Giving up the car is the single most impactful thing after reducing housing costs that an individual can do to bring forward early retirement.
According to Nimblefins the annual average cost of running a car in the UK is now almost £3500 a year.
The three largest expenditures are:
- Fuel - just under £1500
- Car purchase and depreciation - £1000
- Insurance - just under £500.
The full breakdown is as follows:
Now these are national averages, based on households taken from the ONS’ family expenditure survey. Obviously expenditure on cars is going to vary widely, but this at least gives us a ballpark figure to be working with.
The annual average household income is £22 554. This means car expenditure comes in at a whopping 16% or 1/5th of household expenditure.
Looked at over the long term, that £3500 annually, or £300 monthly compounded monthly for 10 years at 5% interest would give you £46 700 including £10 000 in interest at the end of the 10 year period.
That would mean bringing your retirement forward by 2 years in the Early Retirement Extreme model, for every 10 years our average consumer forgoes their car.
Giving up the car is thus the single most impactful thing after reducing housing costs that an individual can do to bring forward early retirement.
The incredible inefficiency of the motorcar
I was first alerted to the incredible economic inefficiency of the motor car by Andre Gorz's excellent 1973 essay 'The Social Ideology of the Motorcar'.
Following Ivan Illich, Gorz made the point that the average American spent four hours a day devoted to their car, either sitting in it (moving or not-moving), or working to pay for the various services associated with driving. He calculated that if you added up all of these hours and divide by the average distance travelled by car, the average American travelled at an average speed of 3.5 miles an hour, or the same as walking pace, but thousands of dollars worse off and probably a lot more stressed as a result.
Given that this is comparable with the speed of a bicycle, and that I am being quite generous in my calculations (the bigger your car, which won't go any faster in all that traffic, the more local your journeys, the more of them are in peak hours, and the lower your wage, then the more time-inefficient the car becomes), all in all I'd say the car is, for your typical person, a total waste of money.
The Early Retirement Extreme approach to transport
The alternative to the motor car is to move close enough to work so you can walk and cycle (it's good to mix it up), do any shopping online (for stuff you need, rather than want), and then take the bus or train for any longer journeys.
According to Bike Radar, there are a range of decent budget road bikes available for around the £600 mark.
Let’s add on £400 for some decent gear and round this up to £1000 and allow our frugal consumer to buy a new one every 10 years, so we’ll call that a yearly purchase/ deflation cost of £200, including a second round of new gear.
Now I’m not going to look up the maintenance costs and insurance, but they are cheap. If I allow £200 a year that’s more than fair.
So that’s £400 a year compared to £3500, getting on for only 10% of the cost of the car, a MASSIVE saving.
NB it has to be the bike as the alternative….the average cost of train travel in the UK is £0.54 per mile, which would = £4300 per year if you’re travelling the national car average of around 8000 miles. And that’s for one person, at least you can double or treble up in the car!
But is it realistic…?
This is the rub… you have to be living within, I’d say, five miles of work to make a daily commute by bike feasible, especially in January, and your capacity to do this depends on where you live.
It also depends on your not having a family, I’m not going to suggest someone with an 8 and 4 year old tries living without a car if they can afford it!
So this exercise may not apply to everyone, but if you’re single, live in a town or city where there’s somewhere cheapish to live within 5 miles of work, I’d consider relying on a bike as your main form of transport, you’ll save a fortune.
And get some exercise into the bargain.
As long as you can deal with the pollution and all those crazy evil car drivers trying to kill you.
Or better yet, just walk, you get a good 1000 miles out of a £70 pair of Asics!