Today is Veteran’s Day. I’m able to take the commuter train today because many people are off today. I’d like to take the train more often but there is very limited parking at the train station. I sometimes drove to the train station and had to drive away because there was no parking. Taking the train is not only good for the environment, but also good for the pocketbook.
How much does it cost for driving one mile? The cost of gas is only a small part. If gas is $3.00 a gallon and you get 25 miles per gallon combined city and highway, that’s 12 cents a mile. You have to also include the cost of the car. If a car costs $20,000 and it lasts 200,000 miles, that’s another 10 cents a mile. Add in financing, insurance, cost of oil changes, tires, brakes, repairs, the tab goes up and up. The IRS sets the vehicle mileage reimbursement rate at $0.485 per mile. By my calculation, it’s pretty close. For the sake of simplicity, let’s just call it 50 cents per mile driven.
For my 24-mile roundtrip commute, if I drive, it costs me $12 per day. The cost of taking public transit is much less. If I have to drive 5 miles to a store, the roundtrip alone will cost $5. I think if one has to pay the cost of driving out of their pocket after each trip, people will drive a lot less.
Say No To Management Fees
If an advisor is charging you a percentage of your assets, you are paying 5-10x too much. Learn how to find an independent advisor, pay for advice, and only the advice.
Anonymous says
Ahh, but this is ‘Merica where people will drive 20 miles to save $5 on a fill-up…
Would be curious if the auto industry has any stats on the average or median mileage life of a car – seems like 200K is high IMHO.
dbp says
Excellent post! It’s just so easy to overlook the total cost of ownership of driving a car. ‘Cost per mile’ is an excellent way to look at it so that it actually changes behavior.
FinanceAndFat says
Wow! I never thought about what my real cost of commuting is- other than the mental fatigue of driving over 50 miles per day round trip. That’s a lot of money I’m wasting.
Thanks!
Anonymous says
Yes, but it would be appropriate to analyze the marginal mileage cost if just looking at a single trip. For example, even if you were to use public transportation for 95% of your travel, what do you do about the other 5%? I think you should consider the cost of the car, insurance, and upkeep as a sunk cost and only consider the marginal costs of driving each mile (gas, addt. maintenance, accident risk, etc). If one were truly willing to dump the car, then one would experience more costs for getting groceries home, etc.
me! says
think about the psychological cost of biking or walking your groceries home, or using public transit, or asking a friend for help.. or not being able to get that drive-thru you desperately need on your study break at 2 am.. or not being able to do as many things as you’d like to do (and yes, i know, that’s our society’s way of life, but i enjoy it)..
i enjoy having the car i just got. totally used, but completely useful for me. i am willing to save up those 50 cents next time at the grocery store and buy cheaper bread to make up for the trip in the long run.
but maintenance costs are definitely a pain. oh well.
Bjorn says
So my wife and I are having an argument over driving 220M back and forth, vs staying the night. I presented her with the marginal cost per mile computation suggested here, and she vehemently denies my math (although I am in fact a Professor of Finance – she’s a poet and that’s not even a joke).
To understand her position, note that I pay for cars while she has to pay her hotels out of her own pocket.
As always in life, economics is about incentives.
Andrew Lin says
What about the cost of occasional accidents? Doesn’t that also need to be amortized into the cost of each mile?
Andrew Lin says
What about the cost of occasional accidents? Doesn’t that also need to be amortized into the cost of each mile?