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The True Cost of Car Ownership Print
Wednesday, 31st May 2006 (by J.D.)This article is about Cars, Real-Life
The American Automobile Association (AAA) says that, on average, it costs 52.2 cents to drive one mile. To drive a Ford Focus like mine 20,000 miles per year, the average cost is 37.6 cents per mile.
How close are the AAA estimates? I ran some numbers.
Based on the purchase price of my vehicle ($16,500), the interest paid ($1,300), and the number of miles on the odometer (81,762 in 66 months), I calculated that for the past year my average cost per mile is $0.2170 over 20,274 miles. But that’s only for the car itself. I’ve also accumulated the following operating expenses:
- Fuel: $1,646.37 ($0.0812 per mile)
- Insurance: $762.93 ($0.0376 per mile)
- Service: $507.07 ($0.0250 per mile)
My total cost-of-ownership per mile is 36.1 cents, which is not far from the AAA estimate of 37.6 cents. My total cost to run the Focus for the past year was $7,514, which is about 5% less than the national $7,967 annual average cost-of-ownership.
I encourage you to run numbers for your car. It’s easy and enlightening. After calculating your current automobile costs, you can explore “what if?” scenarios. For example, how much do rising gas prices affect your costs?
My Ford Focus gets roughly 310 miles on eleven gallons of fuel, for an average of 28.2 mpg. If fuel is at $3.00/gallon instead of $2.00/gallon, I’m paying 10.3% more — $725/year — to run my car.
How much does it affect your cost-per-mile to choose a luxury car instead of something practical? I recently found myself fighting the new car itch. I wanted a new BMW or Audi. A commenter wrote:
In The Millionaire Next Door, one of the best-performing groups in terms of net worth was what the authors called something like “used car prone”. This class of person buys a car that is 3 to 5 years old, and drives it for many years. The authors spend a lot of time discussing this class because it is statistically most likely to have a very high net worth compared to annual income.
If I were driving a new BMW 325i, my total cost of operation would be 60.1 cents per mile, a 68.8% increase over the cost with my Ford Focus.
Examine your driving habits in relation to how much it costs to run your vehicle. For example, driving seven miles into Portland and seven miles home costs me about five bucks. Now the trip to my favorite cheap taco place doesn’t seem so cheap any more.
If I drive 38.6 miles to work and back every day, I spend one hour and $13.93 for the privilege. (When I lived closer to work, my 11.4 mile round-trip cost me twenty minutes and $4.11.) My wife and I plan to drive from Portland to San Francisco for a week-long vacation this summer. We will log about 1200 miles, which will cost me $425. (According to Travelocity, round-trip airfare for two would run $442, so this is basically a wash.)
For more information on the cost of automobile ownership, read the AAA driving cost study for 2006.
May 31st, 2006 at 8:33 pm
You’ve forgotten the resale/total loss value of your vehicle. I bet you can’t sell your 5 year old Focus with 80K on the clock for $17,800, but let’s say you can get $8,000 for it. That means you’ve lost $8,500 in depreciation, plus $1,300 in interest - $9,800 opportunity cost over 80K -> close enough to $0.12 / mile (much better than $0.2170 a mile). Of course, the older a depreciating asset like a car gets, the slower the dollar value drops, so things should only get better from here on in.
June 4th, 2006 at 3:19 am
The other thing you’re not considering is that most of your costs are fixed. The purchase price of the car, the insurance and a lot of the maintenance are the same even if it sits in the driveway all day. Fuel is really the big variable as your miles driven changes. If you only drive the car 100 miles per year, your total cost per mile would be astronomical.
June 4th, 2006 at 8:10 am
While it’s entirely true that if you drove only 100 miles/year, your cost/mile would be high. Most costs of ownership in a car are to some degree variable. For example, if I drove a low number of miles per year, my insurance premium would be lower. Oil changes would slow down to once every six months (or even once a year) just to rid the car of sediment. Even depreciation to some degree would slow down, as a low-mileage car is worth more than a high-mileage car.
Frankly, there is a point where not owning a car and renting one when needed is a reasonable choice. A lot of people who live in NYC do that.
That said, I’ve always felt that the best way to get full value out of any car, whether an economy car or a luxury car, it to drive it.
June 13th, 2006 at 1:21 pm
[...] The true cost of car ownership is greater than most people suspect. But you can get more life out your vehicle, can reduce your cost per mile, by following a few simple suggestions. eHow offers twelve tips to extend the life of your car. [...]
June 16th, 2006 at 10:36 am
I guess that means I can go out and by that J.P. Weigle ranndoneur bicycle I’ve been dreaming about for the last year. it runs about $7,00 fully loaded.
You see, I caught onto the big lie that we need automobiles to survive and, other than the occasional rental car, I pay NOTHING for auto expenses. 99% of my trips are by bicycle, 1% by mass transit, I pay nothing for health clubs since I average about 170 miles per week in cycling.
There are also the larger environmental and societal costs of car ownership not factored into your figures. The increased costs for housing because parking takes up valuable space, oil runoff into our lakes and streams, the occasional Exxon Valdez oil spill, foreign wars, to mention a few. Get rid of you car completely and break free of the chains of death mobile ownership!
August 2nd, 2006 at 6:57 pm
Watch out with your Ford Focus. At 80K miles or so they have a tendency to throw a piston. You’ll need a complete rebuild.
October 3rd, 2006 at 5:19 pm
I’ve kept a spreadsheet since I bought my 99 Jeep Cherokee. Including the initial purchase price, maintenance, insurance, fuel, and taxes, I calculate the cost has been 37c per mile.
November 1st, 2006 at 7:33 am
[...] JD at Get Rich Slowly has a post about calculating the cost of owning and operating a car. Related Posts: [...]
November 2nd, 2006 at 7:55 am
I use my own car to make deliverys for work. I get reimbured for gas and tolls only. SHould I be getting per mile cost as well?
In 2 months I’ve gone 2400 miles for work. How much should that be?
February 17th, 2007 at 3:29 pm
I teach a class called Financial Independence for Women at Saddleback College in Mission Viejo, CA. Am going to recommend your excellent analysis on total car costs-this is one of those stealth cost items that can sabotage a person’s financial goals . If you know of a web site or study that shows depreciation curves or table for a variety of new cars, would love to know about this, as I’m a big believer in buying after a car is about two years old to avoid the “drive off the lot” price collapse.
Thanks for your excellent work!
May 30th, 2007 at 5:00 am
[...] If not, don’t. On a ten-gallon fill-up, saving five cents a gallon only nets you fifty cents. My car costs about 36 cents per mile to operate. It doesn’t make sense for me to go a mile out of my way to find cheaper [...]
September 10th, 2007 at 6:55 pm
[...] http://www.getrichslowly.org/blog/2006/05/31/the-true-cost-of-car-ownership/ [...]
September 23rd, 2007 at 12:18 am
Re: Commend #1.
I think the author’s car is a 2000 Ford Focus… he would be lucky to sell it for $4,500… very poor resale - I should know, I own one myself (2000 Focus ZX3). :-/
Although I have not done the calculations myself, I do keep the cost/mile in mind when using the car. If it’s probably cheaper by transit, I take the bus/subway. If it’s more convenient or significantly faster than transit, I drive.
November 21st, 2007 at 11:01 am
My previous car was an 1987 Audi 5000S Wagon, which I bought in 2006 for $875. I sold it in 2007 for $800. Taxes and liability insurance ran at about $300/year. I also had to pay about $400 during that year for repairs. It did about 17-18 mpg in the city. I drove about 300 miles in 2 weeks. I think it beat all other cars I knew in terms of cost of driving a mile.
The author is missing one important thing in his/her economic analysis: the psychological cost of NOT owning a car. If people keep buying new, expensive cars even though it’s expensive, it means that they value the opportunity to drive such cars more than the money they have to spend (or waste, depending on your point of view). Also, think about the point of this website. Get rich slowly? What for? What’s the point of having a million dollars when I am 75? I completely sympathize with John Wagnitz. I believe that driving less and walking or biking more is a great idea, but unfortunately, that’s not what most people think (especially if you’re in Texas).
December 16th, 2007 at 12:43 pm
Drive the car to San Fran. Your costs included fixed and variable costs but you’re still paying the interest and insurance and taxes either way… A 7 year old car with 80,000 or 81,200 miles on it is worth basically the same amount. The true cost is really gas, 1/3rd the cost of an oil change, 1/30th the cost of a new set of tires and a few pennies for misc. repairs per mi. The best way to get your cost per mi. down is to drive it more miles.
December 21st, 2007 at 5:05 am
Great article. The biking comment would not work for most in Texas. I drive 62 miles round trip from work in a state where the weather changes hourly on some days. Im glad that you can boast about biking it, but take the seat out of your ass and realize that this is not a possibility for all. If you want to get a low cost of operations, buy a used Corolla or Civic and drive it until it rusts away. Personally I would rather pay for the enjoyment of driving my car and for the peace of mind that my pregnant wife is driving a tank of a Tahoe. Flame on….
Oh yea, this blog is about getting rich slowly? WTH?
January 3rd, 2008 at 2:13 pm
I do not see where the actual cost of the car spread over 5 years (60 months) is factored into these cost per mile or cost per year figures. I do see the finance charges.
What am I missing?
March 31st, 2008 at 2:47 pm
Worried about resale, don’t sell it, drive the wheels off, and worried about finance charges, don’t finance it, buy it out right, there are many things you can do to drop these prices significantly.Our 2000 Dodge stratus costs us less every day, its been paid off for years, the insurance is liablilty only and even that goes down every 6 months. The very thought of replacing it when the wheels still move is just unthinkable, even with all he scratches dings and dents. Yeah our neighbors are trading up fast and furiously… but we don’t care. Its all but FREE! Also, I don’t see a lot of commuting in here….. My ultra safe ultra expensive minivan… barely moves… thanks to car pooling and walking the kids to dance class and soccer practice.
May 7th, 2008 at 4:01 pm
Great article!
Ive never done the math on the cost of car ownership but my ex-GF (whom Im still good friends with) found out the hard way how costs go up sharply once you move from a budget car to a luxury brand. After going from an econocar to a BMW 3-Series her maintenance, insurance, and fuel cost increased exponentially but because she loves it so much she refuses to get rid of it.
I’m very very fortunate in having a work car that I get to drive for personal use. No fuel, insurance, or maintanence costs and I even get free car washes! I cant even imagine how much money this saves me a year but I certainly appreciate it. Once I got the work car I sold my Mazda and I havent owned a car for the past 3 years.
July 21st, 2008 at 6:13 pm
I’ve tracked all of my cars to answer the question of true cost of ownership, comparing relatively new cars vs sub-$1,000 cars with high mileage. I do all my repairs myself, and I might add, I make all repairs required (people who swear they haven’t put in a penny’s worth of maintenance are rolling the dice, with their safety and the longevity of the car.
The most cost effective cars (at the gas prices in effect when I owned them) were the perennial bad-boys, rear-wheel drive V8 American cars, purchased with about 50-60k miles. Parts are cheap when needed, value doesn’t change significantly from purchase to sale, and frankly I enjoyed them much more than econo-boxes. Now that gas has goine up, they are not likely to still be lowest, but likewise their purchase prices have plummeted.
The absolute worst cars? VW and BMW. Mediocre gas mileage, sky-high parts prices, and extremely poor reliability.
July 22nd, 2008 at 9:35 pm
The statement below doesn’t add up
My Ford Focus gets roughly 310 miles on eleven gallons of fuel, for an average of 28.2 mpg. If fuel is at $3.00/gallon instead of $2.00/gallon, I’m paying 10.3% more — $725/year — to run my car.
* Fuel: $1,646.37 ($0.0812 per mile)
* Insurance: $762.93 ($0.0376 per mile)
* Service: $507.07 ($0.0250 per mile)
If your fuel cost is 1,646.37 10% more is an additional 164.63 you say $725?
If your currently paying $2.00 and the price goes 3.00 per gallon. That would be a 50% increase in fuel cost per year or $823
October 20th, 2008 at 4:06 pm
The links in the original article no longer work. This one does!
http://www.aaaexchange.com/Main/Default.asp?CategoryID=16&SubCategoryID=76&ContentID=353
December 3rd, 2008 at 11:29 am
[...] isn’t really your actual cost for the trip, of course. I know from past research, for example, that my car currently costs me about 26 cents per mile to run. The site’s [...]
February 25th, 2009 at 8:27 pm
1) as for your trip to SF the number 36.1 is misleading b/c the Insurance and the total costs (+interest) are fixed. Therefor the cost/mile is much lower ~$0.11/mile. It would be much cheaper to drive!
2) The AAA number does not include the total cost of the car. It is only the interest that you are paying on the downpayment. So actually your cost is much lower than the EPA your cost should then be ~$.16/mile. Much cheaper than the AAA value!
This number of is very misleading…
Most of
* Fuel: $1,646.37 ($0.0812 per mile)
* Insurance: $762.93 ($0.0376 per mile)
* Service: $507.07 ($0.0250 per mile)
April 21st, 2009 at 3:37 pm
[...] drive from downtown Portland to our house takes about 20 minutes. If we use my estimated costs for the Ford Focus I recently sold, it comes to 36.1 cents per mile, or about $3.60 per [...]
July 23rd, 2009 at 3:10 pm
Re: Biking vs Driving
I agree biking is not possible for all, but living closer to work is often not even considered. For those who live close enough to work to bike, most consider it to be far more difficult (or impossible) or dangerous than it really is, if they consider it at all. Something like 80% of all car trips are less than 2 miles. In some cases we still save time by driving, but the necessity of such time-slicing is brought on by our tendency to overcommit ourselves and our kids.
I own cars but bike to work as often as possible. “Car Free” is possible for some but not many. I live in a midwestern suburb, and I enjoy cars as well as bikes.
As for “Get Rich Slowly,” I think I get it. First off, “get rich quick” schemes are risky, at best. Secondly, you can get wealthy with patience, frugality, and by “slowing down” and getting out of the consumerist rat-race.
September 12th, 2009 at 9:20 pm
What I would really like to find is a source of maintenance cost averages for cars more than say 5 yrs old. Edmunds.com has a great true-cost-to-own tool, but it only goes back to 2004 or 2005. I’m looking at some 2001 models and am curious. I know people here have bashed BMW but I was looking at a large sampling of prices sorted by odo mileage and found that once they get past 100k mi. they go down in price very very slowly. Basically, advert. prices for a 100k example 3-series AWD (the AWD is why I’m looking to replace the TL I bought with 50k on it) are about $10k. Those with 200k mi. are about $7k. So other than going with a lesser car for someone who loves to drive, drive fast, take corners hard etc. or a much more expensive Porsche with I believe even higher maintenance, I think this is a good choice. The only other make that seems to be on my radar is Suburu which is very reliable, but I’m 6′2″ and every Suburu I’ve ever been in felt very cramped.
So…. does anyone know where to find a good cost of ownership info source, pref. internet, for older cars. It is the only part of this purchase I’m wary of.