The Cost of Driving
And The Savings from Reduced Vehicle Use
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Victoria Transport Policy Institute
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Updated 19 July 2017
This chapter describes the full costs of driving an automobile and the savings that result from TDM strategies that allow consumers to reduce their automobile use. Also see the “Vehicle Costs” chapter of the Transportation Cost and Benefit Analysis Guidebook at www.vtpi.org/tca.
What does it cost you to drive an automobile? What do you save by reducing your automobile travel? This chapter examines these questions. For more information see Transportation Costs.
Several organizations provide typical vehicle purchase, ownership and operating cost estimates:
· Commute Info (http://commuteinfo.org/comm_calc.shtml) calculates the costs of commuting by automobile and the potential savings from using other modes.
· Carfree A to Z (www.carfreeatoz.com/planner) compares commuting time and financial costs for various modes.
· Commute Smart Cost Calculator (http://commutesmart.info/commute-cost-calculator.asp) calculates the potential savings from ridesharing.
· Seattle Commute Cost Calculator (www.rideshareonline.com/Commuters/calculator.html) calculates the potential savings from ridesharing.
· Runzheimer International (www.runzheimer.com), sells estimates of typical annualized ownership and operating costs for several types of vehicles, which are the basis for cost estimates published by automobile associations.
· The Black Book (www.blackbookusa.com and www.canadianblackbook.com), and the Kelley Blue Book (www.kbb.com) provide wholesale and retail price estimates for new and used vehicles, taking into account model, age, condition, mileage, accessories and geographic location; also available at www.cars.com.
· Intellichoice (www.intellichoice.com), provides price estimates for new and used vehicles.
· International Fuel Prices (www.internationalfuelprices.com) is a website with information on international fuel price reports from GTZ (a German international development agency) and other sources.
Vehicle costs are often divided into variable costs (also called operating costs or out of pocket expenses) such as fuel, oil, tire wear, which increase with vehicle use, and fixed costs which are not considered affected by how much a vehicle is driven. Table 1 summarizes one example of this information.
Table 1 American Automobile Association Vehicle Cost Estimates (2009)
|
|
Small Sedan |
Medium Sedan |
Large Sedan |
SUV |
Van |
|
Gas & oil |
8.21¢ |
10.54¢ |
11.51¢ |
14.39 |
12.16 |
|
Maintenance |
4.26¢ |
4.51¢ |
4.92¢ |
4.94 |
4.87 |
|
Tires |
0.61¢ |
0.87¢ |
0.82¢ |
0.95 |
0.74 |
|
Operating costs/mile |
13.08¢ |
15.92¢ |
17.25¢ |
20.28¢ |
17.77¢ |
|
Insurance |
$948 |
$957 |
$1,022 |
$948 |
$897 |
|
License & registration |
$419 |
$572 |
$711 |
$727 |
$602 |
|
Depreciation |
$2,430 |
$3,401 |
$4,551 |
$4,619 |
$3,818 |
|
Financing |
$553 |
$786 |
$998 |
$1,023 |
$832 |
|
Ownership costs/year |
$4,350 |
$5,716 |
$7,282 |
$7,317 |
$6,149 |
|
Total for 12,500 annual miles |
$5,985 |
$7,706 |
$9,438 |
$9,852 |
$8,370 |
|
Average cost per mile |
$0.35 |
$0.46 |
$0.58 |
$0.59 |
$0.49 |
(From Your Driving Costs 2009, American Automobile Association (www.ouraaa.com), based on data from Runzheimer International.)
These estimates assume a relatively new car (typically the first four years of vehicle life). As a result, these values tend to overstate depreciation and insurance, and understate maintenance and repair costs compared to the overall vehicle fleet. Consumer expenditure surveys (Table 2) indicate somewhat lower average vehicle costs. Mohammadian and Miller (2002) estimate annual fuel, maintenance, depreciation and insurance costs for vehicles of various types and ages.
Table 2 Average Transportation Expenditures (2002 U.S. Dollars)
|
|
Per Household |
Portion of Household Total |
Per Vehicle Year |
Per Vehicle Mile |
|
Vehicle purchases |
$3,665 |
9.0% |
$1,833 |
$0.15 |
|
Gasoline and motor oil |
$1,235 |
3.0% |
$618 |
$0.05 |
|
Vehicle finance charges |
$397 |
1.0% |
$199 |
$0.02 |
|
Maintenance and repairs |
$697 |
1.7% |
$349 |
$0.03 |
|
Vehicle insurance |
$894 |
2.2% |
$447 |
$0.04 |
|
Other vehicle charges |
$483 |
1.2% |
$242 |
$0.02 |
|
Total vehicle expenses |
$7,371 |
18.1% |
$3,686 |
$0.29 |
|
Public transport expenses |
$389 |
1.0% |
$195 |
NA |
|
Total transportation expenses |
$7,760 |
19.1% |
$3,880 |
$0.29 |
(2002 Consumer Expenditure Survey, Bureau of Labor Statistics, www.bls.gov. “Public Transport” includes intercity air, rail and bus transport, as well as local transit services).
Depreciation is usually considered a completely fixed cost, but it is actually partly variable since increased driving increases the frequency of vehicle repairs and replacement, and reduces vehicle resale value. Surveys of used vehicle price guides (www.edmunds.com), which provide guidelines for adjusting prices based on vehicle mileage readings, indicates that mileage-related depreciation typically averages 5-15¢ per mile, or about as much as vehicle operating costs. Most leased vehicles have additional charges averaging about 10¢ per mile for mileage over a certain level. Increased driving also increases the risk of costs associated with a crash, traffic or parking citation.
|
Mileage-Based Depreciation Example (by Art Ludwig, www.oasisdesign.net) It is significantly more expensive to drive your car, and you save much more when you reduce your vehicle mileage, than indicated by the American Automobile Association’s widely reproduced car cost estimates (www.aaa-calif.com/members/corpinfo/costbrch.asp). These estimates treat depreciation as a fixed vehicle ownership cost, ignoring the higher rate of depreciation that occurs with increased vehicle use.
For example, according to Kelly Blue Book (www.kbb.com) a 2001 Honda Accord with 10,000 miles has an estimated resale value of $21,175, while the same car with 20,000 miles has a value of $19,350, indicating that mileage-based depreciation averages 18 cents per mile. This is greater than the entire vehicle operating costs estimated by the AAA. If the condition also drops (which is likely to occur with greater use), per-mile depreciation is even greater. In the case of the 2001 Honda, if the condition drops one increment, from excellent to good, the vehicle’s value declines to $18,230, representing mileage-based depreciation averaging 29 cents per mile, about three times the estimated vehicle operating costs. Thus, the true cost of operating this vehicle is two to three times greater than what an owner would conclude from the AAA’s published estimates. |
This indicates that the real cost of driving, and so the real potential consumer savings from reduced driving, are about twice what is usually recognized. Motorists and modelers often assume that driving costs about 10¢ per vehicle mile, considering just direct vehicle operating costs, but there are additional mileage-related costs that average another 10-15¢ per mile. As a result, TDM strategies that allow motorists to reduce their mileage provide about twice the financial savings than is usually recognized. Savings typically average 20-25¢ per mile. Below are examples of TDM strategies that can help consumers save money by reducing vehicle mileage and ownership costs:
Pedestrian and Cycling Improvements
Vehicle ownership also involves parking costs, which typically range from about $250 annually for a space in a suburban parking lot, up to $1,200 annually for a space in a parking garage (Parking Evaluation), and even higher for underground parking. Most vehicle parking is not individually priced. It is usually included with housing, or provided free by businesses and local governments. As a result, motorists usually consider it a “sunk” cost, with no savings from reduced vehicle ownership and use. However, in some cases motorists do pay directly for parking, either because they lease a parking space, or because the space they use has an opportunity cost, such as being able to use a garage as a workshop or storage area. Parking Pricing, Parking Management and Location Efficient Development allow motorists to capture additional parking cost savings from reduced automobile use.
In addition to financial costs, travel involves substantial non-market costs associated with time and risk (Transportation Costs). These are often the largest cost of travel. For example, travel time and crash risk average about 40¢ per mile for an average trip, assuming travel time costs of $10 hour, and 7¢ per mile in non-market crash costs per vehicle mile.
Alternative modes are often slower than driving and some have higher per-mile crash rates, implying that TDM strategies that shift modes increase consumer time and risk costs. However, consumers often compensate by reducing their total travel. A local walking or cycling trip may substitute for a cross-town car trip. Transit users rely more on local services that are within walking distance of their destinations. Non-drivers travel about 1/3 as much as much as an average motorist (NPTS 1995). As a result, total travel time costs are about equal, and total crash risk tends to decline (TDM Safety Impacts).
Existing transportation models often evaluate economic impacts by assigning standard values to travel time, which assumes that any increase in travel time represents a cost to consumers, and any reduction in travel time represents a benefit (Litman, 2001). This ignores the possibility that some travelers may sometimes prefer slower modes. This tends to favor transportation improvements that increase vehicle mobility, and undervalues TDM strategies that increase Accessibility or improves Transportation Options.
For example, many people enjoy walking and cycling and will chose them for some trips even if they are slower. Consumers sometimes consider time spent walking and cycling a benefit rather than a cost as indicated by the popularity of recreational strolling and cycling. Similarly, some people prefer ridesharing or transit because they find it less stressful than driving.
The assumption that any mode shift increases consumer costs is clearly incorrect for strategies that rely on positive incentives. With such incentives, travelers who continue driving are no worse off, but they have improved transportation choices or financial rewards for using alternative modes. Many TDM strategies rely on positive incentives to change travel behavior. In fact, more TDM strategies are based on positive incentives than negative incentives, as illustrated in Table 3. As a result, travelers only change mode if they are directly better off overall, regardless of whether they increase or reduce travel time.
Table 3 Comparing Direct Consumer Impacts of TDM Strategies
|
Positive Incentives |
Mixed |
Negative Incentives |
|
|
TDM strategies in the left column tend to have positive direct impacts on consumers, while those on the right tend to have negative direct impacts. Some strategies have mixed impacts because their consumer impacts vary depending on circumstances and perspective. Direct benefits occur in addition to indirect consumer benefits, such as reduced congestion, tax savings, increased road safety and environmental protection.
McCann (2000) found that land use and transportation factors can affect per capita transportation costs. Households in more Automobile Dependent communities devote more than 20% of household expenditures to surface transportation (over $8,500 annually), while those in communities with more diverse transportation systems spend less than 17% (less than $5,500 annually). Polzin, Chu and Raman (2008) found that transit service improvements that lead to reductions in household vehicle ownership save up to $3,500 annually per vehicle reduced. An international comparison by Newman and Kenworthy (1999) also found higher per capita transportation expenditures in more automobile-dependent regions. Similar differences may exist between more and less automobile-dependent neighborhoods within regions, for example, between a more accessible and automobile-oriented neighborhoods. This suggests that TDM strategies that create more efficient land use, may provide overall transportation cost savings to households. Below are examples of TDM strategies that can result in more efficient land use.
Location Efficient Development
Automobile use imposes various costs on others, including congestion, crash risk, road and parking facility costs, and various environmental impacts. Table 4 summarizes estimates of these costs. This suggests that reducing vehicle travel can provide external benefits that average about 40¢ per vehicle-mile. Of course, actual savings and benefits depend on specific conditions.
Table 4 Motor Vehicle External Cost Summary (Transportation Costs).
|
Costs |
Per Veh-mile |
|
Traffic Services |
1.2¢ |
|
Fuel Externalities |
1.6 ¢ |
|
Roadway Land Value |
2.6¢ |
|
Traffic Congestion |
4.0¢ |
|
Environmental Costs |
4.0¢ |
|
Roadway Costs |
4.8¢ |
|
Non-residential Parking |
12.0¢ |
|
Crash Damages |
10.0¢+ |
|
Land Use Impacts |
? |
|
Equity Impacts |
? |
|
Total |
40.2 |
This table summarizes various external costs of driving.
|
The mayor worked late one Wednesday and so is in a hurry to reach his weekly card game at his club. He gets increasingly irritated with the slowness of his limousine driver. “Can’t you go any faster?” he asks angrily. “I have to obey the speed limits,” says the driver.
The mayor orders the driver into the back, takes the wheel and speeds away. A few minutes later a police car pulls the limousine over. The senior officer orders the junior to go write a ticket, but the junior officer comes back and says he doesn’t dare, because limousine passenger is too important.
“Well, who is it?” the senior officer asks.
“I didn’t recognize him,” explains the junior officer, “but our mayor is his chauffeur.” |
Vehicle cost estimates often consider just a portion of total costs. Fixed, non-market and external costs are often ignored or undervalued. The full cost of driving is higher than most estimates indicate, so reductions in driving provide greater savings than is usually recognized. Table 5 summarizes various user cost categories.
Table 5 Vehicle Costs
|
Category |
Description |
How It Can Be Measured |
Typical Values |
|
Vehicle Operating Costs |
Fuel, oil and tire wear. |
Per-mile costs times mileage reduced. |
10-15¢ per vehicle-mile. Higher under congested conditions. |
|
Long-Term Mileage-Related Costs |
Mileage-related depreciation, mileage lease fees, user costs from crashes and tickets. |
Per-mile costs times mileage reduced. |
10¢ per vehicle-mile. |
|
Special cost |
Tolls, parking fees, Parking Cash Out, PAYD insurance. |
Specific market conditions. |
Varies. |
|
Vehicle Ownership |
Reductions in fixed vehicle costs. |
Reduced vehicle ownership times vehicle ownership costs. |
$3,000 per vehicle-year. |
|
Residential Parking |
Reductions in residential parking costs due to reduced vehicle ownership. |
Reduced vehicle ownership times savings per reduced residential parking space. |
$100-1,200 per vehicle-year. |
Reducing automobile travel can provide a variety of consumer savings. (2001 U.S. dollars).
For example, when comparing a highway and a transit improvement or rideshare program, conventional models assume that every traveler has an automobile that would simply sit unused when they shift to these alternative modes. They assume that the cost of driving is just the costs for fuel, oil and tire wear, so alternative modes provide savings of just $1-2 per trip. But their real savings are about twice this much, averaging $2-4 per trip, suggesting that there are far greater consumer savings from TDM strategies that improve transportation choices and reward motorists for using travel alternatives.
Many models also assume that any shift to a slower travel mode represents a cost to consumers, but many people prefer using alternatives, even if they increase travel times. Any mode shift that results from a positive incentive must make consumers better off overall as a result, or they would not make the change.
Automobile use also imposes external Costs, including costs for congestion, crash risk, roads and parking facilities, traffic services and environmental impacts. Although they may be difficult to measure, they are substantial. This suggests that reductions in motor vehicle travel can provide substantial benefits to society.
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What Can You Save From Reduced Driving?
Henry David Thoreau’s book, Walden (www.nanosft.com/walden) celebrates the simple life. In one passage Thoreau argues that, “the swiftest traveller is he that goes afoot.” He illustrates this with an example comparing his walking trip with a friend’s train trip to the nearby town of Fitchburg:
“I start now on foot, and get there before night. You will in the meanwhile have earned your fare, and arrive there some time tomorrow, or possibly this evening, if you are lucky enough to get a job in season. Instead of going to Fitchburg, you will be working here the greater part of the day. And so, if the railroad reached round the world, I think that I should keep ahead of you; and as for seeing the country and getting experience of that kind, I should have to cut your acquaintance altogether.
…This spending of the best part of one's life earning money in order to enjoy a questionable liberty during the least valuable part of it reminds me of the Englishman who went to India to make a fortune first, in order that he might return to England and live the life of a poet. He should have gone up garret at once.”
Many people face the same trade-off today. You can spend a good portion of your life earning money for a fancy car, or you can use slower but less expensive travel modes. Average motorists devote nearly 20% of their household budget on their automobiles, representing about 1.5 hours per working day. Combining this with the amount of time spent driving represents an overall speed of about 15 miles per hour per working day.
Most people can organize their lives to depend less on automobiles, and save money as a result. For starters, you can set a goal for reducing your automobile use by 10-20%. Just because you own a car doesn’t mean that you must use it for every trip. Leave your car at home, and bicycle, walk, carpool, or ride the bus when possible. Shop locally rather than at the big-box stores across town. Explore recreation activities nearby.
Once you’ve proven you can do it, consider “shedding” a car. If your household owns two cars, cut back to one. If you own one car, become car-free altogether. For suggestions on how to accomplish this see Individual Actions to Reduce Driving. |
For more information on issues related to transportation costs see Transportation Costs, Transportation Statistics, Evaluating TDM, Measuring Transportation, TDM Planning, Comprehensive TDM Evaluation, Evaluating TDM Equity, Individual Actions to Reduce Driving, Market Principles and Evaluating Transportation Options.
AAA (2006), Your Driving Costs, American Automobile Association (www.aaanewsroom.net/Assets/Files/2006328951420.YourDrivingCosts2006.pdf).
Apogee Research (1994), The Costs of Transportation, Conservation Law Foundation (www.clf.org).
Silvia Banfi, et al (2000), External Costs of Transport: Accident, Environmental and Congestion Costs in Western Europe, INFRAS (www.infras.ch) and IWW (www.infras.ch).
BAW (2005), The Real Costs of Car Ownership Calculator, Bikes at Work Inc. (www.bikesatwork.com/carfree/cost-of-car-ownership.html).
Lawrence Blincoe (1995), Economic Cost of Motor Vehicle Crashes 1994, NHTSA (www.nhtsa.doc.gov); at www.nhtsa.doc.gov/people/economic/ecomvc1994.html.
BTS (annual reports), North American Transportation in Figures, Bureau of Transportation Statistics, USDOT (www.bts.gov).
BTS (annual reports), Transportation Safety Data, Bureau of Transportation Statistics, USDOT (www.bts.gov/programs/btsprod/nts/chp3v.html).
Commuter Solutions (2010), How Much Does It Really Cost You To Drive?, Commuter Solutions (www.commutesolutions.org); at http://commutesolutions.org/external/tcod.html. This article identifies and outlines many of the actual costs of driving, both the direct costs a driver pays and those hidden costs carried by the public at large.
Mark Delucchi (1996-97), Annualized Social Cost of Motor Vehicle Use in the United States, Based on 1990-1991 Data, Institute of Transportation Studies, University of California at Davis (www.ota.fhwa.dot.gov/scalds/DELUCCHI.pdf and www.engr.ucdavis.edu/~its); summarized in “Total Cost of Motor-Vehicle Use,” Access (www.uctc.net), No. 8, Spring 1996, pp. 7-13.
Mark Delucchi (2000), “Environmental Externalities of Motor-Vehicle Use in the US,” Journal of Transportation Economics and Policy, Vol. 34, No. 2, May 2000, pp. 135-168.
David J. Forkenbrock and Glen E. Weisbrod (2001), Guidebook for Assessing the Social and Economic Effects of Transportation Projects, NCHRP Report 456, Transportation Research Board, National Academy Press (www.trb.org).
International Fuel Prices (www.internationalfuelprices.com) is a website with information on international fuel price reports from GTZ (a German international development agency) and other sources.
Art Ludwig (2002), What Does Driving Really Cost? Oasis Design (http://oasisdesign.net/Activism/drivingcosts.htm).
Todd Litman (2009), Transportation Cost and Benefit Analysis; Techniques, Estimates and Implications, Victoria Transport Policy Institute (www.vtpi.org); particularly the “Vehicle Costs” chapter at www.vtpi.org/tca/tca0501.pdf.
Todd Litman (2010), Raise My Taxes, Please! Evaluating Household Savings From High Quality Public Transit Service, VTPI (www.vtpi.org); at www.vtpi.org/raisetaxes.pdf.
Todd Litman (2015), Understanding Smart Growth Saving, VTPI (www.vtpi.org); at www.vtpi.org/sg_save.pdf.
Todd Litman (2007), Transportation Affordability: Evaluation and Improvement Strategies, VTPI (www.vtpi.org); at www.vtpi.org/affordability.pdf.
Todd Litman (2015), Affordable-Accessible Housing In A Dynamic City: Why and How To Support Development of More Affordable Housing In Accessible Locations, Victoria Transport Policy Institute (www.vtpi.org); at www.vtpi.org/aff_acc_hou.pdf. Also see the Affordable-Accessible Housing Photo Essay, at www.vtpi.org/aff_acc_photo.pdf.
Todd Litman (2016), Selling Smart Growth: Communicating The Direct Benefits of More Accessible, Multi-Modal Locations to Households, Businesses and Governments, Victoria Transport Policy Institute (www.vtpi.org); at www.vtpi.org/ssg.pdf.
Livable Places, The Cost of Car Ownership, Livable Places (www.livableplaces.org/policy/carownership.html).
James MacKenzie, Roger Dower and Donald Chen (1992), The Going Rate, World Resources Institute (Washington DC; www.wri.org).
David Maddison, David Pearce, Olof Johansson, Edward Calthrop, Todd Litman, and Eric Verhoef (1996), The True Costs of Road Transport, Blueprint #5, Earthscan (London).
Barbara McCann (2000), Driven to Spend; The Impact of Sprawl on Household Transportation Expenses, STPP (www.transact.org).
Abolfazl Mohammadian and Eric J. Miller (2002), The Costs of Driving: Modelling the Expected Ownership and Operating Costs of Vehicles, Transportation Research Board 81st Annual Meeting (www.trb.org).
NMRA (annual reports), Operating Costs of Popular Cars, NRMA Motoring & Services (www.mynrma.com.au); available at www.mynrma.com.au/cps/rde/xchg/mynrma/hs.xsl/operating_costs.htm. Provides estimates of the total costs of owning and operating popular Australian vehicles.
NPTS (2001), National Personal Transportation Survey, Bureau of Transportation Statistics (www.bts.gov).
Steven E. Polzin, Xuehao Chu and Vishaka Shiva Raman (2008), Exploration of a Shift in Household Transportation Spending from Vehicles to Public Transportation, Center for Urban Transportation Research (www.nctr.usf.edu); at http://www.nctr.usf.edu/pdf/77722.pdf.
SCCRTA (2008), How much does it REALLY cost you to drive? The True Cost of Driving Online Calculator, Commute Solutions program of the Santa Cruz County Regional Transportation Commission (www.commutesolutions.org/calc.htm).
Transport Canada, T-Facts (www.tc.gc.ca/pol/en/T-Facts3/TFactsmenu_e.asp). Includes information on vehicle use and costs.
True Cost of Driving Online Calculator (http://commutesolutions.org/external/calc.html)
TTI (1997), MicroBENCOST, Texas Transportation Institute (http://tti.tamu.edu).
Vehicle Cost Calculator (www.agric.gov.ab.ca/app24/costcalculators/vehicle/getvechimpls.jsp), produced by the Alberta Department of Agriculture, Food and Rural Development, estimates and compares the ownership and operating costs for a vehicle, with default values for eleven types of vehicles that can be modified to reflect specific conditions.
This Encyclopedia is produced by the Victoria Transport Policy Institute to help improve understanding of Transportation Demand Management. It is an ongoing project. Please send us your comments and suggestions for improvement.
Victoria Transport Policy Institute
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