The real cost of owning a car

Owning a car is more expensive than what it seems. Even a cheap car can turns out to be a very expensive deal. Additionally, cars require not only expected expenses (cost of the car, taxes and insurance) but they can also mean non-expected significant expenses. In particular for new cars, the money that you loose on devaluation is very significant.

Check my calculator (The real cost of owning a car) with 2 examples and feel free to play with it. The values on the excel sheet are in Euros and they should be considered as pretty representative examples of the European reality. In the calculator I assume that the car will be sold after 5 years at a certain price that can be defined.

A new car with a price of 26k will cost, on average, 500 Euros per month and even a cheap used car with a price of 5k will cost more than 300 Euros per month. Are you sure you can’t find other options to travel around? I understand not everyone can walk to work or go by bike (luckily I can go by bike) but first analyse all public transportation options. Public transportation monthly tickets normally pay off, in particular in Europe, which is the reality I am most familiar with. In Frankfurt, the monthly pass is 85 Euros per month, but, if you pay annually, you get 2 months for free, which means that you are actually paying only 71 Euros per month. These discounts are quite common in other cities as well. What can you do?

  • Be aware of the costs associated with owning your car. Yes, even a cheap car is expensive!
  • Analyse public transportation options and discounts associated with it.
  • Move closer to work. If you live together with your partner, try to move at least close to either your work or his/hers to avoid paying 2 monthly tickets. Another reason for renting instead of buying: flexibility in dealing with other costs.
  • Check other options for when you really need a car, i.e., going somewhere without public transportation or if you want to travel for the weekend. You should be able to find cheap rental places. When we need a car for a few hours (hardly ever, only for very specific reasons like going to Ikea), there is an app that allows us to pick up some cars that are parked in the city for 3 Euros per hour + 0.26 per km. When we need a car for the weekend, we check only the cheapest car available and we book it, normally at around 30 Euros per day.

Another reason for renting a car when you need one instead of buying is that also you can take into account the costs associated with the car in the travelling you are going to make. When you own a car and you travel for one weekend, it may seem you are travelling for free, except the cost of gas, but actually you are not. When I rent, I know I have to spend additional 60 Euros, which I take into account in the total cost of travelling. I have no unexpected costs now which allow me to predict much easily how much I can spend and save.

Do you agree with this approach or think it is absolutely impossible to live without a car?


Starting investing: my strategy

With more than 100k in the bank account, we have decided it is about time to start creating passive income. Real Estate is our first bet. Rich dad poor dad was probably the book than mostly drove me towards this journey of reaching financial independence and I am following some of the rules I learnt there, while adding some of our own knowledge about the real estate market in Portugal.

  • Invest in a market that you know

Portugal is definitely the way to go. We are from the 2 biggest cities in the country and we truly think that investing in the center of a city there is a safe bet. Prices are high but due to the limited space and to the increasing investment Portugal has done in previous years in transportation, which makes living in the center, without a car, possible and valued. More and more Portuguese value being close to work, supermarkets, restaurants and the possibility to move around easily to other places on the city. It is actually a European trend but it has started late in my country. It is important to know your market, not only because you need to analyse the legal contracts, but also to easily understand the taxes to pay and know the best areas to invest in.

  • Analyse the trends but do not buy an apartment exclusively based on one trend

Tourism in Portugal is increasing very significantly. Renting an apartment through AirBnB is highly profitable and many old buildings are being totally rebuilt for that purpose. Naturally, tourists pay more to stay in the city center and prefer to stay in what we can call typical apartments, i.e., not necessarily big but with national characteristics. This is what we are aiming for in the medium-turn, as the rate of return is quite high. However, we are aware that in a few years this trend may not be as strong, in addition to the fact that supply of houses is actually increasing, which may led to a decrease in prices charged per night in the future. This is why we will invest in a studio in the city centre, which can easily then be rented to students or young couples who do not have kids yet.

  • Do not aim for cheap/low-rent investment

You can always buy a cheap apartment, ask for a low rent and still make a profit. I have to tell you, it is risky, there is a high chance you have an empty apartment for some months, tenants who may not pay, more issues with the construction and neighbours. You do not have to aim for high-end but be aware that the low-end can be very costly.

We will invest 95k in a new 40 sqm studio in the city centre, next to the metro, train and near many supermarkets/restaurants/bars. For your information, check below our expected, but slightly conservative, annual returns on this investment, based on the total cost of the apartment, i.e., including all the costs, such as taxes and furniture in the initial price.

Total cost 101,085
House price 95,000
Registration costs 375
Taxes 1710
Furniture 4000
Long-term rent AirBnB
Annual return 5.03% Annual return 7.64%
Total profit/year 5080 Total profit/year 7720
Average profit/month 423 Average profit/month 643
Months occupied 12 Months occupied 12
Monthly rent 500
Apartment costs/monthly 25 Price/night 60
House insurance/annual 100 Occupation rate 67%
Annual taxes 520 Property manager rate 30%
Monthly expenses 120
Apartment costs/monthly 25
House insurance/annual 100
Annual taxes 520


  • Apartment is not yet totally built – it will be in December – and there can be a delay in construction, which would mean a few more months without earnings. Not very likely though as we have visited the apartment a few weeks ago and it seemed quite advanced. The only risk here is the government licence, which can only be granted after construction and may delay the process.
  • I am not a technical expert; therefore I cannot predict the problems we might have with the construction, where we will have leaking or other issues. I hope not!
  • Construction company going bankrupt. Very low risk as they have other buildings in the city, apart from being property managers of some of them. Also, they are very exposed, very active on social network. But it is still a risk!

To diminish the risks, I have talked to a lawyer to analyse the situation and to make sure there is nothing wrong with the legal contract. Additionally, I did an extensive analysis on the evolution of the real estate market and try to be realistic/towards the pessimistic side with my assumptions. I have also investigated the construction company because they are rather new in the market. But I have realized the risks are rather low and a passive investment which yields, just on passive income, i.e., without taking into account the possible valuation of the asset, which I believe might increase in value, between 5% and 7.6% is a rather good investment.