When does it make sense to move?

When gas climbed to $4 a gallon, lots of people talked about getting rid of their cars. It takes a while to make that lifestyle change, so gas prices went back down before most people were able to figureit out.  But since gas prices can make up a pretty small portion of the price of owning a car, it still makes sense for a lot of people to get rid of them. Since these costs are better hidden than paying at the pump, it’s hard to take them into account.
A parking meter
At some point, those hidden costs are going to be more expensive that picking up and moving closer in to town. Obviously, that point is going to be different depending on your town, car, and driving habits, but is it ever feasible?

Let’s take my friend Ian. He doesn’t drive much, so his gas costs are minimal, even when gas prices are high. Apart from driving to Ohio to visit his parents twice a year, Ian just drives downtown a couple of times a week and to the mall once or twice a month.

First, the old expenses. In addition to regular maintenance (of about $100 a year), Ian spent almost $2000 last year in repairs. Hopefully, that won’t happen again, but the car is only getting older so it will eventually break down entirely. For now, let’s estimate it at $1000 of repairs a year. Excluding gas costs for his longer trips, Ian spends about $10 a week for gas, or $520 a year. Insurance is about $350 a year. Ian owns the car outright, so he doesn’t have any loan payments, but assuming his car only lasts another three years, he’ll want to set aside at least $1000 a year to buy a new one then. If he took out a loan payment on a $13,000 car then, he’d be paying about $2400 a year at that point.

Maintenance Repairs Gas Insurance Loan / Savings
$100 $1000 $520 $375 $1000

Without a car, Ian wouldn’t have to pay for any of that, saving him about $3000 a year. If he had a new car, he’d be spending less on repairs but more on his loan (or amortized savings) and insurance, so I’m guessing this would be similar for others in the area.

On the other hand, Ian would have some additional expenses. He could pay piecemeal to ride the bus, but at $1 a ride it adds up. A semi-annual pass here is $150, which basically gives him a free month. That makes bus costs $300 a year. Ian also makes those two long drives a year to visit his family. Ignoring gas costs (which would be about the same if he drove his own car), he’ll just have to pay for a car rental (or change his lifestyle and fly or bus, but let’s try and keep things as simple as possible). To rent a car for a week costs $215 including all fees and taxes. Or, for a longer trip, Ian could rent a car and drop it off in a nearby city the next day for $100 (and another $100 on the way back). Two trips like that a year will cost Ian about $430.

Getting rid of his car will save Ian $3000 and cost him $730, a net savings of $2270 or $190 a month. If you ignore saving up for a new car, Ian will save a little over $100 a month ($1270 over 12 months).

In order to maintain his current lifestyle, though, Ian is going to need to move. The biggest problem with taking the bus from his current location is that he has to spend 30 minutes getting to the bus station and then another 15-30 minutes getting where he needs to go. If he moved to an apartment close enough to the station, the wait would only be 15-30 minutes total, about what it takes in a car from his current place. He’d also be close enough to downtown that he’d only have to take the bus when going to the mall twice a month.

Therefore, it makes sense for Ian to move if he can do so for less than an extra $190 a month. The place he lives now, south of town, costs $330 a month (his costs with a roommate), so if he can find a place within walking distance of the bus station, which is downtown, for less than $520 a month, he’s saving money.

Obviously, these numbers are different for everyone. It’s not too hard to run the numbers on your own situation and see how much of a rent increase you can cover. Then, you can decide if the kind of place you can get in a better location is worth the increase in costs. In Bloomington, a good one-person apartment downtown would run about $600 a month, which is more than Ian wants to spend. If he’s willing to continue splitting costs with a roommate, though, they could get something comparable to where they are now for $900 a month (so $450 a month in Ian’s costs). That works out pretty well.

Even though I tried to keep Ian’s lifestyle the same, there would certainly still be differences which might make it more expensive in either direction. For example, if Ian occasionally has to drive long distances for work, he’d have to add additional rental costs. Or the lost convenience of being able to quickly get to the grocery store (or hospital or soccer practice or whatever) might not be worth the savings to him.

From a purely economical standpoint, though, the price increase in Bloomington in moving downtown from the outskirts is more than made up by the ability to get rid of a car.

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