How much does driving cost?

APTA has just come out with a press release touting large savings for households that do not drive but instead take mass transit. The average it claims is $10,000 per year per person nationwide; in some cities it’s higher, and Second Avenue Sagas seized upon the study’s claim of a $14,000 saving in New York.

The only problem: drivers in the US do not spend $10,000 a year, let alone $10,000 more than transit riders. The federal government has a detailed breakdown of household budgets, so that it can compute inflation rates accurately and set cost-of-living adjustments and monetary policy. The New York Times has a nifty graphic breaking down household spending as of 2008, and transportation was 18% of American households’ budgets, of which about 17% is on cars and 1% is on all other forms of transportation. Mean household income in the US is $68,000 per year as of 2009, so we’re talking about $11,560 spent on cars per household. There are on average a bit more than 2 cars per household in the US (246 million cars, about 113 million households), so we’re talking about $5,400 per car. Not $10,000.

At least it’s better than its shilling against a climate bill on the grounds that some of the carbon taxes it would raise from roads would not go to the Highway Trust Fund, to the point that it proposed an alternative that would raise less money for transit. But in either case, it cares less about a mode shift benefiting transit users and the environment than about lobbying for transit operators’ interests.

10 comments

  1. Ben

    But what’s the number of cars per household only among households with cars? And what’s the average spending on transportation only among households with cars? The data you’re using to question this study includes those who are theoretically saving somewhere between $5,000 and $14,000 a year on transportation due to a lack of an automobile, skewing the numbers a bit lower. While on a national scale, maybe this means little, on a metropolitan area scale (NYC, for example, has about half of its citizens living without a car) this can skew the numbers a great deal. A more refined set of data is necessary for a true approximation of the savings.

  2. Alon Levy

    A little bit higher – nationwide, more than 90% of households own cars.

    But I think you’re misunderstanding the analysis. Remember, $5,000 is the spending per car; APTA claims $10,000 saving from going down from two cars to one, so this is the correct comparison. If I restricted the analysis only to households with cars, then I’d have to multiply and divide by the same factor.

    The reason APTA’s numbers are higher in large, dense cities like New York is that car ownership in large, dense cities is more expensive. It is not because of the lower rate of car ownership. Usually the same causes that make other people not have cars will also make it more expensive for you to have one; but the mere fact that other people do not own cars does not by itself make car ownership more expensive.

  3. Nathanael

    Alon, I’m going to lay you a bet that the household spending numbers used by the NYT *do not include the cost of purchasing a car*. Get back to me after you’ve checked whether that is true. If so, that accounts for most of the difference, over the lifetime of a car.

    I’m betting on this because if I’m not mistaken many Americans still buy cars with a large upfront payment. Car leases aren’t the standard yet, nor are no-money-down ten-year loans, unless I’m really not up to day. Therefore it wouldn’t show up in a yearly household budget.

    • Alon Levy

      The big blue blob in the graphic is “New cars and trucks.” The off-white blob to its upper left is “Used cars and trucks.” Both together work out to an average of about $2,000 per year per car, which looks like a reasonable figure for both upfront purchases and leases.

      The BLS doesn’t do just yearly budgets – it looks at all consumer spending, including lump-sum payments. See for example the inclusion of college tuition, even though families only pay it for four years per child.

  4. jim

    Th mean and median are not good measures of central tendency in this case. I think that spending on cars is bimodal. There’s two populations: (1) those that either buy used cars and run them into the ground or buy new cars and hang on to them forever — their spending is dominated by variable costs: gas and tolls; and (2) those that either buy new cars and trade them in quickly or lease — their spending is dominated by fixed costs: depreciation and interest (or lease payment which is equivalent to depreciation and interest), routine maintenance, insurance, taxes and fees. It’s quite likely that the second population spending peaks at $10K/yr. It wouldn’t surprise me if the peak at $10K was higher than the peak at $3K.

    Not that this is relevant to New Yorkers, who, even when they have cars, buy and use them in different patterns than the rest of the country.

  5. Joseph E

    In the linked article APTA explains their methodology: (http://www.apta.com/mediacenter/pressreleases/2011/Pages/110510_May_Transit_Savings.aspx)

    “The cost of driving is calculated using the 2011 AAA average cost of driving formula… assumes that a person will drive an average of 15,000 miles per year …”
    The AA rate is $0.56 per mile from last year, which they adjusted up for $3.95 a gallon gas, to about $0.60 a mile. http://wot.motortrend.com/aaa-study-shows-cost-driving-rise-65401.html
    They then add parking costs (about $160 per month) for a space downtown.

    So, if you think these averages are too high, AAA is apparently the culprit.

    I think the difference is due to the variation between median costs for the population as a whole, and average costs for AAA drivers, who are assumed to be buying new vehicles. AAA seems to want to number to be higher, to support higher tax right-offs and mileage payments from employers.

    From an individual standpoint, the household median of $5400 per car is more realistic, but from a public policy standpoint even AAA’s figures of $10,000 per car are too low, because they don’t include the costs of subsidizing driving and the negative externalities caused by traffic congestion, pollution, importing oil, and traffic injuries.

    If there are 150 million cars in operation in the US, then $10k per car per year is only $1.5 trillion, or 10% of the GDP, which is less than the 14% of household budget calculation. I hate to quote theses guys, but even they put transportation as 16% of GDP in 1997, in an article claiming that driving is cheap. (http://www.ti.org/vaupdate04.html) If US GDP is 14 trillion this year, that would mean almost $2 trillion devoted to transporation (mainly private cars).

    So the cost of one car is probably close to the AAA estimate of $10,000 on average, though the median cost will certainly be lower, while some high-income folks (like my boss, who buys a new car every year) will be spending much more.

    • Alon Levy

      First, the average vehicle in the US is driven 12,500 miles per year, not 15,000. Multiply that by $0.60 and it’s $7,500.

      Second, most driving in the US is not downtown-bound; it’s inappropriate to include downtown parking. Parking-constrained downtowns already have decent transit mode shares, thank you very much: Downtown LA’s is 50%. Worse, people who actually work downtown and drive 15,000 miles a year probably live in outer suburbs and their transit alternative is expensive commuter rail, so a $10,000 cost difference would translate to about $13,000 driving cost.

      And third, in practice, the AAA’s numbers are a bit too high, and I make no apologies for trusting the BLS more. Perhaps the AAA accelerates depreciation, or assumes perfect rather than realistic maintenance.

      By the way, the US has 240 million passenger cars, including SUVs and light trucks. I wish it only had 150 million. And household spending is not much more than half of GDP, so if it’s really $10,000 then households spend about 30% of their budget on transportation.

    • M1EK

      Cars don’t depreciate per-mile unless you’re driving them so much that you’re decreasing their lifespan by a significant amount (almost nobody does this).

      Go to the Blue Book and look at the price for a 5 year old Honda Civic in low, medium, and high mileage scenarios – look how little that price changes compared to the original sales price of the vehicle (5 years ago).

      Last time I did this, a couple years back: http://mdahmus.monkeysystems.com/blog/archives/000440.html

      A 1998 Civic would be either 9 or 10 years old today, depending. The added depreciation due to driving normally versus the little-old-lady case is no more than $100 per year ($8.25 per month). The depreciation due to age swamps this figure by a factor of 10 or more. This stands to reason – would you really pay a ton of money for a 9-year-old Civic just because it wasn’t driven very much? Of course not.

      The IRS uses a per-mile figure because that’s the only rational way they can let businesses reimburse employees for business use of vehicles. It doesn’t mean it’s the actual cost the employee incurs, though.

      • Alon Levy

        Obviously, those costs are not marginal. Anecdotally, I know people who are reimbursed 55 cents per mile volunteer to drive whenever possible. And I remember another commenter (could be you, I forget) who said the same on another blog.

        However, it still makes sense to compute the costs of owning a vehicle and not just driving it. APTA’s official position here is “If you give us gobs of money, people might give up their cars and save money riding transit.”

  6. Pingback: More on Driving vs. Transit Costs | Pedestrian Observations

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