The All-In Cost of Car Dependency 2022: How Driving Wrecks Your Finances (Without You Noticing)

one thing i've learned since the start of this channel is there's a lot of misunderstanding about what it actually costs to own and operate a motor vehicle we're gonna dive into that today and i'm also gonna share some data that i think really helped shed some light on the costs of car dependency it's all coming up next this is city nerd weekly content on cities and transportation viewers suggested topics always welcome and today's topic is sort of a viewer suggestion albeit indirectly you see from time to time i do these race videos where i compare the travel time and cost for different modes and without fail i get tons of comments from people telling me i'm overestimating the costs of driving like the following are just from my texas high-speed rail video alone your statement about depreciation insurance etc is a fallacious attempt to gerrymander the results the only relevant cost here is gasoline you way overestimated the driving cost i have a basic car that gets me 32 miles per gallon that trip would only cost me 20 not 158 double question mark i think you've overestimated the cost of gas i have a honda fit and i spend 25 dollars in gas and that's just a small sampling it's kind of funny but it also really goes to the heart of why car dependency is so entrenched in the u.s this really is the way most people understand the cost of driving a car having a car itself is non-negotiable it's a given so when you're making a decision about whether to drive somewhere the only cost you really need to factor in is gas so in a way today's video is a peek into the psychology of car culture and how the costs people consider when they drive every day are completely misaligned with the costs they're actually paying so what this video isn't going to be about is externalities meaning the non-monetary costs that driving imposes on everyone else an example is this graphic that's been circulating recently that illustrates a lot of the environmental costs of driving but there are also things like congestion and delay drivers impose on everyone else bad land use patterns and increased death injury and just general mayhem in the public right of way all interesting topics for a different video but today i just want to talk about what people pay out of pocket for the privilege of transporting themselves around the city in a climate glass and metal box that weighs 20 times as much as they do if i'm on your feed on the bird app then you've seen this take but the lead here is that the fact that the only cost people seem to account for is gas when they're choosing how to get around every day is not only a huge problem but it's a very intentional part of the automotive industry's business model so first let's lay out all the personal costs associated with driving and see how expensive it really is first the big one capital cost when you buy a motor vehicle you're purchasing an asset that goes on your personal balance sheet it's a depreciating asset but it's still an asset and there are all kinds of ways people pay for cars you can pay all cash upfront or you can do what most americans do and take out a loan i'm not really gonna spend time talking about financing and interest it's gonna vary based on your credit score and some other factors but here are some numbers that are kind of eye-opening most recent data shows that americans borrow an average of about 40 000 for a new car and 27 000 for a used car and that's just the borrowing piece let alone if you're putting down a down payment or doing a trade-in anyway the number the dealer always wants you to focus on is just the monthly payment and that's in the data too it's not pretty and the average loan term whether it's new or used is almost six years and that's how most people think of the capital cost it's a monthly payment with occasional periods of bliss where the cars paid off and it feels like it's essentially free so quick disclosure before i got into planning and engineering i was actually in accounting so it really colors the way i think about this and it's probably why i have a stronger opinion on it than a sane person should anyway here's how i view the capital cost of a motor vehicle regardless of how you pay for it you buy it it depreciates and then you sell it for a much lower price the differential over whatever time period you own the car is what the car costs edmonds has a good infographic on this they show on average a car loses 11 of its value when it's driven off the lot because now it's not a new car anymore and then it loses 15 to 25 of its residual value every year thereafter after five years it's worth something like 35 or 40 of what you paid for it so just think about that if you buy a new vehicle for forty thousand dollars and you wanna trade it in after five years it could be worth about fifteen thousand dollars rinse and repeat you're paying twenty five thousand dollars or five thousand dollars a year just for the capital cost of owning a car not including interest or any of the other expenses like gas insurance and maintenance now let's go through the other expenses insurance which is going to vary based on things like your age and your driving record and the year make and model of your car might average around eighteen hundred dollars a year then there's general maintenance you're gonna be getting oil changes and then rotating your tires once or twice a year getting car washes so maybe 250 bucks a year and then you're gonna want to buy a new set of tires every five or six years so add like 150 bucks a year for that vehicle registration and emissions testing which is going to vary by state could be something like 100 bucks a year and then there's parking which is completely variable and just depends a lot on where you live where you work and where you like to go it can be quote unquote free if you park on the street but your car might get broken into occasionally so you might pay more for a place with a garage but let's be honest the only time most people pay out of pocket for parking is if they're driving to like an airport or a sporting event it's free almost everywhere else outside of downtown well other than it's baked into the prices you pay at the stores and restaurants that have all that free parking even if you don't drive there the fact is you're subsidizing free parking even if you choose not to drive just think about the opportunity cost of all the public right-of-way land that we all collectively own theoretically that's devoted to on-street parking it's just wildly counterproductive and that brings us to gas which is the only cost that people tend to notice in their day-to-day lives which no coincidence is why people are losing their minds over it now and it's completely variable it depends on your fuel efficiency it depends how much you drive it depends on the price of fuel or if you have an ev your capital cost is probably higher but you're paying less on energy and maintenance so i've got an interesting national data set to share and kind of a punch line to all of this albeit kind of an unfunny one but first feel free to drop a like on the video if you enjoy tedious explanations of proper accounting subscribe if you're a glutton for punishment and let's check the numbers we can now fill city ground home of nottingham forest football club currently in the second division of english football but a club that won back-to-back european cups that's today's champions league in 1979 and 1980. but honestly i picked city grounds this week just because i love that it's like 750 feet away from meadow lane where knotts county plays only in the uk okay here's the kicker on this whole thing even though gas is the only apparent marginal cost the only cost that feels like it scales by how much driving you do it's really an illusion the reality is all the costs i mentioned the capital cost insurance maintenance all of them scale by how much driving you do if you drive more the odometer on your car turns over faster it accelerates your maintenance schedule and it moves up your timeline for vehicle replacement if you drive more that means more exposure and higher potential for crashes and citations both of which will increase your insurance payment it all scales so my guy who thinks driving from dallas to houston is only going to run him 20 bucks well you don't need to be a cpa to see that that just does not compute so as promised let's go the national data this is information from the 2019-20 consumer expenditure survey which is regularly published by the u.s bureau of labor and statistics it's an interesting data set and i'll leave a link in the description you've maybe heard that the average u.s household spend 15 percent of their budget on transportation and 30 on housing which is true in the aggregate but sometimes you hear it presented as sort of a budgeting guideline which i think is ridiculous there is a ton of variation in what different households spend luckily you can slice up the bls data in different ways including by household income and if you look at household spending on transportation and housing by percentage of income instead of overall expenses it's a more nuanced story if you look at income quintiles meaning if you split up all u.s households into top 20 income second 20 middle 20 etc you really start to see what a drag housing and transportation spending is on household finances if you're in the middle quintile of households yeah you're around 30 on housing and 15 on transportation but most households in fact exactly 80 of them are not in the middle quintile if you're in the lowest quintile you're spending 31 of your income on transportation and 80 on housing yeah your math is correct that is over a hundred percent and that's really the definition of not being able to get ahead if you're in the next quintile up it's 18 on transportation and 42 on housing and you're still falling behind the highest two quintiles spend more on transportation and housing but it's proportionately less of their income it's not really a surprise but i don't know it's interesting to see it in the actual data let's dig a little further into that middle quintile because the bls data really details out the types of spending on transportation it's about 3 900 on vehicle capital costs so that's an average for all households in this quintile it includes new vehicles used vehicles all cash purchases loan payments it's really including all the phases of vehicle ownership we talked about earlier all smashed together spending on fuel averages 1800 insurance 1600 about 1700 on all other vehicle related costs and the average spending on public transportation was 392 dollars keep in mind some of these are going to be multi-vehicle households and some are zero vehicle households so these aren't for vehicle numbers but the point is you could really see the impact of that transportation expense line and what it could mean if someone has the ability to get by without a car it's not one size fits all and i'll talk more about car free living in challenging environments in a future video i'm not going to tell you it's super feasible for every single household in fact i'm 100 sure i'd get called elitist for even suggesting that but my hope is that the data i shared today sort of crystallizes what the actual cost of driving is and illustrates why breaking the cycle of car dependency is so important for helping people build financial stability and a better quality of life that's all i've got keep the great topic suggestions coming i'll be back with a new installment next week and i'll see you then

Channel: CityNerd

Views: 283,110

Keywords: how to buy a car, is now a good time to buy a car, gas prices, electric cars vs gas cars, is an electric car worth it, depreciation

Id: c2rI-5ZFW1E

Length: 12min 33sec (753 seconds)

Published: Wed Mar 30 2022