Saving for a Down Payment: Transportation

February 10, 2018 by Marty Orefice | Financing, Real Estate

Public transportation is a step many people choose to take in order to save money for a down payment.
In previous articles, we’ve discussed saving for a down payment through budget cuts to food and housing costs. This article discusses saving by cutting the cost of transportation, which is one of the key factors the Bureau of Labor Statistics says goes into every American budget.

How Much Do You Spend on Transportation?

In 2016, the average household spent $9,049 on transportation. The majority of that amount ($3,634) went to pay for a vehicle. Most households spent $1,909 on gasoline and motor oil and the remainder was spent on other expenses, like insurance and repairs.

Transportation is about 16 percent of the average family’s budget. It’s not the easiest category to decrease spending on, but decreasing spending on transportation will get you closer to saving a down payment for a home.

No matter what, you’re going to need transportation to work. There are several options you can look at to figure out how to save on transportation.

Own a Car or Rideshare?

A car is one of the most expensive things you pay for and, for most people, you only use it a few hours a day. Is it worth paying so much money for something that sits in a parking lot?

Owning a car makes sense for certain professions, like real estate agents, who spend their whole day driving from home to home. And it makes sense for people who live in spread out rural areas where public transportation is not reliable. However, for others, it’s a convenience, but not a requirement – especially in the modern technology era that we live in.

The average Uber or Lyft ride is between $10 and $15 – except in New York where the average ride costs about $30 due to regulations. On the high end of that, let’s say you use a rideshare service twice a day every day and spend $15 a ride. You’ll spend $5,475 a year on transportation, whereas the average is about $3,500 more.

That’s a serious amount of money, but it only works if you’re limiting yourself to two rides a day. If there are two adults in the household with jobs that aren’t near each other or if you’re driving kids to and from school, you’re probably taking more rides than that. To begin with, your family probably spends more than the national average because it includes people who are single and couples who work in the same location who skew the data. However, you’re likely better off having your own car.

If you are better off with your own car, you will need to consider whether both adults need a car. If you work on opposite sides of town, you probably cannot carpool each other, but that doesn’t mean carpooling is out of the question.


If someone who works with you or near you lives nearby to you, you can save a considerable amount of money by carpooling with them.

According to data from the Telework Coalition, the average American uses 601 gallons of gas per year getting to and from work. If you carpool with a neighbor, you can split the cost of that gas. At a conservative estimate, 601 gallons of gas is at least $1,200 per year. If you split that with someone you carpool with, you’ll save $600 a year on gasoline.

That works if you’re the person with the car or the person hitching a ride. And if you and your significant other use the strategy, you can save $1,200 per year by carpooling. You can save even more if it means that one of you doesn’t need to purchase a vehicle.

While there might be emergency situations in which you both need a vehicle, at that point, you can always look back to ridesharing, as a potential $15 expense isn’t worth the cost of car payments or car insurance.

Leasing or Buying?

The leasing or buying debate for cars is the same as the renting or buying debate for homes. In the short run, it may be cheaper to lease a car, but at the end of the lease, you have nothing to show for it. Whereas, if you buy a car, at the end of your car payment, you have a car that you can choose to sell or keep using. You’re left with something of value.

More so, if you lease a car, you’ll have to pay for excess miles and damages when you return it to the dealership.

If you’re saving for a down payment on a home that you want to buy soon, leasing a car will probably give you the ability to put more money into your savings account. However, it will be an expense that the bank will be aware of when they evaluate whether you’re ready for a loan.

It’s a more financially viable investment to purchase a car than it is to lease one. It is important to be aware that cars depreciate the most within three years of when they are made. Therefore, for the best deal, buy a car from the dealership that is more than three years old.

Using Public Transportation

In cities that have public transportation, it is likely the cheapest option, especially if you buy your tickets wisely.

Buying tickets in bulk with a weekly, monthly or yearly pass is often cheaper than buying single tickets. Additionally, take advantage of every discount option you’re given. It’s often cheaper to buy tickets on websites like Groupon than it is to buy them in person. If you do buy them in person, look for discounts for locals, students, seniors, etc. Some employers also offer discounts on public transportation.

Public transportation affords the advantage of not needing to pay for a vehicle, vehicle maintenance, or gasoline. In cities with good public transportation, like New York City, you can save an exorbitant amount of money. According to a 2017 Transit Report by the American Public Transportation Association, New Yorkers save $14,800 per year by using public transportation. That’s way higher than what the average American household spends on transportation, but New York City is one of the more expensive cities in the United States. You can use this calculator to determine how much you can save in your area.
White bus On Road Near High Rise Building During Daytime by Kaique Rocha is licensed under The Pexels Photo License.

Marty Orefice

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Marty Orefice


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