The True Cost of Car Ownership!

did you know the average american could spend over 900 000 on car ownership in their lifetime and if you calculated the opportunity cost of owning a car you could have 11 million dollars in your bank account i knew cars were expensive but what today let's figure out what the hell is going on here [Music] in a recent video i talked about car dependency and many reasons why i hate it which you might find weird coming from a car enthusiast what i've realized is that cars are the most enjoyable and least problematic when they're not a requirement i'd like my car experiences to be limited to fun things only and to limit my time spent stuck in traffic this shift in perspective has also caused me to look closely at how much we actually spend on cars and honestly it's kind of nuts granted for most americans the cost of an automobile is a given in order to live a productive life because of the sprawling spread out manner in which our cities were built post world war ii nearly every task whether it's getting to a job finding food seeking medical care or taking your kids to school all usually require a car and with that you're forced to pay a multitude of costs some obvious and some hidden so today let's see if we can figure out the true cost of car ownership u.s consumers owe to combine 1.44 trillion dollars in auto loans in the third quarter of 2021. right now there's still a pretty huge imbalance between car supply and demand which means new cars are pricey the average new car transaction cost in the us is over 48 thousand dollars a decade ago the majority of new cars sold were below 30 000 for those with good credit including the cost of financing you'll end up paying 65 grand for that 48 000 car over 13 grand in interest and if you have bad credit a 48 000 loan with fees taxes and interest could cost you 88 000 36 grand of that being interest the average monthly payment for a car has ballooned to 712 dollars a month most loans run almost 70 months or nearly six years that's a long time to be putting money towards a vehicle americans drive over 14 000 miles a year on average so for a new vehicle you'll finish paying your loan when the car has almost 90 000 miles on the clock and possibly some mechanical issues to go with it so that's the cost of buying and financing a car but obviously there's additional cost to go into car ownership the average person in the us pays almost 1800 a year for auto insurance and of course if you're particularly crashy your rates will go up even more maintenance repair entire cost have climbed to almost 1300 a year per car and some people get stuck with much larger bills i'm looking at you alfa romeo julia owners the average fuel cost for one car is up to over twenty six hundred dollars per year if you're driving a fuel sipping hybrid or an electric car that primarily charges at home your fuel or energy costs are going to be well below average but if you were one of the people that bought a gas guzzling suburban when gas was cheap you're probably not a happy camper right now what about non-essential costs things that car owners treat as discretionary or fun things like angry jeep faces please stop doing this by the way almost half of all new cars sold in the u.s will be accessorized within two years raking in 18 billion dollars worth of sales there's other costs like parking tickets speeding tickets and roadside assistance but those can vary so it's tough to come up with an average here and keep in mind all of these costs we've been talking about so far they are for one vehicle the average american household has two vehicles so you might as well go ahead and double all of these figures there's also another set of costs that most of us don't even consider or maybe we never even knew they existed what i'm referring to are costs that are subsidized through taxes and fees that we all pay whether or not you even own a car this includes costs of maintaining roads maintaining bridges and parking lots health costs accounting for crash damages and air pollution and the costs of providing free parking a german study calculated that all of these subsidies can amount to 246 thousand dollars over your lifetime almost five grand a year i just learned that the city of madison wisconsin pays 240 a month in debt service per parking space in just one of their parking garages because they don't charge enough for parking and if it's like that in madison i can guarantee you it could be like that in many other north american cities and towns and these subsidized parking spaces are everywhere the u.s has as many as two billion parking spots for 250 million cars or eight spots per vehicle parking takes up a third of all land area in u.s cities and while you may not directly pay for a parking spot you can be assured that those costs are being passed on to you somehow hidden in your taxes hidden in the cost of goods you buy if you live in an apartment or a townhouse with free parking yeah well it's not actually free whether you own a car or not renters generally pay the cost of building and maintaining parking spaces it's simply factored into your monthly rent garage parking costs renters about 1700 a year an additional seventeen percent of a housing unit's rent and it's designed this way zoning laws in most of the us require that new construction adhere to minimum parking requirements meaning they must include a certain number of parking spots per housing unit so whether you like it or not the cost of car ownership is also hidden in your rent as you move away from cities and get further into the suburbs the economics of it all get even more messed up suburbs generally require many more miles worth of pavement sidewalks and curbs per capita this huge amount of car dependent infrastructure serves fewer homes and often a smaller tax base and in many cases can be insolvent it's because sprawling spread out car dependent infrastructure is more expensive than what many municipalities can afford because of modern zoning laws that force car ownership the distance between housing and jobs has increased making nearly everyone reliant on a car housing may be more affordable in sprawling suburbs though the increased cost of transportation can negate the savings made through housing so yeah i've been throwing out a bunch of numbers many which seem pretty concerning but it's still a bit hard to get the full picture without knowing what percentage of your income all of this equates to the average american household spent almost ten thousand dollars on transportation in 2020 which accounted for 16 percent of household expenses and as you can see it's gotten even more expensive since then and for very low income families it was as much as 29 of their income we spend more on car ownership than we do on food doesn't that seem kind of backwards that because of the way our cities and suburbs are built we're forced to need cars more than we need food the one thing that i find fascinating about all this is that cars are a household's second largest expense for something that spends 96 of its time parked because so many of us can only afford to live in car dependent places most of us buy cars out of necessity and many folks are struggling to afford them and it's not just low income families either middle class families are also struggling in early 2021 one in 12 people with a car loan or lease or 8 million americans were more than 90 days late on their car payments and nearly half of all auto loans are under water meaning people owe more on the car than what it's worth 3 700 on average you could just blame this on people making bad financial decisions like this dodge journey right here a dodge journey is always a bad financial decision but most places in the us have terrible public transit no decent cycling infrastructure and poor walkability those that are struggling financially often feel like there's no other option but to try to own a car even if it is a dodge journey okay some might say i'm not poor i can afford the monthly payments i can afford that sweet 3 inch lift kit and gaudy pointed lug nuts on my brand new ram 2500 good for you but there's one more thing we should consider the lifetime cost of car ownership and the opportunity cost of owning and operating cars throughout our lifetimes if you take aaa's yearly car ownership estimate and multiply it times 50 a pretty low estimate for the number of years an american will drive you will have spent 536 thousand 000 for the privilege of owning and operating a car over your lifetime and if we go with my estimates we're at over 700 grand and none of this includes any of those indirect subsidies we've been talking about add those in and we're at almost a million dollars now that's a lot of money but what about the opportunity cost of car ownership let's say that instead of owning and operating vehicles we invest this money in the stock market after 50 years you'd have over 11 million dollars in your bank account insanity you have to wonder how much richer might we all be if car ownership weren't a requirement are we done yet nope there's even more costs to consider some of us are lucky to live in a place that doesn't experience much traffic but the vast majority of people in north america live in urban and suburban areas so most of us experience soul-crushing traffic at one time or another in 2018 the average u.s driver spent 97 hours stuck behind other cars that's two and a half work weeks just sitting in your car probably angry because of all of the other cars if you're lucky and don't often get stuck in traffic you're still likely spending a ton of time in the car the average us commute is 52 minutes a day that amounts to nine full days per year just to get to and from work sure you can listen to podcasts and music and look at the scenery when you're not stuck behind some idiot in a busted up nissan altima but there are only so many self-help audiobooks one can listen to now many people don't have a choice other than to get to work by car but we should be honest with ourselves about where our time goes time is valuable right you'd probably rather be doing something else spending time with your kids catching up on the fourth season of stranger things and wondering if barb will come back from the dead is it possible to spend less on car ownership and instead save some of that money for things that might be more important to you if your car is large and inefficient consider downsizing to a smaller more efficient vehicle you'll save on gas and on insurance if your car is already efficient and reliable don't buy a new car just because you want something shiny and new and if you absolutely want to buy a car do an audit of your driving habits don't buy a larger or less efficient vehicle just for edge cases some might say they need to be able to tow 15 000 pounds because they want to tow their boat to the lake but how often do you really do that once a year twice a year if that's the case buy a smaller more efficient vehicle that covers 99 of your usual activities and rent a vehicle for those edge cases try to keep your monthly payment well below 10 of your income but maybe most importantly stop thinking about cars as a status symbol that's exactly what the car industry wants you to do in order to convince you to spend more on a vehicle than you can actually afford instead of symbols of status it's much more liberating to think of cars as symbols of debt [Music] trying to save money when buying a car is one thing to really eat into those car ownership costs the best thing to do is simply drive less can you optimize your traveling so your household could go from two cars to just one can you go car free it's very likely driving less would not be easy but remember that 11 million opportunity cost i mentioned 11 million of your dollars that you're furiously shoveling into the pockets of the car industry how can we get some of that money back can you convince your employer to let you work remotely even if just a couple days a week or start searching for a new job that will let you now of course there's many jobs that are not possible to do remotely just try working a landscaping job from home if you can't drive less for work can you drive less for other activities can you carpool if you don't have to drive that much could you get by using a car share service can you eliminate some car trips by walking or biking to some destinations it will end up being better for the environment and better for your health of course it seems reasonable in theory but if you're in a car dependent suburb it's likely the pedestrian infrastructure is terrible which means walking or biking could be unpleasant or dangerous but it could be worth a try to determine which streets are the safest and most pleasant to walk or bike on what about an e-bike most car trips are three miles or less for some trips taking an e-bike can be nearly as quick as driving and of course it's far cheaper per mile but again lack of protected bike lanes means you'd have to be willing to fight with car traffic or take longer routes to avoid busy streets what are the bus or train options in your town or city can you get to work via public transit yes in many cities buses are stuck in the same traffic as cars so they can be slower than driving but it's still infinitely less expensive and while it will likely cost you some time you could use that time to do other things now this one might be the most difficult and potentially reserved for those with good economic mobility can you move to a more walkable or bikeable neighborhood there are a handful of cities that have started valuing the mobility of people and not just cars providing protected bike lanes dedicated bus lanes and improved rail options those areas can be expensive to live in because surprise people like to live in places where cars are not always a requirement so yeah not exactly perfect alternatives but they are there [Music] when the first freeways were built in the u.s it must have seemed like a pathway to a bright future there's no doubt that the automobile is responsible for an immense amount of economic growth we abandon our robust network of trains and streetcars with the idea that the private automobile would entirely solve the problem of personal mobility but with it came traffic long commutes urban sprawl parking as far as the eye can see huge costs and a shocking number of car related fatalities every year for at least two generations we've accepted this as completely normal we see it everywhere around us with more cars on the road than ever and more car missions filling our skies it's clear that investing in other forms of mobility could improve our health and save us a ton of money in european cities where cycling walking and public transit were prioritized over cars driving actually became more pleasant if bike lanes and bus lanes are built correctly in a connected and efficient network it will reduce space for cars but also reduce the number of cars on the road by convincing more people to use e-bikes buses and trains traffic will actually improve for those who choose to drive unlike adding car lanes which has been proven to only make traffic worse few americans take public transit walk or cycle to work but it's not because there's no interest or demand it's because there's so few convenient options some people don't even really like driving they just have to if that describes you it's worth working at a local level to help support the alternatives if zoning laws were changed to allow housing closer to commerce and once again encourage the development of mixed-use walkable neighborhoods transportation costs will go down for everyone and cities and towns could actually afford to maintain their roads by not forcing car ownership for everyone we can build places that are easier and far less expensive to get around and we won't end up with 43 000 people killed by cars each year we can also reduce emissions decrease the financial burden on the poor and surprise make things far more pleasant for those that still choose to drive the point of this video isn't meant to make you feel bad about driving or to say you're an idiot for owning cars i mean i still own 13 of them i'm a perfect example that many of us aren't always good at acting in our best interests but let's be honest about the costs there are things you can do to reduce your car dependency and reduce the amount you spend on car ownership just keep that cool 11 million dollars in the back your mind and it might be easier to make a change and now instead of buying a 14th car maybe i'll take that money and invest it anyone know if dogecoin is a good idea if you like this video and you want to see more like it please consider subscribing and hitting that bell icon if you'd like to support the channel you can buy a hello road t-shirt at helloroad.tv shop or become a patron at patreon.com color road thanks so much for watching i hope you're well and i'll see you soon [Music] can we take a moment to calculate the true cost of wearing this shirt all day i'm just now realizing that this kind of makes me look like i'm 75 years old nothing wrong with being 75 but it wasn't exactly what i was going for your car sounds like garbage of course it's a bmw in case you were wondering your car sounds terrible and you should be embarrassed

Channel: Hello Road

Views: 26,492

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Id: mpBIhQhjZuo

Length: 17min 6sec (1026 seconds)

Published: Fri Aug 26 2022