Friday, March 14, 2014

Will the real cost of car ownership kindly stand up

Carsharing changes our relationship with the cars we owned and loved and hated over much of the century just behind us. And one of the points we hear from proponents again and again is that carsharing offers substantial savings, because the cost of owning a car has become much higher than in the past. Surely the cost of car ownership in the 21st century --  and all that goes with it including direct and indirect costs, among them depreciation, insurance, petrol, maintenance, parking, etc.,  -- is no light burden. But how expensive is it really? In this article, carsharing expert Dave Brook digs into the numbers and reflects on the true cost of ownership for most car owners in the United States.

canada cost car ownership

Does it really cost $9,000 per year to own a car in the US?

By Dave Brook, first appeared in , 7 March 2014

I saw it again: another article quoting a statistic of how much it costs to own a car!  You know, the one quoting AAA's calculations that it costs $9,000 per year.

I am so tired of seeing that statistic!  Not that's it wrong, mind you, but because I don't think quoting it (without some context) actually makes people more aware of the cost of car ownership. Let me explain why.

First of all, if you own a car, you're probably NOT spending $9,000 per year, and I think the chances are slim that you even know someone spending that much each year (unless they own a very fancy car and live in a big city with very expensive rented parking space).

It's not that the $9,000 number isn't true - I think the AAA did their homework, since it matches up very closely with Intellichoice cost of ownership numbers.  But as the AAA chart (PDF) shows, it's only true for very high mileage drivers in new, medium size cars - and, I would argue, these people aren't the people likely to join and use carsharing.

I think the number that is more realistic to quote is the AAA number for a small sedan at a lower annual mileage of 10,000 miles per year - about $5,900 per year.  And these are big numbers:

  • $12 per day

  • 60¢ per mile (10,000 miles/year)

  • 46¢ per mile (over 15,000 mi/yr)

So my second objection to the $9,000 per year price tag is that it probably doesn't apply to a big percentage of the prospective customers for round-trip, station-based carsharing.*  Remember these AAA numbers are for new cars and would apply to vehicles less than 5 years old.  But most of the cars on the road today aren't new and especially those owned by prospective carsharing members.  The average age of cars on the road is almost 11 years -  34% of all cars are between 6 and 10 years old and another 36% are older than 10 years.   I would suggest that probably 40-50% of the vehicles on the road would be considered fully amortized (no depreciation or finance charges in the AAA chart) - these owners are probably looking at operating costs in the 25¢ per mile range.

It well known that most people who own a car don't have a very clear ide of what their car is costing them.  So, they don't have a good reference point to compare carsharing rates to ownership.  The closest comparison might be cost of car rental, so carsharing may seem expensive, since most rental rates have a lot of hidden costs - fuel, insurance, inconvenience of renting, etc.  And, unless they are familiar with bicycling/walking/transit use, it can be difficult to imagine accomplishing much of one's life without a car parked out front.

Don't get me wrong, part of any marketing campaign for carsharing needs to include the cost of ownership comparison.   But people make their decision to join carsharing based on many factors, one of which is cost comparison, but for most people the fundamental decision is a "value" question - "carsharing is convenient and less hassle and I get to drive to drive a variety of cool cars."

So, let's get out there and tell the world how expensive car ownership is - but give them a believable number in a context they can relate to.

*  Although, the $9,000/year number might apply to a greater percentage of prospects for one-way/on-demand carsharing, they are probably interested in one-way service for the convenience aspects not the money-savings.

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About the author:

ws-pic-brook2Founder of Carsharing Portland, the first commercial carsharing company in the US in 1998. Later company joined Flexcar and he had various responsibilities with them, including setting up their San Diego operation. Since 2003 an independent consultant. Now Managing Partner for team-red us, transportation consultants specializing in innovative strategies. Affiliated with team-red GmbH, Berlin, Germany.   Contact via email Dave Brook or  +1503-313-1320 begin_of_the_skype_highlighting +1503-313-1320 FREE  end_of_the_skype_highlighting.

About the editor:

eb-about the editor - 9mar14

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  1. The Canadian infographic mentions 18.000 kilometers/year. You say that's highly much (and I agree), but next you talk about 10.000 Miles which is app 16.000 km, and still that's much!

  2. Thanks for pointing this out. The Canadian numbers are whatever they are, and in the event in a country of great spaces that would seem like a fair number. All the years we have been following carsharing around the world, it struck me that the border number, the upper limit of kilometers traveled per year for someone looking into carsharing as a second option to car ownership was probably on the order of 10,000 km/year. I would not however call that a "statistic", rather I think of it as an educated guess.


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