Dawn of the Geeks

in-town-vs-out-of-town is the spreadsheet used to support my posts.

The first in the series just lays out the facts. In this we’ll try to form a conclusion. It really boils down to a simple question: do the savings in home ownership make up for the loss in car ownership?

Let’s start with the first observation: You can’t be in a situation where you can’t afford to live out of town but can afford to live in town. There are about 22 working days in a month. So if you don’t carpool, get 24 miles per gallon and drive 50 miles each way you will spend $360 a month in gas going to and from work. You save $700 a month in mortage payments so per month you’re ahead about $340 living out of town. In five years you will probably need a new car having driven yours about 130,000 miles. In the meantime you have saved around $20,000 in monthly mortgage bills.

So if you put the money you save away into a high yeild savings account each month you’ll have enough for a brand new car every 5 years in cash. $20,000 will buy you a very nice car.

Obviously it’s not ideal to break even.

So you have to decide, can you find ways to cut back on vehical costs and gas usage or will you end up at a loss after 30 years because vehical maintenance brought you down?

Personally I think it’s a lot easier to chop off costs on a car rather than a house. It’s hard to find an affordable house in town. It’s easier to find someone to carpool with. Or buy cheaper cars. A brand new engine will set you back less than $10,000. So if you really want to be cheap you can buy an older used car and just replace the engine every 5 years or 150,000 miles.

Once you buy a house there’s nothing you can do to cut down the cost of your mortgage. Eventually you may be able to refinance and get your interest rate down a point or two. But that’s rare and only saves you 10-20K over the life of the loan.

Most of the time you will save money living outside of town. As long as you find a way to carpool. That’s the easiest way to double the life of your vehicals and cut your gas usage in half.

The other thing that makes your decision easier is the advent of the electric car which is happening in just a couple years. That will reduce your gas usage to 0. The estimate is that electric is about the equivelant of $1 per gallon. So you save 75% of your gas cost. Which adds up quickly and makes living outside of town more appealing.

So really I don’t see how you can lose by living outside of town. Unless you don’t find ways to cut back on vehical usage.