Understanding Car Costs and When to Drive

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In America, driving is one of the most popular ways of getting around. After trying out my local public transportation system recently, I realized that my car provides a ton of value in convenience and comfort. Often times though, we forget the costs of a car and how different factors impact the cost. We pay for gas and maintenance separate from each trip so it can be difficult to associate the two. I’ll try to provide a simple overview of the costs of driving so that you can make better decisions on when to drive and when to fly or even skip a trip.

Types of Car Costs

Most companies pay employees who drive on the job about $0.50 per mile these days, but don’t be tempted to use that to evaluate your costs. Costs should first be broken up into a few categories.

  • Mileage Costs – what you pay per mile for things like gas, oil, and mileage depreciation
  • Time Costs – what you pay in age depreciation of your vehicle

Depreciation is tricky since your car loses value as it ages and as you drive it more. For example, a 2008 model is worth less than the same 2009 model even if they have the same mileage. On the other hand, a 2008 model with 50K miles is worth less than a 2008 model with 25K miles.

Evaluating the Cost of Driving

In the big scheme of planning money well, it’s probably good to know all the costs of driving, but for the sake of understanding the costs of trips time costs are out of your control. For mileage costs we can again break costs into a few categories.

  • Fixed Mileage Costs – costs like gas that don’t change just because a car ages
  • Variable Mileage Costs – costs like mileage depreciation that do change as the car ages

The big problem with using a set number, like $0.50/mile, to evaluate the cost of driving is that as your car ages that number changes. Here are a few examples.

An old car may have this breakdown.

  • Gets 25MPG and gas costs $3/gallon = $0.12/mile for gas
  • Drives 10K per year and costs $1,000 in oil and maintenance per year = $0.10/mile
  • Value drops $500 this year (and less next) due to mileage = $0.05/mile
  • Total is $0.27/mile

A similar car, but newer model

  • Gets 30MPG and gas costs $3/gallon = $0.10/mile for gas
  • Drives 10K per year and costs $600 in oil and maintenance per year = $0.06/mile
  • Value drops $2,000 this year (and less next) due to mileage = $0.20/mile
  • Total is $0.46/mile

You can do the same for your car and you will see that the driving factor is the age of the car since gas efficiency and maintenance don’t change much over time (arguably some cars do need a lot more maintenance as they age so evaluate this appropriately).

How to Use this Information for Your Benefit

Since these are real costs you will pay to drive, be sure to consider them when necessary. Don’t plan out every trip but on long trips this may help you decide to fly instead of drive, or on short trips it may influence you to combine errands instead of going out 5 times in one day.

  • If you live in a house with two cars, drive the one that costs less per mile on long trips
  • Before you decide to do a road trip to save money, see if a flight is actually cheaper
  • Don’t drive five miles to save a few cents on gas since you spend it getting there
  • Don’t deliver something to save a stamp when you’re actually paying more to drive

For me, I still have to consider factors like time and convenience. Sometimes I may drive instead of flying if it’s a five hour trip since the airport can be such a hassle. Also, it’s fun to get out of the house and get some fresh air so maybe spending a little extra to deliver something is fine. In the end, I’m just glad I know the costs when I drive.

What are your thoughts on driving? Leave me a comment below.

4 thoughts on “Understanding Car Costs and When to Drive”

  1. I normally try to use my wife’s car since I can go the same distance on 35 a tank instead of 60. But my truck is 10 times more comfortable so I do tend to waste the money on comfort, but depending on if the trip is business or fun also changes my decision. I normally go cheap for business and spend more on fun for trips.

  2. I wish North America was more like Europe with a better opportunity to use public transportation. It’s typically inexpensive and can get you anywhere you need to go and usually more quickly than by car. Unless you live in a huge city like New York, the only real way to get around is by driving. I wish I would only have to use my car once a week…

    Thanks for the post!

  3. You have recommended that “If you live in a house with two cars, drive the one that costs less per mile on long trips,” but, of course, there are so many other variables to consider (as you have also pointed out). In our household, the car that will cost less per mile to drive is probably not reliable for a long trip. We could factor in an if-and-when-the-car-breaks-down cost, which would then make the more reliable car still the less expensive option.

  4. Clayton – Great to hear that you’re good at balancing having fun and saving money. Really, all our financial choices come down to that.

    Conrad – I totally agree on public transportation. I wish there was more of that where I live in Atlanta. It helps us use our travel time to do other things like read.

    Lara – Yea, as a car gets older you are definitely trying to squeeze the last few miles you can get out of it if possible. It’s great that you are using a car as long as possible and it’s definitely not worth it if the car breaks down on a long trip. I sometimes wonder if the cost impact today should be considered or the cost impact at the time the car is sold. I think this is an accounting dilemma in the business world, and drives many business people crazy. Your way makes sense though for the real world.

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