I think car ownership is more expensive than most people think. We look at the monthly payment, or our gas bill, and then quickly look away. We treat it like an immutable expense, like it’s already the absolute lowest it can go. But I’m not so sure.
My wife and I own two cars. Mine is a 2014 Hyundai Elantra with 70,000 miles on it. Hers is a Lexus RX 450h with 30,000 miles on it. I bought mine new, hers was used, with around 25,000 miles on it.
Assuming we keep each car until it has 200,000 miles on it, here’s what it costs each of us drive our cars, on a per mile basis:
| $3.50/gallon | $4.50/gallon | |
| Nicholas | Michelle | |
| Gas | $0.099 | $0.158 |
| Oil Changes | $0.009 | $0.023 |
| Tires | $0.014 | $0.020 |
| Brakes | $0.006 | $0.030 |
| Depreciation | $0.088 | $0.225 |
| Expected repairs | $0.050 | $0.075 |
| Total/Mile | $0.265 | $0.531 |
The first thing that stands out to me from these numbers is that the Lexus costs twice as much to drive as the Hyundai, per mile.
Within that number, the biggest cost differences are depreciation and gas. The Hyundai gets better gas mileage, and runs on regular, whereas the Lexus requires more expensive premium. The other advantage of the Hyundai is that it’s a lot cheaper to replace ($17,500 vs $45,000).
When we look at buying a new car, gas mileage and depreciation are two areas to focus on. The easiest way to cut our auto expenses is to buy smaller, cheaper, more fuel-efficient cars, and to drive them for longer. Even if you drive the same car for 200,000 miles (or more than 10 years), the biggest expense is still replacing it with a new car. This is doubly true if you buy a new car every 100,000 miles.
The third big takeaway is how expensive each car is to drive. A relatively short, 10 mile trip in the Lexus costs $5.31. Even the relatively economical Hyundai costs $2.65! For every 100 miles, our cars cost $53.31 and $26.50 to drive, respectively. That’s far more expensive than I thought.
Faced with a 10 mile trip in the Lexus, I ask myself, “is this worth $5?” If someone paid me $5 to stay home, or to ride my bike there, would I take it?
I don’t say yes every time. I still have to live my life, meet up with friends, go see and do cool things. But there are some times when it’s a choice between spending an hour on a bike or watching an hour of tv, where it’s pretty worth it to me.
What I really like about this analysis is that it illustrates the extent to which driving a car (and what type of car your drive) is a discretionary expense. This is a big shift from how most people think about their cars.
For most people, cars only cost money at specific moments: when they fill up with gas, when the car needs repairs, or new tires, or when the monthly payment comes due. As a result, people treat these expenses as nondiscretionary, the same way they think of rent, or healthcare, or groceries. And in that moment, they’re not wrong. Not buying gas, or not getting repairs done, is always more expensive than ponying up the cash.
But when you zoom out, you see that all these expenses were accrued with each mile driven, before the bill comes due. So while the bill itself is non-negotiable, we do have a lot of control over how much it is and how often it comes due. The cost is directly related to miles driven, as well as what kind of car we drive.
Sure, most of us prefer a nicer, bigger car, all else equal. But when you look at the actual cost of doing so, all things aren’t equal. For a 20 mile commute, if someone paid us $5 every day to drive a smaller car, wouldn’t we take it?
How many of us would pull out our wallets, take out a $10 bill, and shred it, in order drive a bigger car on a 40 mile trip?
Maybe the big car makes sense on snow days, or when we’re hauling a car full of kids, bags, and groceries… But how often are we doing that? Isn’t our car empty more than half the time?
And when we do need a bigger vehicle, aren’t there usually other options available? On snow days, most of us can work remotely. Those who can’t, can either walk or carpool (you’re effectively getting paid $1000 for doing so on these rare days. That’s the money saved by not needing a bigger car the rest of the year).
The other option is just to drive a lot less. Which is also more doable than most people think. We can bundle trips, or replace some of our trips with a bike ride or walk. And isn’t it kind of insane to drive our car anywhere within 2 miles of our home? Most cars won’t even warm up before you get there. There’s not enough time to get into a podcast, or enjoy a full song on the radio.
These short trips add up, and are also the easiest to replace by walking or biking.
Beyond strictly financial considerations, I also suspect there’s a better way to live than what most of us are currently doing. The happiest people I know are fairly active. They often walk or ride their bike instead of driving. They also do their own cooking. They live in smaller, but well-located houses. They have decent flexibility of time. And they live within their means.
The simple pleasures are the most reliable, and their lives are testament to this.
I look at people like this and think, “yes. That’s the life for me.”