Saving for a big goal requires big sacrifices. So if you’re trying to build up a house deposit, you should consider ditching your car.
The big three expenses for almost everyone are housing, transport, and food. But transport is often the one that people forget, thinking it’s unchangeable. It’s not.
The cost of your car isn’t just the cost of petrol. It’s also the cost of buying it in the first place, paying interest if you used a loan, maintaining it, paying for a WOF and rego, and paying for insurance.
This is what’s called the true cost of a car.
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For just a small car, AA figures show that warrant, rego and insurance can add up to $4500 a year. That’s steep.
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Meanwhile if you’re driving it a relatively conservative 14,000km per year, the AA says it will cost the average person $2400 a year in petrol. Then you should add in about $1500 per year for basic maintenance like oil changes and replacing tyres.
That’s just the minimum costs for a small car. So given how many of us Kiwis are partial to a big engine, or a ute, many of us are likely paying a lot more.
Now I get it, it’s sometimes tricky to make life work without a car. But how badly do you want that house deposit – are you prepared to make some lifestyle changes to get it?
If you are in a partnership, consider becoming a one car household. Don’t forget, the fixed costs of having the car are in the thousands, before you even put in petrol. Getting rid of it entirely is more important than just not using it.
Or could you have no cars, car pooling to work, and taking public transport elsewhere?
It’s even better if you can bike. Then you can scrap your gym membership too, and jack up your deposit savings even further.
If you really can’t imagine how you can get around without a car, then it might be worth moving house before buying house.
Living more centrally might cost more on paper, but if you can ditch your car and get everywhere on foot, it will likely cost you less overall.
You can’t nickel and dime your way to saving hundreds of thousands of dollars. Besides, you don’t want to spend your life agonising over every small, muffin-sized decision.
A big change that’s one and done might feel big at the time, but before you know it it’s just your new lifestyle that you don’t even think about.
Whether you’re wanting to buy your first home, or boost your equity so that you can get into an investment property too, ditching your car could be the way to do it.
- Frances Cook is the host of the personal finance podcast Cooking the Books. She is not a financial adviser, and all information is general in nature. For individual advice, see a financial adviser.
