Over the weekend someone made an interesting case to me. This person argued that when you think about the total cost of driving, gasoline isn't actually that expensive, relatively speaking. It was an interesting point-of-view, because when I hear people complaining about how it's so expensive to drive, usually they complain about the price of gasoline.

(from TheTruthAbout on Flickr)

There are really only two costs that every driver must always pay every month... there's the cost of insurance, and the cost of fuel.

Let's say I have a pretty run-of-the-mill insurance policy in DC. It's better than state minimum liability coverage but not quite comprehensive coverage either. $80 per month sounds reasonable for this sort of policy. Now let's assume I drive a pretty average car that gets 30 miles per gallon on average and is completely paid off.  Let's also assume that gasoline costs $4 per gallon. That means that for the same $80 I could drive my car 600 miles. That's a lot of miles!

So unless I live more than 15 miles from my job and drive every day; or unless I make a lot of non-work related trips; or unless the price of gasoline goes well above $4 per gallon, I'm probably not going to spend more on gasoline every month than I'm going to spend on insurance.

Of course, this isn't meant to suggest that driving isn't expensive - it's really expensive. But this obviously isn't simply because the price of gasoline is what it is. All of the other costs matter, and they probably matter even more than some people think.

1 comments:

    On June 04, 2012 Anonymous said...

    I agree that the cost of gasoline is not that bad compared with the other costs of driving. But your analysis is simplistic and doesn't go far enough, because there are many additional costs you didn't include:

    * Taxes and registration. It varies a lot on the jurisdiction and car, but up to a few hundred dollars per year are possible.

    * Maintenance. Depends on how old and reliable your car is, and how diligent you are, but let's say at least $100 per year.

    * Parking. This depends on the driver and some may get away paying very little in parking, but others may need to pay well over $1000 per year.

    * Depreciation. Your car has a resale value that is constantly decreasing. The depreciation cost depends on the model, condition, and age, but $1000 per year wouldn't be uncommon.

    In the first three cases, you might say that not every driver needs to pay them (or can get away without paying them for a while), but the last one affects every driver, even though many people never think about it because it's not a monthly bill that they have to pay.