More on Driving vs. Transit Costs

Thanks to Elizabeth Alexis of CARRD for finding and giving me a link to the AAA’s methodology for computing driving costs, used in APTA’s flawed study about the high household savings coming from switching from driving to transit. The AAA methodology indeed assumes perfect rather than realistic maintenance and tire changing, and has elevated depreciation and warranty charges.

The full list of problems with the AAA methodology, according to Elizabeth:

You are spot on about the misuse of data.  The AAA study is really misleading It represents the costs for someone who buys a new car from the dealer  with the extended warranty, overinsures it, drives it for 5 years, buys a new set of tires and then trades it in to the dealer, getting totally ripped in the process.  If everyone did this, the average car fleet would be 2 1/2 years old (instead of 9).     The only thing this study tells you is that you should never buy a new car and that you are an idiot to do anything but buy used cars off craigslist.

They are also assuming:

1) You buy a new car every five years.
2) Even though you know you will sell the car, you buy the extended warranty.
3) You accept the dealer’s trade-in price (which is very low generally).
4) Even though you know you are going to sell it to the dealer for no money, you go ahead and put on a new set of tires right before doing so.
5) You buy insurance with really low deductibles.
6) Because on average you have a 2.5 year old car, your annual car tax and your insurance are very high (in most states, the taxes are based on the value of the car).
7) And you finance the car @ non-deductible 6% interest. It should be noted that most car loans are 3-5 years.  So if you kept a car after it was paid off… this cost would go away.

A better study for the costs of driving was done by Steven Polzin, of the National Center for Transit Research, who also serves on “several APTA committees.” Using various government survey data, he finds an average saving of $3,600 from giving up a car; this is less than the cost of an average car, since households might give up the lesser used car or take more transit or drive the remaining car more. I encourage everyone to bookmark the study and refer to page 18 for comparative spending on transportation in the US versus the EU-15; it’s a difference of 19.5% of household budget versus about 14%. Any figures for world public transit leaders Japan and Switzerland will be appreciated.

5 comments

  1. Joseph E

    I like this site, which lets you estimate your own costs, including insurance, registration, motor vehicle taxes, finance charges, depreciation, fuel, maintenance, parking and tolls. You can also add injuries, time lost, and property damage. And there is a separate section to calculate negative externalities like traffic, pollution, taxes spent on roads, etc.

    While the $3600 figure is probably a realistic average amount saved by dropping one car and is a good one to use for public policy reasons, it may be lower or much higher for different individuals.

    http://www.commutesolutions.org/calc.htm

    • Alon Levy

      Negative externalities are an entirely different can of worms. If anything, the source you link to (ultimately Mark Delucchi) underestimates them. For a really egregious example, because he was working from a US policy perspective he only included climate damages to the US from US emissions, leading to an extremely low figure of ¢13 per gallon of gasoline. Based on newer studies, about the minimum defensible figure is around ¢40 per gallon, and more realistically, with a lower discount rate, $1. (And James Hansen advocates $2.) More on this in a future post, I promise.

  2. M1EK

    I always have a beef with the commute calculators used in the “just leave your car at home” case as well – the presumption that depreciation is non-trivially a function of miles-driven (it’s not). Even insurance really isn’t for most people – most people can’t switch to mile-based insurance, which is more expensive at the margins anyways; and most maintenance assumes calendar schedules in addition to mile schedules (although as in your complaint above, people realistically don’t follow it to the level recommended).

    My own drive versus transit comparisons inevitably end up with driving being cheaper – because we have 2 Priora – and no tolls, and no parking charges. Depreciation is effectively zero, as is insurance – and only a small portion of maintenance can realistically be assigned per-mile. Yet Cap Metro’s calculator would have me leaving my car at home every day. Even for SUV drivers, the more realistic calculators have people saving a buck or so per day at the expense of maybe an extra hour of travel time. Not gonna happen, which is why I spend so much energy on making transit more competitive in speed and reliability instead of throwing my lot in with the people who think frequent (slow) service will somehow get people to leave their car at home.

    • EngineerScotty

      The treatment of depreciation is an important concern. The IRS amortizes depreciation over mileage–those who are permitted (in the US) to deduct auto use from their taxes do so on a per-mile basis; and for fleet/commercial purchasers of vehicles, this is reasonable–mileage and not age is the key determinant of a vehicle’s residual value (assuming that the vehicle is maintained in good condition).

      Personal automobiles, on the other hand, exhibit other characteristics. Cars lose substantial resale value simply by being driven off the lot (and becoming “used cars” and not “new cars”); and continue to lose value even when parked in the garage–age matters as much as mileage. The net effect of both of these factors is that once you have a car, it becomes inefficient not to use it; the marginal cost of driving (fuel, amortized maintenance, parking/tolls) goes way down once the fixed costs are better accounted for.

    • Ian Mitchell

      The best case scenario to me seems not to make transit oriented in getting people out of cars, but being good enough that people don’t find it necessary to buy them. Off-peak service, reliability, and comfort/ease (GPS tracking, wifi onboard), are huge factors for this.

      Nobody who drives seems to know or care if transit is free or $5. The people riding transit cares more about not having to worry about needing to shell out for a cab if they have to work later, and typically won’t worry about taking an extra 20-40 minutes per day if it’s relaxed facebook or e-mail catch up time.

      This is my perspective from the sunbelt. People who move, especially out of college, will not buy cars if the transit is decent enough. People who have cars, aren’t getting out of them, even if it’s faster, cheaper, and more luxurious- because they aren’t going to even be aware.

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