One of the top three areas people spend (and waste) their money is on transportation (alongside food and housing). However, much more than for food, people seem to overlook that they have choices concerning their transportation and associated spending. For whatever reason, people tend to think of their transportation expenses as given, facts of life irrevocably laid out by the Traffic Gods at the dawn of time, nary to be questioned again.

Come on people! Never in human history have we had more options at our fingertips or greater ability to act in changing our situation, yet we can’t figure out getting around traffic or cutting down our spending on vehicles, gas, and insurance? I have more faith in you than that.

Let’s start with vehicles.

As you’ve undoubtedly guessed from the fact that you’re reading a blog about personal finance and early retirement, I think buying a depreciating asset is one of the dumbest things you could choose to do with your money. In fact, aside from setting your house or money on fire, the only thing worse than buying a depreciating asset is financing a depreciating asset.

Not only do I want to wash money down the toilet buying this brand new car, but I want to pay you even more! In fact, while we’re at it, throw in as many warranties as you can find, expensive insurance, and let’s make it a truck so that gas is a constant thorn in my side and turn all of these into recurring monthly expenses.

Alright, you get the picture.

Buying a new car is almost always a terrible idea, especially if you’re trying to retire early, save money, or just don’t want to hand your hard-earned cash over to the dealership as if it were a charity. As you’re likely aware, the moment you drive a car off the lot, it loses a huge amount of its value. You can literally buy the same exact car with just a little more mileage on it for thousands less with a little patience and perseverance. In most cases, it’s not just some sudden, complete surprise you need a car, so you should be planning for this.

The other consideration here is how you will fund your purchase. There are essentially three options:

1. Finance the purchase, paying the bank $1,000s in interest over years of your life
2. Save up to purchase the car ahead of time, paying yourself interest
3. Use a combination of bikes, public transportation, ridesharing, and Uber/Lyft to avoid the need to ever buy a car

Guess which one I’m going to suggest!

Saving vs Financing

I’ve covered this topic a bit here, but let’s take another look at the true cost of financing a car, especially a new one. The average auto loan for a new car in the US in Q1 2019 was $32,187.¹ The average interest rate was 8.35% (although as high as 20+% for lower credit scores), and the average loan term was 69 months. Excuse me while I vomit profusely.

Those details lead to a monthly payment of $589, before insurance, gas, or anything else. Let’s break that down compared to sticking the money in a savings account or investing it:

Let’s break this down a bit. First off, it hurt me to even look at these numbers. Please don’t spend this much on a car. Even if you’re going to finance, you can purchase a perfectly good used car that will serve all your needs for significantly cheaper. You don’t need a $589/month car payment on top of everything else, and the more expensive a car is, the more expensive it is to maintain or repair.

At the beginning of the loan, nearly 40% of each of those $589 payments is interest paid to the bank and doesn’t even reduce the debt. Over the term of this loan, our theoretical average consumer would pay $8,453 dollars above and beyond the original price of the car/loan, increasing his cost by 26.3% and bringing the total cost of the loan to $40,640. The car will only be worth ~$8,500 – $9,000 by the time he completes the loan, based on average depreciation numbers and taking good care of it.

Had that $589/month been stuck in a savings account at 2.7% interest (the highest available in a normal, high-yield savings account right now), Sally Saver would have been able to purchase a $30,000 vehicle within four years. This knocks almost two years off, saving $12,369 in payments and earning a discount of just over 5%, based on the interest she would have earned.

If she had invested it instead, earning 7% returns each year, she would have been able to purchase the vehicle after only 44 months, more than two years earlier. She would have saved $14,725 in payments and a whopping 22% of the purchase would have been funded by the returns on her investment instead of making all those payments herself.

Hopefully, if someone is saving or investing like this, they’re smart enough not to buy a new car. The average used car loan was closer to $20,000 in Q1 2019, but you can find a perfectly good used car for much cheaper!

If you’re going to finance a car, it’s important to understand how much you’ll actually end up paying. It’s much easier to fall into the trap of spending way more than you need on a car with financing. Saving up and paying in cash can help put into perspective how much you’re really spending, as can adding the amount of interest you would pay over the life of a loan to the purchase price of the car.

To car or not to car

Another important consideration is whether you truly need a car at all or whether you need both in a two-car household. I’m sure at this point you’re thinking poor old Wallet has gone completely off his rocker, but hear me out.

People subscribe to this belief that they absolutely need to have a car, but it doesn’t always hold up to examination. While I covered this in more depth when I wrote about public transportation, you should be living close to where you work or vice versa. I often see people living far from where they work for one of two reasons. Either they have a mistaken belief that housing is cheaper further out, or housing really is cheaper further out but they’re spending so much on transportation it doesn’t matter.

This is a case of being penny wise but pound (or in this case dollar) foolish. If I’m saving $100-200/month on rent, but I could get by with a combination of public transportation, a bike, and Uber if I lived closer to where I work, am I really saving? That $300/month car note, $100/month insurance, $100/month on gas, and $0.50/mile maintenance is starting to look pretty pricey!

Okay, so you’re keeping the car.

Even if you can’t completely eliminate your need for a personal vehicle, the combination of what you can save on gas, wear and tear on your vehicle (most people forget about this), and the opportunity cost of spending so much time driving is likely higher than whatever money you might be “saving” on rent.

The average commute time in America is nearly an hour per day.² Let’s conservatively estimate you can cut your commute in half by moving into town. Let’s also assume your time is worth $25/hour. Over the course of a month, you can save yourself roughly 25 hours of your time (an hour a day for 25 workdays), at an estimated value of $625 per month or 300 hours and $7,500 per year. That’s an extra day per month and almost two weeks per year! And that’s not even counting the real dollar savings or what they’d be worth invested over ten years.

While it’s true that opportunity cost might not hit your cash flow this way depending on how you spend your time, our time is the most valuable commodity on Earth, and you can’t get it back. What is it worth to you to be able to spend more time with friends and family, do something you love, go back to school, or start a business? The specifics will depend on your situation, but the trade-offs are real.

Wear and tear on the other hand will actually hit your cash flow, but most people ignore it along with opportunity cost because it’s a delayed cash flow. They don’t notice until something breaks or they need a new car, which of course they didn’t plan for. Back to crisis mode.

Hidden costs

The reality is, there’s a hidden cost for every mile you drive. The average American has a 16-mile commute each way,³ and the average cost to drive per mile is ~$0.56/mile.⁴ We’ll call it $0.50/mile to make the math easy. For the average commuter, this adds up to nearly $4,000/year just from commuting, although this can be much higher or lower depending on how much you drive and how well you maintain your vehicle.

The most immediate hit to your cash flow is of course gas, and the most obvious lever is how far you drive your own vehicle. Shocking, I know. Good thing I’m here to explain these things to you!

As an example, if you cut your commute in half from 32 miles/day to 16 miles/day (extremely conservative), you stand to save in the neighborhood of $85-100/month in commute costs, or $15,000-$17,000 over ten years if invested. That’s nothing to shake a stick at.

Another more acute hit to your cash flow may be parking, particularly if you work in a dense urban area. This is true for an increasingly large proportion of the population as opportunities and populations increasingly shift toward urban centers.⁵ As an example, many of my co-workers pay over $150/month to park underneath our building, sometimes justifying it by noting that it comes right out of their paycheck, so they don’t even notice. This is ludicrous, especially considering our company subsidizes public transit costs by footing 50% of the bill. Just getting rid of the parking alone is worth $25,963 over ten years, invested conservatively.

While the obvious answer is to drive less, living closer and taking advantage of public transport, some people can’t completely make this jump (or think they can’t). For various reasons, we still have one car in our household, although we sold Mrs. Wallet’s.

Share the costs

One of the reasons driving to work is so inefficient and traffic is so bad is that most individuals feel the need to drive their own car, all by themselves with all that empty space in the other seats. An easy answer to cutting back significantly on costs without ditching your ride is to participate in ridesharing.

Most likely, you can find someone who has a similar schedule and commutes to you and lives nearby. If not, I recommend socializing a bit more until you find them. If you still can’t figure it out, apps like Waze make this a breeze. If you share a ride with one to three others, you can cut your cost to a half, quarter, or less, all while cutting back on traffic and your carbon footprint.

If you find yourself protesting the little bit of extra time it may take to share a ride instead of taking your own, consider the trade-off you’re making. If you calculate your potential savings and divide by the time you’ll lose, you’ll get an hourly rate equivalent. If that’s more than what you make at your job or more than you think your time is worth, you should at least try it. Make sure to consider it on an after-tax basis.

Fuel efficient vehicles

Another option you should be considering, particularly if you’re driving long distances or frequently is the fuel efficiency of your vehicle. While it may be cool to have a sports car or handy to have a truck at times, unless you use their specific functions regularly, it’s probably not worth all the extra cash you’re shelling out if you have an average or longer commute.

Maintenance

Regular maintenance is an easy win. If you have a car, you should be getting your oil changed, rotating your tires, doing regular maintenance, and more extensive check-ins well, regularly. Your owner’s manual is actually pretty reliable for this information. You can also lookup ownership forums for the specific make and model of your car for more detailed information or tips on optimizing.

Insurance

Shopping for insurance can often provide a lucrative opportunity just to change companies, getting the exact same coverage. Unfortunately, I haven’t figured out a rhyme or reason to how different companies price in comparison to each other, and comparison shopping for insurance is probably one of the most boring tasks you’ll ever perform outside of cleaning a toilet.

You’re in luck, however! Here at the peak of human civilization, other intelligent humans have made this task as easy as logging into your online account. Companies such as Gabi will literally look up all the details of your current account for you and get detailed quotes with the exact same coverage, selecting the cheapest one for you. It doesn’t get much better than that. If you’ve been with the same company for a long time, it’s at least worth looking.

Other tips and tricks for saving on gas.

So you don’t want to change any of your behavior, eh? Luckily, we still have options! If we’re going to pay for gas, at least we can minimize the cost. With a combination of the right credit card, cashback programs, and not being a consumer sucker, the modern world leaves us well equipped to never pay retail again.

Let’s start with credit cards, as these will yield your greatest RoI (Return on Investment). My suggestion would be to go with this card (Make sure the rewards categories are still relevant if you use this link, as they can change). Chase has some of the best cards around, and their rewards points, known as Chase Ultimate Rewards points, are highly valued. Depending on the card(s) you have with Chase, you are guaranteed a return of 1.25-1.5 cents per point, and if you’re smart you can get much more. This link has some additional information on business cards in general, as does this one.

The ink card I linked to above yields 5X points per dollar spent on gas, utilities, and office supply stores. Even at only 1.5 cents per point, that’s a 7.5% return on the money you would have spent anyway. Depending on how you look at it, this is either a discount on your gas or automatic savings for a vacation. Either way, you win.

What makes this even better is the fact that if you haven’t already signed up for the card, you’ll also get the signup bonus of 50,000 points, worth $500+. Just shift all your normal spending over to the new card until you hit the minimum spend and then only keep purchases that yield 5X points. The average spender will have no problem hitting the minimum.

Cashback programs

The fun doesn’t stop here, though. You can stack this with other cashback programs to boost your return even further. These apps range from passive to slightly active, and some programs are more lucrative than others. You can often stack several for a single purchase.

• Passive
  • Dosh
    • Link your credit card and you will earn cashback if there is an active offer where you shop. Signing up through my link (in the name) will earn me a signup bonus as soon as you link your first card.
  • Drop
    • Similar to Dosh, but less lucrative/less partnerships. Signing up through my link (in the name) will earn us both a signup bonus of $5 as soon as you link your first card.
• Semi-passive
  • Acorns
    • Acorns Found Money operates similar to Dosh, but you have to activate the deal first. For example, they currently have a Found Money deal running where you get $0.25 back for every purchase at Chevron. Signing up through my link (in the name) will earn us both a $5 signup bonus.
  • Chase Offers
    • Similar to Acorns Found Money. If you have certain Chase cards you have access to activate Chase Offers, which give you statement credits (aka cashback) when you spend at merchants you’ve activated deals for.
• Active
  • GetUpside
    • Specific to gas stations. Requires taking a picture of your receipt. Will also show you which gas station near you is cheapest that they offer cashback at. Sometimes even stacking the cashback may not be as lucrative as simply going for the cheapest gas station in your area. Signing up through my link (in the name) will earn us both an extra 15¢/gal back on our next gas purchase tracked through the app.
  • Trunow
    • Similar to GetUpside. Offers less cashback and is available at less gas stations, but also offers cashback on purchases inside the gas station. Signing up through my link (in the name) will earn us both a signup bonus of $1 once you scan your first receipt.
  • Receipt Hog
    • Similar to GetUpside in that you have to take a picture of your receipt. You usually have to answer at least one question (like how your trip was and how many people came) as well. Pays less, but is applicable to any and all receipts.
  • Receipt Pal
    • Essentially identical to Receipt Hog. Signing up through my link (in the name) may earn me a signup bonus.

Membership Perks

Companies such as Uber provide perks for their drivers. These perks usually involve partnerships for discounts with other companies, ranging from insurance to regular maintenance like oil changes. As far as I’m aware, you don’t have to be driving regularly to take advantage of these perks, as long as you’re still qualified as a driver and in good standing with the company.

While I think driving for Uber probably isn’t as good of a deal as people think it is, I am an Uber Eats bike courier, which gives me access to these benefits. I think that is worth it and adds value to the program, even if I’m not delivering food very often.

If you work at a large company or are a member of a professional or educational organization, check with your organization. You may be surprised. If you are a student, teacher, or first responder, check out ID.me.

Rewards programs

It’s common for various companies to offer rewards programs that can translate into free or discounted gas. In my area, Kroger (a grocery store chain) offers fuel rewards based on how much you spend. While you shouldn’t spend extra to reach for these, there’s no reason not to take advantage of what is effectively another cashback program for spending you’re going to do anyway.

The savings from these rewards programs can be substantial if you spend a lot on groceries, and there are often opportunities to earn extra discounts on food or a higher number of points than usual during promotional periods or signup. I would consider this another option to be aware of, although it isn’t super high return.

Gas companies also often offer rewards programs or cashback as well. While some of these programs require you to sign up for a credit card, others are free to join, like Shell Fuel Rewards. Be aware that these types of programs only apply to that specific brand of gas stations. Given that you can earn a return of greater than 5% on all your spending at the gas pump with the ink card, there’s probably no reason to waste a credit card spot on one of their credit cards, but the rewards programs can be worth it.

Most offer the ability to link it directly to your existing credit card or phone number so you don’t have to carry another card around in your wallet. That being said, who says there’s not an offer out there that makes sense for you if you drive a lot? Do your research.

Discounted gift cards

Fairly regularly, companies offer discounted gift cards, including to gas stations! Merchants on eBay run these types of promotions, for example. You need to be careful you’re buying from a reputable seller that is generating new gift cards as opposed to selling existing cards that someone may or may not have used, as the latter often don’t work. Assuming you follow that rule, you can sometimes get discounts up to 20% and even stack cashback and/or credit card rewards on top. If you know you’re going to spend the money on gas anyway, it doesn’t get a whole lot better than that.

Stacking rewards

It is usually possible to stack rewards. For example, if you pay at a Shell station with your Ink card, you’ll get 5X points. You could also get cashback from your linked Fuel Rewards points, get cashback from the GetUpside and Trunow apps, and potentially even upload your receipts to Receipt Hog and Receipt Pal on top of that. While the last two in particular won’t earn you a lot of cashback, the combination of stacking all of these can provide a huge discount.

I just checked GetUpside and Trunow. Not only do both apps show me which gas station is cheapest around me (at least that they offer cashback at), they offer cashback! The cheapest gas station also happens to offer the most cashback. $2.29/gal, 7¢/gal back via GetUpside, and 0.5¢/gal back from Trunow. This is conveniently the same amount of “cashback” I would receive (at minimum) in points by paying with the Ink card.

So by simply paying with the right credit card and taking pictures of my receipt with a couple apps, I’m guaranteed at least a 15% discount. On top of that, I can submit the receipt to Receipt Hog and Receipt Pal, and if there’s an active Chase Offers or Acorns promotion, I could take advantage of that too. While 15% may not seem like a lot if it only takes $30 to fill up your tank, this adds up to a significant amount over the course of a year, for example.

Your health

Who do you think is healthier, all else held equal: someone who spends an hour a day sitting on a glorified couch with wheels and a motor attached to it (your car) or someone who spends an hour a day (or even thirty minutes) on a bike?⁶ I’ll let you ponder that head-scratcher for a minute…

Thinking beyond yourself.

Every time you drive, there is an impact on the environment and you are benefiting from the hidden carbon subsidy. There’s a lot of debate today about climate change and carbon’s role in it. Personally, I think we should be careful and considerate of our impact on the environment and how our actions could potentially impact future generations.

The truth is, we don’t know exactly what effect dumping such massive amounts of carbon into the environment will have, although it’s probably pretty safe to assume it’s not good. I tend to agree with Elon Musk:

“It’s the dumbest experiment in human history.”
~ Elon Musk

My general sentiment is that even if it turns out we would have been fine dumping more carbon, it’s probably a good idea for us to try to avoid completely screwing ourselves and ending up with a more sustainable way of living as a byproduct.

This is another case of a hidden, delayed cost that people don’t consider in their day-to-day decisions. By not paying the cost now and putting it off for future generations to deal with and clean up, we are in effect taking full advantage of an implicit carbon subsidy.

Even if you aren’t concerned with the immediate effects on yourself, consider the impacts (both immediate and long-term) that your actions have on others. The actions you take and changes you make today make a difference, even if you don’t consider them.

While it may seem that changing the habits of one person in one area of their life may be too small to matter, I would encourage you to reconsider this assumption. The entire premise of this blog is that small, consistent actions over time generate an outsized impact.

The actions you take affect everyone around you, whether you realize it or not. Take a step into the Unknown, and shine a light that makes it easier for your fellows to follow into what is now a part of the expanded world of the Known.

Luckily, making the changes necessary to drastically reduce your impact on the environment are not particularly difficult. Even better, in most cases they not only aren’t expensive; they actually save you money!⁸ Equally if not more importantly, many of the changes you can make will also improve your happiness, which is really what this is all about.

Did you find this helpful? Were there tips and tactics that I missed? What has your experience been like?

Much Love,
(Your) Wallet

Footnotes

1. All auto loan statistics were found here and were last updated on 8/17/2019.
2. The average commute time in 2017 (the latest year for which we have data) was 26.9 minutes, and this number has been increasing yearly. I got my data from this article. The distribution of commute times also varies widely, with some people spending almost no time commuting and some having hellishly long daily commutes. Poor souls.
3. From here.
4. From here. Depending on your car type, this ranges from about $0.45-$0.67/mile, on average.
5. See here for the shift of opportunity to urban centers and here for the general shift of population.
6. Check out this post and the linked study for an interesting perspective on electric bikes and micro-mobility.
7. From his interview with Joe Rogan. He speaks about this about one minute into this video, or you can checkout the entire interview here, which I recommend.
8. Check here and here for some additional ideas to start you off.

This post is part of a series on saving money on “The Big Three”: food, housing, and transportation.

Note: I may receive points or some other type of return if you sign up for a service or purchase a product through one of my referral links. This is a nice way to say thank you for the time and effort it takes to create this blog and helps keep it free! If you do so, thank you!