My family downsized to one car 5 years ago. This is how much we saved

Over five years ago, my family of four downsized from two cars to one. I originally expected that we would have one car for a year, but it turned into a much longer experiment that has saved us thousands of dollars on car payments, insurance, and maintenance.

Here’s how much we saved compared to the average cost of buying a new car or keeping my old one—and how you can save on car costs without getting rid of your car.

I saved about $45,000 compared to buying a new car.

My family currently has one car, which we paid off a couple of years ago, so our car expenses are pretty minimal, mostly gas and car insurance.

However, if we had decided to buy a new car five years ago instead of cutting it out of our budget, I wanted to see how much it would have cost us. To put it all into perspective, let’s look at the average cost of a new car in 2020, which was $38,960, and the average annual percentage rate (APR) for a car loan at that time (about 5%).

Data source: Author’s calculations.

Buying a new car at the average price over the last five years would cost me almost $45,000! Although I had no intention of buying a car at the time, this shows how much money I would have to put into my budget over a five-year period, which would likely cause me some financial stress.

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I saved $17,665 compared to keeping my old car.

Even if I kept my old car that was already paid for, I would still save a ton of money by getting rid of it. It was older, so I would have been much more likely to pay for maintenance, which costs about $400 a year ($2,000 over five years) for a Honda Civic, according to RepairPal.

Additionally, I would have to pay for car insurance for the last five years, which in my state averages about $3,133 per year or $15,665 over five years. This means that if I kept my old car and just paid for insurance and average annual maintenance, I’d still be $17,665 ahead!

Want to pay less for car insurance? Head here to see our list of cheap car insurance companies..

How to save money no matter how many cars you have

Car insurance costs have risen 22% this year, putting a strain on many people’s budgets. Luckily, there are a few things you can do to reduce these costs (not related to getting rid of the car). Here are some options.

1. Increase your deductible

Increasing your deductible means you’ll pay more money out of pocket if you’re in an accident, but it will also lower your monthly insurance premiums. Increasing your deductible to $1,000 can save you up to 40% on collision and comprehensive insurance premiums.

2. Combine home and car insurance

As the commercials show, you can save money by combining home or renter insurance with car insurance. Although it varies by provider, you can save up to 25% by teaming up with some companies.

3. Comparison store

Not all insurance companies will charge you the same premiums. That’s why it’s worth comparing insurance quotes to find the best auto insurance to suit your needs. A recent Consumer Reports study found that people who switch car insurance companies save an average of $461 a year.

While I liked not having the extra expense of a second car, I’ll probably need another one at some point. And when I do, you can bet I’ll be looking for an inexpensive used car, as well as cheap car insurance.