By Robert Leaker
If you are the type of person who really enjoys your car and derives some intrinsic value from looking good while cruising downtown, then this article is not for you. You do not own a car, you own an expensive toy.
Let’s face it; cars are sink holes for cash. They cost money to acquire, money to operate, money to insure and if living or commuting downtown, they even cost money to store and park. I could recreate or regurgitate a number of articles online with cash flow statements and arguments pro-buy, pro-lease or proused, but I won’t bore you with the details. These are all biased to the assumption that you need a car or you will become a shut-in. As in each of my columns, my objective here is to help you increase your net worth, not to squander it.
Step 1: Do you really need a car or do you want a toy?
There is nothing wrong with owning a toy. Just understand that cars are depreciating assets and, with few exceptions, contribute nothing to your net worth. You may recall that I am all for leveraging yourself to buy a house which appreciates in value and builds wealth. I even encourage you to borrow money to keep your house updated, looking good and enjoyable to live in – after all, it is perhaps the most enjoyable wealth asset in your portfolio. A car on the other hand, is either a tool for going from point A to point B as quickly and conveniently as possible, or it is a mechanism to push your financial independence further away. Consider living carless downtown – think of the freedom gained from parking, and of the time you’ll save while walking to work. Then bask in the minimal eco-footprint you leave behind and the extra cash you leave in your wallet.
Step 2: If Step 1 Didn’t Stop You, What kind of car do you need?
Okay, so you have determined that you just can’t live without a car. Now what? First determine what you are going to be using your car for.
If you live and work downtown and only need a car for the occasional weekend to visit Mom and Dad, or to get to a cottage, I would encourage you to rent, timeshare or borrow one as needed. For a community-minded solution, look into Hamilton CarShare (see www.communitycarshare.ca/hamilton for more information). These options are all significantly cheaper than paying garage fees, insurance and monthly payments for what amounts to a fancy lawn ornament. Heck, you can even treat yourself by renting a new model exotic and consider it entertainment!
If you are commuting downtown regularly from a nearby suburb and rarely exceeding 60 km/h, then I recommend you buy a small, low to mid-mileage off lease vehicle every five years. Save more money by purchasing a used Smart car or an electric car – save on fuel and park virtually wherever you like. Used cars also are cheaper to insure. Google the cash flows – it is the cheapest option.
Need to drive on the highway daily? This is where I’ll go out on a limb. Buy a tank.. Make sure you have a steel frame with 4-wheel drive. No amount of insurance will help you enjoy your net worth or retirement lying paralyzed in hospital after some smartphone-texting junkie in an SUV rolls over your cash-saving sub-compact while going 150 km/h in a snowstorm. This may sound strange coming from a banker, but wealth means nothing if you can’t enjoy it – safety trumps all other considerations.
In short, cars are a drain on the wealth of the individual, and ultimately a drain on the wealth of the community. Effective public transportation is the only real ‘smart’ transportation. We need our province and our city to invest in efficient public transportation before we can fully release ourselves from this expensive, auto-centric culture.
ROBERT LEAKER is the Vice-President of Emerging Markets and Innovation at Meridian Credit Union.