Thursday, June 28, 2012

Is Your Car a Luxury or a Necessity?

If you ask Canadians today whether their car is a luxury or a necessity, most will readily tell you that it is a necessity in their lives without hesitation. However, with the average Canadian household debt skyrocketing to record levels in recent years, reaching over $100,800 per household in 2011, a closer look at what is a necessary versus a luxury may be in order. Many people are trying to save money and eliminate debt, and getting rid of the car may be good place to start.

The Cost of Driving

The cost of driving is higher than what you may think. Your car loan is perhaps the largest expense associated with driving, and many people take on a car loan payment that equates to $400, $500 or more per month for a 5-year or 6-year term. In addition to this financial commitment, drivers pay other costs. The average cost of a car insurance premium varies by location in Canada, but it is not uncommon for a driver to pay over $1,000 per year in insurance. This is coupled with the regular cost of filling up the tank, vehicle repairs and maintenance and more. If you crunch the numbers on your own vehicle's total monthly costs, you may be surprised to learn that the cost of driving your own car each month may exceed $600 or $700 per month, if not more.

Other Means of Transportation

Driving your own car does provide you with your own personal mode of transportation, and there is considerable convenience in this. However, many people do have other options available to them. For example, many are able to ride a bike to work many months of the year and can carpool with a co-worker or friend during the colder months. Others are able to make use of local or city transportation services. Still others may be able to consolidate from a two-car family down to a one-car family with minor adjustments. Would it be convenient to get rid of a car? Likely not. However, this $600, $700 or more per month cost of driving is not a necessity for most. It is necessary to consider this expense as a cost of a convenience in your life if you do have another option to consider.

What Could You Do With That Extra Money?

Because the cost of driving is so high for most drivers, you should consider what you would do with that extra money freed up in your budget each month. Owning and driving a vehicle is a choice for most rather than a necessity. When you make the choice to spend money on driving a car, you do give up the opportunity to use that money for important things like reducing debt. Consider for a moment how quickly you would be able to pay off unsecured debt balances if you contributed an extra $600, $700 or more each month to paying your accounts off. Whether you make the decision to keep your car and enjoy the convenience it provides or you make the decision to give up ownership of your car and reduce debt balances more quickly, you may consider talking to a Canadian debt company for further assistance with debt reduction and money management. If you want to know how to get out of debt more quickly and easily, visit debt.ca for more information.

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