"There are plenty of ways to get ahead. The first is so basic I'm almost embarrassed to say it: spend less than you earn." - Paul Clitheroe

Renting vs Owning A Car

By , January 18th, 2011 | 8 Comments »

While most people are surprised to find out that I don’t have a cell phone, they are even more surprised when they also find out that I also don’t have a car. As with the cell phone, the reason I don’t have a car has nothing to do with lack of money. I can afford to buy a car and it would fit into my budget of spending less than I earn.

After deciding to travel 2 weeks each month this year, I decided that I would need a car for many of the trips I wanted to make. I knew that I would be driving a lot of miles during my trips, but wouldn’t have a real need for a car during the times I wasn’t traveling. I assumed the obvious frugal choice would be to buy a quality used car for about $5000 and drive it into the ground. Then I decided to run some numbers and was surprised to see that renting a car ended up making the most financial sense.

I knew it was possible to rent a car for under $20 a day including all fees which would come to about $300 a month or about $3600 for the year. While this is less than the $5000, I would not have a car at the end of the year. The value of the car would make both costs about even. With this in mind, the advantage went to buying the car because I would have it to use all the time instead of only two weeks a month.

I then began to think about other costs associated with owning a car. Registration, fees and taxes would be a couple of hundred dollars. The difference in insurance costs would be about $1000 a year more for owning a car (when renting, using my credit card covers collision, but I ended up taking out a non car owner liability insurance policy to make sure I was covered there). Car maintenance would be a few hundred dollars a year at a minimum, and that was assuming that nothing went wrong with the car. Taking all this into account, I figured the two options were about even: buying the car would be more expensive, but it would give me access to the car all the time.

There were two main reasons that I ended up opting to rent instead of buy. With the number of miles I would be driving, the chance of nothing going wrong with the car during the year would be a poor assumption. Costs could be a few hundred dollars or thousands and there was no way to predict this. With a rental car, if anything went wrong with the car, the rental car agency would take care of it so there was no chance of additional costs surprising me.

The other reason was that owning a car actually would limit what I wanted to do. I wanted to travel. If I owned a car, it would mean that all my travel would need to be within driving distance. If I wanted to fly someplace and rent a car, it would add even more to the cost of my transportation (since the car I owned would be sitting at home).

I could drive long distances, but this would mean spending less time exploring the areas I wanted to see while traveling. For example, I am currently traveling Arizona and New Mexico for 11 days. I flew to Tucson where I was able to rent a car for $193 including all fees. Had I owned a car, I would have had to drive to Tucson which would have taken 4 days (2 days there and 2 days back) and would have cost about the same (the airline ticket compared to the cost of gas for the car would have been about the same).

I’ve been surprised at the number of times I have found out that what I at first assumed was the obvious frugal choice ended up not being the most cost effective for my personal situation. It is the reason that I always run the numbers (making sure to include as many of the incidental costs that usually get forgotten) before making final a decision.

Here are more of my favorite articles for your reading pleasure:

Answer the call of black gold and buy an oil well
Raise your credit score by 200 points
Save an emergency fund with the 52 week savings challenge

Get Your FREE Book Now

Enter your name and email address to get your FREE copy of "Guide to Shopping at Costco."

We won't send you spam. Unsubscribe at any time. Powered by ConvertKit
What did you think about this article?
1 Star2 Stars3 Stars4 Stars5 Stars (5 votes, average: 3.80 out of 5)


  • Gail says:

    I’m so glad that some have renting a car when needed as a frugal option. We live in the country with no car rental place within an hours distance, no bus, no taxi, etc. That being said we bought our car about 5-6 years ago for $1 and we fill the tank about every month although this was a short month as I had to travel to the hospital three times this week so that added a lot of miles. We only put an average of 3000 miles on it a year, and yes it is about 12 years old and getting rusty and will need some extensive body work before passing inspection next December. In the meantime it is still cheaper than making car payments or renting a car and for medical emergencies, which I generally have at least once a year, it is instantly available, which is a circumstance that you do need to remember for those poor health.

  • Garrett says:

    It’s good to read an article like this especially when you include the numbers. I was thinking of just renting a car. I live in the San Diego area and the transit system here is impecable. There’s a bus stop on every corner and the trolley system is very easy to access. I only live a mile or two from work so even riding a bike would be an option. I bought a motorcycle a few months back which turned out to be a lemon so I thought I’d just by a car. But my personal situation really doesn’t require that I own one not to mention there is a rental company just down the street from me. So I too went with just renting a car.

  • Anna Beth says:

    Thank you so much. Universities should hire you.

  • dave says:

    Also, you can get a bike. Use human power for short trips to grocery store etc.

    If you need to go further, you can put a small motor on the bike, and now you have a 35 mph, 300+ mpg “motorized bicyle”. Kits are available online, the golden eagle is my favorite (no affiliation whatsoever).

    Also,if you want to be a little more eco concscious you can put a small electric hub motor on the front wheel and now you have a 500+ mpg hydbrid. Use the electric motor for short trips, the gas motor for long ones. Just like a Prius,except you aren’t wasting 97% of the energy in a gallon of gas on heat loss from the engine, friction from the tires and moving a great big huge hulking heap of metal through time and space. No registration, no licensing, no taxes, fuel expense becomes trivial. You can drive across the US for 40 bucks.

    Here’s one in action:


  • Malyi says:

    Isn’t $20*30 days = $600?

  • CR123 says:

    Depending on your usage and situation, renting a car can be cost-effective in the long run. Great post!


Leave a Reply


Sign up for the "Saving Advisor" newsletter (Weekly)
Google Plus

Subscribe by email:

Related Articles

Previous Years Articles

Today, last year...

Copyright © 2018 SavingAdvice.com. All Rights Reserved.