The True Cost Of Owning A Car
Everyone knows that cars are expensive. In addition to the cost of acquisition, there's maintenance, insurance and the ever-increasing cost of gasoline. We all know that those costs add up, but few of us know exactly how much it really costs to own a car. Let's take a look.
According to Consumer Expenditures in 2006, released in February of 2008 by the U.S. Department of Labor's U.S. Bureau of Labor Statistics, the average vehicle costs $8,003 per year to own and operate. The breakdown of the figure comes to $3,421 for purchasing the vehicle, $2,227 in gasoline and motor oil expenses, and $2,355 in other vehicle-related costs. As one might expect, the least affluent spend less than the most affluent. In fact, the nation's most affluent quintile spends a whole lot more, with their $15,198 in annual vehicle expenses coming in at nearly six times the $2,856 spent by the least affluent. An overview of vehicle expenses based on household income is provided in figure 1 below.
|Item||Lowest 20% of Income Earners||Second 20% of Income Earners||Third 20% of Income Earners||Fourth 20% of Income Earners||Highest 20% of Income Earners|
|Figure 1: 2006 household cost of owning a vehicle per quintiles of income.|
|Source: Bureau of Labor Statistics|
Statistics From the American Automobile Association
The American Automobile Association (AAA) also compiles statistics on the cost of driving, and has been doing so since 1950. In its 2007 Your Driving Costs survey, it summarizes the cost of gasoline, maintenance, insurance, license and registration, loan finance charges and depreciation costs for a variety of vehicles. That data is summarized figure 2 below. (For related reading, see Shopping For Car Insurance.)
|2007 Model||10,000 Miles per Year||15,000 Miles per Year||20,000 Miles per Year|
|Small Sedan||50.5 cents||41.4 cents||37.4 cents|
|Medium Sedan||61.8 cents||52.5 cents||48.2 cents|
|Large Sedan||74.2 cents||62.5 cents||56.8 cents|
|4WD SUV||81.5 cents||66.6 cents||59.6 cents|
|Minivan||69.2 cents||57.6 cents||52.2 cents|
|Figure 2: Yearly cost per mile of various vehicles based on number of miles driven|
|Source: American Automobile Association|
According to the AAA, the average person spends $9,641 per year for the privilege of driving. Keep in mind that these estimated costs are based on an average gasoline cost of $2.256 per gallon. The numbers also don't include the cost of parking. (To read more, see Getting A Grip On The Cost Of Gas.)
Putting those costs in terms of an average commute to work, the driver of a medium sedan who pays 52.5 cents per mile spends $10.50 to make a 20-mile round trip each day. The tab comes to $52.50 in a five-day week. Multiply that by 50 weeks per year and the grand total comes to $2,625. In many major cities, an annual bus pass costs less than a third of that amount. In 2008, even in Los Angeles, a $62 monthly bus pass only costs you $744 for the year. (For related reading, see Extreme Commuting: Is It For You?)
Minimize Your Costs
Regardless of how much you spend on your car each year, less is always better. Although eliminating all spending on transportation isn't practical or possible for most people, there are steps that can be taken to keep your costs low.
For starters, if you don't drive much, leasing a vehicle may be right for you. (Read Pros And Cons of Leasing Vs Buying A Vehicle to learn how leasing a car can help you to minimize your monthly costs.)
If public transportation goes to the places that you need to be, you should seriously consider its merits. Not only does somebody else do the driving, but taking public transportation can often reduce your monthly transportation expenditures by a significant amount. Buses, trains, subways and van pools all provide relatively inexpensive alternatives to driving yourself to work.
Car pools are another great option. Just because you own a car, doesn't mean that you always need to drive it. Taking turns with a friend can save you money and save wear and tear on your vehicle.
If you work odd shifts or can't access public transportation, you might have no choice but to own and use your own vehicle. If that's the case, think small. Remember those numbers you looked at earlier? Driving a small sedan is likely to cost in the neighborhood of 50.5 cents per mile versus 81.5 cents for a gas guzzling SUV, which amounts to a 30% savings per year! It's also a good move for the environment and, since you have to breathe the air too, a good move for your health. (Interested in buying a true gas sipper? Read Hybrids: Friends Or Financial Foes?)
Similarly, don't pay for an eight-cylinder engine when four cylinders will work just fine. Unless you're hauling heavy loads on a routine basis, the extra cost of a bigger engine results in more money spent on gasoline.
Whatever you are driving, make a conscious effort to drive it less frequently. Walking or biking to local destinations is good for your health and good for your budget. When you do drive, consolidate your trips. Go to the shopping center, the bank and the dry cleaner all in the same trip instead of making three separate trips.
Regardless of how you get from place to place, pay attention to how much you are spending. This includes ancillary costs, such as car insurance and regular maintenance. By keeping an eye on your expenses, you can keep more money in your pocket.