I read an article on TIME the other day on how much we spend on driving. It was actually a summary of a study from Energy Trap. The study is quite long and I bookmarked it so I can go through it in detail.
Basically, they are saying an American family spends more money on their ride than on health insurance or taxes. By the end of 2011, we will have spent more than $490 Billion dollars on gasoline. That is a huge amount! Many families are having a difficult time paying for the total cost of a car – gas, insurance, parking, repair and maintenance, not to mention monthly payments. At this rate, it might be better to sell your car and bike or walk instead. At least consider sharing a car instead of maintaining multiple cars.
It got me thinking and I figured I should calculate how much we spend on driving this year. The Energy Trap site conveniently has an annual cost of gas and transportation calculator at the top of page 3. Here is our result.
The picture might be a bit small so here is a quick recap.
We spend $1,972 per year on our car where the average American spends $7,900 on a car & fuel. I think we are doing quite well on this front. Our housing on the other hand is quite expensive, but that’s another story.
*update* As Brave New Life pointed out in the comment. I should have taken depreciation into consideration as well. I checked and our Mazda5 depreciated about $3,000 in one year. 🙁 I’ll round it up and say driving cost us $5,000 this past year. The good news is the car should depreciate less and less every year.
How come our car expenses are so low? It seems we made many right choices over the last 5 years to reduce our transportation cost.
- We share one car.
- Mrs. RB40 takes public transportation to work (free) every day. I take public transport to work about 40% of the time.
- I fill up the tank about twice a month for a total of about $100/month. I drove about 7,500 miles over the last 12 months. The low mileage kept gas expense and maintenance cost down.
- We paid for the car in full and we no longer have car payments.
- It is a newer vehicle and requires minimal repair and maintenance.
- Our car insurance price is somewhat reasonable.
- We live in the city and can walk or take free public transport to many locations.
I would hate to spend 15.5% of our income on transportation like the average household. Americans have become so dependent on driving that even when the price of gasoline goes up, we reduce expenses in other areas to keep driving. As the price of gas goes up, I think many of us will have to evaluate how much we spend on transportation and make some difficult choices.
Darren is in a tough position because he can’t sell his home and move due to the housing market, but there are still a few things he can do. He can sell his vehicle and purchase a more fuel efficient vehicle and try to find full time employment instead of 2 part time jobs. Hopefully he can figure something out soon because gas price is going up again. Spending 51% of his income on transportation is not sustainable at all.
How much do you spend on your vehicle per year? Is it more than you think when you put your numbers into the calculator? What is your percentage? If it is too high, what would you be willing to do to reduce that cost?
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CelloDad telecommutes (I like to say he goes to the office four days – a year) so we have one car for toting the four of us, the groceries and the cello.
Once, for fun, I did this estimate: if you take the average annual mileage of the average car, and figure in the average time we spend in that car plus the hours of work (at the median salary) required to afford driving the car, you find that in the 2010’s the average speed of the average car is 13 mph. Or the speed of a leisurely bike ride. Biking is cheaper. Certainly if you count the long-term health benefits.
4 days a year is great! Nice job.
How do you get “FREE” public transport?
Her employer pays the cost of public transport. I guess it’s not really free. It’s one of the benefit of her job.
We have a free zone in our city. That’s not really free either because the tax payer pays.
The monthly payment is just one piece of the car expense pie. I would ditch the car if I could.
I see the tie-in:
http://financiallyconsumed.com/wordpress/2011/11/02/energy-smart-car-buying
I think I would be scared to calculate our percentage. My husband spends the majority of the day commuting between two jobs at opposite ends of the city. Luckily his mileage between job 1 and 2 is tax deductible, but it still gives us an astronomically high gas bill each month.
You should do it once to see what the percentage is. Maybe it will give you the incentive to make some changes. What happens if gas price keep increasing?
We have two vehicles (again–we were down to one for several months this summer). No car loans; we paid cash for my used car, and paid off the car loan on my husband’s Mustang. My new (used) vehicle gets an awesome 27.9 mpg, so I am now filling up only twice a month instead of four times a month. The mustang still needs weekly gas fill ups though.
Not sure our yearly costs, but maybe I should figure that out! Insurance per month is $170 for both vehicle.
Driving is an economy in itself. We are driving and millions of people getting their daily bread because of that. Just wanted to give an interesting twist. I am with you reduce unnecessary travel expenses. You are doing very good.
Our cars are really old, so require some maintenance, but…. we only had a car payment one time ever!!! And, I try to take public transportation whenevre I can :). Frankly, I’m not crazy about driving.
I am pretty close to the average (for two of us, the average is for per person?). Our annual transportation expenses is close to $6000 including gas, insurance and maintenance. We have two cars. We can’t manage with one because I am on the road for 3 days a week. So for those 3 days I drive ~500-600 miles. I easily drive 30000 miles an year. My husband ~12000. And we have high coverage as a safety precaution for my frequent driving. You are doing awesome in this area!
You are doing a lot better than us. I drive about 26,000 a year and my husband drives about 24,000. Those numbers are too depressing for me to calculate out.
I guess that I spend about $144 a month (I have no idea what my wife spends though), so it’s about $1728 a year for me, and maybe double that number if you include my wife.
What helps me get such a low number is that fact that I occasionally telecommute to work.
You’ve given me an idea, I think I’ll write my mileage numbers down and then a year later check to see if my estimate matches my actual miles…
I wish I could use public transportation, at one time I was car pooling with a buddy to work, but my schedule varies too much to do that anymore.
I had to break out the spreadsheet for this one. Including insurance on two cars, maintenance and gas, our transport costs are 4.5% of gross income. No car payments.
By the way, some portion of public transport is paid through property and/or other local taxes. “Public” does not equate to “free”.
4.5% is pretty reasonable. You’re right about public transport. Even if the employer pay for the tickets, we still paid for it out of taxes. At least we’re using public transport and not just paying tax and not using the system like most people.
This is the major downside to living rural. We save costs in a huge variety of places (I’ll own a fairly nice home outright by the time I’m 30), but when it comes to travel, it’s tough to skimp. I do try to be as efficient as possible with Hyundai Elantra though.
Owning a home outright when you’re 30 is a great accomplishment. Most people can’t get there at all.
You are doing awesome. Not only are you saving money but you are also being green and saving the planet with your methods. I used to be able to walk to work but I have since moved offices and walking is no longer possible. I now carpool with my hubby which saves us on parking and on some gas.
Thanks! Carpool is an excellent way to save on gas and other car expenses. This is one thing that people can do to cut cost, but most of us value conveniences too much.
Cars can be a huge part of household expenses. The way I see it, for many of us, a car is necessary. Additionally, carpooling and other measures might not be realistic. Thus, we will need to drive.
In doing so, there are unavoidable costs: gas, wear and tear, oil changes, insuarance, etc. However, there are also costs that are, in fact, avoidable.
For example: the cost of a second car, the cost of carrying a car loan, and the costs associated with buying a car that has a brand name that is a ‘want’ rather than a ‘need’.
Yeap, I don’t like paying premium for luxury features and brands. I’d rather put that money toward the 529.
It says we spend 9% of our income on transportation. Which is off since it only takes the price of your car into account if you have a car payment. The car isn’t free just because it’s paid off. (don’t I wish!)
Darren needs to get a cheaper car and move closer to work. 🙂
9% is quite a lot, but better than 15%. I think if a car is paid off, you can just count repair and maintenance. 🙂
I don’t see why we need to count depreciation.
I spend a little more on gas than you do and my insurance is higher (2 cars). I fill up every three weeks and my wife every two weeks. In sothern California a car is more necessary. At least I do not have payments for my cars.
A car is a necessity in many cities. Fortunately, we live in a city with pretty good public transportation.
I keep track of all my car costs and the last time I totaled things up my cost per mile was 35.6 cents per mile valuing my car at $0 or 16.9 cents per mile using a more realistic figure for depreciation. Even with that low cost per mile our annual costs are probably higher than average because we drive a lot. Most of that is business miles though so if I deducted them from our costs we might almost break even.
Between 2 cars, gas and maintenance we spend 8% of our income on automobiles. Why did Derek sign himself up to pay 51% of his income for a car? That’s just crazy talk to me.
From what I understand, Derek had a full time job, but got laid off and is working 2 part time jobs now. He is driving a lot more and gas is a big part of the bill. I agree that it’s crazy and he should try his best to reduce it as much as he can.
We have two cars: one paid off, one not. We both drive even though we could use public transportation for free! But I sometimes have to work long hours and need a car to get home at a decent time. Beaker in cases like that needs to run home and get our pug out. So… it’s complicated for us to use pub transportation. Therefore, we spend a lot! 🙁
We spend significantly less than the typical family too. We do have two vehicles but live very close to our respective jobs. We also don’t have car debt. Kudos to you for paying so little in transportation.
I don’t drive, so I walk or take public transportation or occasionally someone drives me. I spend $300/month on public transit, including the discount that I get for paying up front in bulk (~6% for one transit agency; ~35% for an unlimited monthly pass from another). It’s like a monthly car payment, only I don’t have the additional hassle of insurance, gas, maintenance, or parking. (My girlfriend has a CityCarShare membership, so that’s a little extra in gas or mileage a couple times a month.)
Though it’s less expensive than owning a car — particularly with city parking rates! — that’s still a sizeable chunk of my income. I’ve recently realized that I can cut some of those costs by funding my public transit costs with pre-tax money from a benefits plan offered by my company. By reducing the amount of taxable income from my paycheck by $3600 (assuming I’d started in January), I may see a dip in my taxes at the end of the year. I’ll see how different my paycheck looks this Friday!
I never heard of funding public transit with pre-tax money. That’s a great plan! I would take public transit all the time if our company offers something like that.
I also share a car with my wife. She takes it to work and I ride the train (for a reasonable price). We also don’t drive that much outside of her commute, so we only put around 10k miles on it per year.
That’s great! It seems lower income workers are impacted most by high gas price.
I used to spend a lot on my vehicle per year, but after I got a job really close to home, I dont spend near as much (though I still spend ~6k per year and I’m still making payments). I dont like driving all that much and it really bothered me that it was taking up so much of my income, so I really looked hard for a new job.
6k is quite a lot of money! Once the payments are done, it should look much better right? It’s great to live close to work.
I’m also lucky that we share one car and don’t drive very much. I ride my bike to school and work and whenever I can. Mr. LH only runs errands in the car. We are probably a little under $1,500 annually. But that doesn’t count car payments. However, we will have our car paid off by February (hopefully!)
$1,500 is very low. Great job! How much are you paying for insurance?
Yeah, that is incredibly low. I wish I could ride my bike to work. Too bad I live in a congested area with no bike paths.
Since you don’t have a loan (good) and the car is new, you need to account for depreciation of the car. On a new car, that’s usually quite significant.
I don’t think we need to count depreciation. It’s sunk cost, money already spent.
It’s sunk cost… Sort of. Look at it this way – it will be worth less in a year than it is today due to age and mileage. Therefore, it’s still depreciating and stil costs you additional money to own.
Actually, the way I look at it is through an amortization schedule. Let’s say you buy a $20K car, you plan to drive it for 10 years, and expect it to be worth $5K at the end. Ignore opportunity costs, inflation, etc. This means you are paying $15K over a 10 year span, which equals $125/month or $1500/year. This would turn your $1900 into $4400.
From an income statement and cash flow perspective, you are right that this is a sunk cost and that you are technically now paying only $1900 per month. But being honest with yourself about the true cost of owning your car, it has to be accounted for somehow.
I see your point and will take depreciation into consideration next time. 😉