People typically spend less money on transportation expenses in retirement. Without the need to drive to work every day, retirees’ transportation costs on average fall by 26%, according to a report by the Government Accountability Office that tracked pre- and post-retirement spending.
However, retirees still need to get around, which is why you can expect the costs of a car to remain one of your largest expenses in retirement. The Bureau of Labor Statistics found retirees spend an average of $6,852 annually, or $571 per month, on transportation, including the costs for vehicle purchases, gasoline, insurance, maintenance and repairs.
Big-ticket purchases, such as a car, require more careful planning once you reach retirement. The money used to pay for them is unlikely to come from a traditional paycheck. Therefore, there are additional factors to consider first. For example, the tax consequences for withdrawing a large sum of money from an IRA to purchase a car.
In this video, Advance Capital financial adviser Robert Kleber discusses the myriad aspects of buying a car in retirement, including the pros and cons of leasing, whether to pay cash or finance, and why you should forget the new-car smell and buy used.