Sunday, April 18, 2010

Thoughts (and data!) on car ownership costs

I've bummed a ride home (in a car! the beauty of commuting on a folding bike) a couple times this winter during exceptionally bad weather or late workdays when the siren call of a warm, faster commute pulled too strongly to ignore. The co-worker from whom I've accepted rides mentioned last week that she had calculated that as long as she continues to car pool with another co-worker of ours, their combined costs for the car commute are less than the cost of two annual transit passes, even with the passes partially subsidized by our employer at a rate of around 35%. This sort of argument is one I've heard before, a different aspect of the siren song of automobiles, and I had a feeling that in this case, as in many others, it was based on an incomplete calculation.

I know this because during the process of selling our car I wrote a maintenance record summary in a spreadsheet as a service to the new owner as well as for my own records (I also gave the new owner my file of all the receipts and reports). Combining these tabulated maintenance costs with records of our insurance and registration payments, depreciation based on the actual purchase and sale price of the car, and a reasonable guess at fuel costs (using recorded distance driven, measured fuel efficiency, and average fuel price), I made a realistic estimate of the total cost of owning that car for almost exactly 5 years.

Make/model: 2001 Ford Focus ZTS sedan, 4-cyl, EFI, 1.8L, FWD
Primary place of use: Upstate NY
Primary mode of use: 24-mile round trip year-round 6-day per week commute on country roads (4-years)
Other use: Occasional trips to nearby cities, 3 cross-continent road trips
Special equipment/costs: Excellent snow tires ($600/set, two sets), ~$2000 extra repair due to driving on salted roads.
Length of ownership: 5 years
Total distance driven: 52373 miles

Maintenance, repairs, and tires: $6685.51
Value depreciation: $6000
Fuel (28 MPG, $2.60/gal): $4863.21
Insurance (2 drivers): $2760
License & registration: $90

Total cost of ownership: $20398.72
Annual cost of ownership: $4079.743
Cost of ownership per mile: $0.39

The estimate is large. Much larger than most people realize and much larger than I had realized until I finally tabulated all the costs. This accounted for almost 10% of our household income, spent to have the use of a single car. This estimate is also conservative, it doesn't account foe a few oil changes that happened in other states and the receipts didn't get filed, and the estimate of average fuel price is undoubtedly low. Most of the time it was much closed to $3.00/gal. Note that the current reimbursement rate for mileage on a personally-owned vehicle is $0.50. When most people see such a rate they think of it as exceptionally high and think they're getting paid to drive, when in fact our costs for a small, inexpensive, relatively efficient car were almost 80% of this figure!

This isn't to say that we didn't get something for our money. By being able to commit to a car commute (a dubious decision in hindsight) we were able to buy a house in an area with we could afford. On the other hand, before we moved out of town (our first year of owning the car we lived in town in a rental and only used the car for grocery and errand) we only put about 4500 miles on the car, after that we put on almost 12000 annually. The difference between these numbers is almost exactly the length of our 6-day/week commute.

Making another reasonable estimate that half of the depreciation can be counted as mileage-based and half as time-based (a car that isn't driven doesn't lose value as quickly) while counting maintenance and fuel as purely mileage-based and insurance and registration and purely time-based, it comes out that about 71% of our costs were based on mileage and 29% were based on time-owned. This means that if we hadn't moved out of town our annual car costs would have been $2420 instead of $4080. The incremental cost of our commute was $1660 per year: 40% of our total cost of owning the car.

To me, this drove home the point that if you're going to own a car anyway and you carpool driving can be cheaper than an annual transit pass costing around $1000 per year per person. This is one of the financial traps of car ownership: the incremental cost of any extra usage is small enough that if you own a car it's hard to financially justify not using it. It's a pair of thrifty handcuffs, making the owners feel good about driving more. I consider this throwing good money after bad.

By using car rentals and car-sharing instead of owning our own car, we incur something very close to the actual per-trip cost of car ownership, but structured such that the overhead (the time-based costs) are paid on a usage basis. This shifts the thrift decision from saving money by driving more to saving money by driving less.

The financial incentive to not drive can't be entirely realized by not driving. It's realized by not owning a car. This is a huge psychological hurdle that can be difficult to get over, and there needs to be plenty of shared infrastructure in place to make it happen: good transit, convenient car-sharing, and walkable/bikeable everyday shopping were keys to getting over that hurdle for us. Once we had structured our lives to be able to take advantage of them, the financial decision to sell the car was easy.

As an aside, when I've succumbed to the offer of a ride home, traffic has always made it take longer than taking the train.


centrallyisolated said...

Thanks for posting all this data... it's cool to see such comprehensive figures for car ownership costs (I guess you'd probably want to figure in parking costs for commuting, as well?). I'm too lazy to actually make these calculations for how much I spent on my car when I had it, but I'm sure it was at least 10% of my income (and probably more, since my Canadian insurance was close to $100 a month!).

I think you're absolutely right about the different incentives offered by car owning vs car sharing as well -- when I had the car I used it for lots of trips that didn't really require a car because it wouldn't make sense to take a cab, etc, when I already had a car. Now that I'm not shelling out all the upfront costs of car ownership, it makes a lot more sense to use other transportation modes and I only occasionally find the need to take the carshare car or a rental. I'm glad the non-car commute is working out so well for you!

Anonymous said...

For me my bike stopped me having to get a second car. In the end the money was not as important as other considerations such as convenience. But sometime convenience and saving money go together. I save $12-(approx $2900- PA) every day I don't drive, just in parking fees, and I get to ride my bike right into my workplace.

Clever said...

the netherlands used to make car ownership really expensive with hefty sales tax and steep licensing fees. recently they dropped these ownership costs dramatically, substituting in their place a heavy per-mile usage fee, GPS-based. the rate of car ownership has thus increased, while the amount of unnecessary driving has dropped. progress.

Matt in Tacoma said...

Very helpful. I'm going to pass this around in connection with the H+T Index I recently heard about ( Wishing I kept records like that...

Christy said...

wow, that was very very insightful. i had never thought before about how the culture and economic structures of driving lead one to the paradoxical logic that driving more can make you save more money. whereas actually the best thing for your wallet (and your body, and your environment) is to not own a car. i've been playing with this idea for a while, since it's even more ridiculously easy to bike around eugene than it is portland (way less hills, less miles to traverse), and this is giving me some good facts to chew on. talk soon!

Mr Colostomy said...

The UK is not exactly a cycling utopia, but coming from a car-free perspective I am always confused by peoples' logic when comparing the cost of their car to the cost of others use of public transport. They always seem to compare fuel cost to public transport cost and forget to also factor in the cost of the car, its maintenance, insurance, vehicle excise duty and parking. Not to mention the social, political and environmental problems caused by car usage and ownership.

Even here I get by car free just fine, all I need is my Yuba Mundo

Max said...

One thing that I hope to see more of, is mileage based car insurance.

It reduces the annual cost and increases the incremental cost of car ownership. Impressive that Texas got this done.

Andrea Bloom said...

Murray sent me this link - very cool. I did my thesis (a documentary film) on commuting and I learned a lot. As a car-less person, I've always advocated for public transit and/or bikes and walking, and the benefits to health, the environment, and one's lifestyle cannot be overstated. That said, there are also numerous studies that show if your commute is over 12 miles, the cost you pay in driving will often far outweigh the cost you'd pay of getting an apartment/house closer to your job.