.

Why can’t it wait? Who says we gotta decide now?

That’s a valid point, you don’t necessarily need to decide now. The point of thinking about it now is for those of us who do our own retirement planning. When estimating living expenses in retirement, owning two cars makes a big difference.

Yeah, that makes sense. Well, thanks for the lesson.

You bet. Come back anytime.

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