Should You Ditch Your Second Car in Retirement? The Surprising Savings of Downsizing

When many of us think about downsizing in retirement, we picture ourselves trading our current home for a smaller place. That is one way to cut back on expenses, although often not as much as we hope. But there’s another money-saving way to downsize without even moving: cutting back to one car. 

Key Takeaways

• If you don’t need more than one car, cutting back could save you money.
• How much you can save will depend on the kind of vehicle and how much you drive.
• If you frequently need multiple cars, there may be better ways to pare back your budget.

How Much Could You Realistically Save?

A 2024 AAA study put the average annual cost of owning and operating a new car at $12,297.

However, that number includes factors that might not be relevant to you: depreciation at $4,680 a year and finance charges at $1,332 a year. If you aren’t concerned with your car’s resale value, depreciation may not matter. And if you paid cash for your car or already paid off any loans, you can scratch that from the list, too.

In terms of costs you’ll likely face, AAA estimates annual insurance premiums at $1,715 a year. License, registration fees, and taxes average out at $815 a year, although a substantial chunk of that represents one-time expenses you already paid when you bought the car.

Where you might want to focus is on two other categories: the first being fuel, the second maintenance, repair, and tires. AAA estimates average fuel costs at 14.9 cents a mile and maintenance, repair, and tire costs at 10.13 cents a mile.

Those are just averages, and the numbers can vary widely depending on what you kind of vehicle you drive and how much you drive it. For gasoline-powered cars, a small sedan will cost the least per mile, and a pickup truck the most, according to AAA, (Electric cars have slightly higher total overall costs, but that’s due in large part to their rapid rate of depreciation.)

So, going by the averages, if you drive 10,000 miles a year, you can expect to pay about $1,490 for gas and $1,013 for maintenance, repair, and tires, for a total of $2,503 a year. Add in the $1,715 for insurance and you’re up to an annual cost of $4,218. If you pay to store your car in a garage or lot, you’ll want to add that in as well. 

Note

If you drive your car for charitable purposes, you can deduct 14 cents per mile on your taxes, but only if you itemize.

Other Considerations

Of course, there are other reasons you might want to downsize to a single car, aside from relieving the stress on your budget. For example, one car may be plenty for your current lifestyle. You’ll also free up some extra space in your garage or driveway. And if you occasionally need two cars at the same time you can always rent one or call a ride service like Lyft or Uber.

The Bottom Line

You could save yourself some money, and maybe some money worries, if you downsize to a single car. However, the savings may not be huge—and if you really need more than one car, you could probably find less inconvenient ways to pare back.